It’s no secret that many remote workers are reluctant to return to the office. Global Workplace Analytics found that more than half of U.S. employees can complete at least some of their work remotely, and 82% want to work from home at least one day per week, with 19% hoping for a full-time remote option.[1,2,3] That runs counter to what many CEOs want to see happen. It’s also driving some interesting commercial real estate trends.
“Most companies are publicly saying, ‘We want to be an employer of choice and be flexible and give people lots of options,’” says John Pilant, managing director at Truist Securities. “But corporate culture can be difficult to maintain when teams are working remotely for long periods of time.”
Lindsey Houser, managing director at Truist Commercial Real Estate, says that despite the popularity of remote work and the exodus from big cities in 2020, big tech companies like Amazon and Apple are actually leasing more office space, not less. “Many real estate investment trusts are saying don’t pay attention to what you hear or read about this big shift to remote work,” he says.
4 smart property moves
What can you do with your business-related properties in today’s market? Consider these four commercial real estate trends.
1. Remodel the office to be more welcoming. Some business owners are remodeling buildings to make them more attractive to remote workers. “For example, we’re seeing owners invest in their common areas and redo their lobbies,” says Houser. Consider this as a way to attract or retain top talent.
2. Lease extra space to cover building costs. Businesses that have too much physical space are leasing portions of their buildings to other businesses. For instance, one business scrapped a full-out redesign and has leased the first floor to an urgent care clinic. The added revenue covers the company’s building costs and boosts its bottom line.
3. Separate heart-and-soul from brick-and-mortar. “Family business owners love buying real estate and they love owning their building,” says Jason Cagle, head of Industry Specialization and Advisory at Truist Commercial. “It’s the physical manifestation of the business they have built.”
Their facility may also be a prominent landmark in their community and a home-away-from-home for longtime workers. However, some owners are trying to take a more rational approach in the current environment.
“Owning a building usually means a 30-year mortgage, which locks you into the building for the long term,” Cagle says. “But what if you buy a warehouse and your business doubles but the warehouse doesn’t support it? What do you do then?”
In 2022, leasing or looking for flex space might be a better option than owning, building, adding on, or even moving. Also consider a leaseback, in which you’d sell your building to a third party, then lease it back from the new owner. “This allows you to still use the building, while also freeing up capital you can reinvest in your business for growth,” Cagle explains.
4. Make real estate updates with ESG in mind. Some older, environmentally unfriendly commercial real estate is becoming functionally obsolete.
“This type of property is just going to end up being demolished or will need to undergo significant rehabilitation,” says Kathy Farrell, head of Commercial Real Estate for Truist. “Most businesses today want modern, clean, energy-efficient office space for their employees, especially after coming through a global health crisis.”
Businesses can take advantage of various tax programs to upgrade existing properties to be more energy efficient. “This is one way property owners can achieve their environmental, social, and governance (ESG) goals,” she says. Just don’t forget to disclose the improvements to your stakeholders.
What’s your best real estate move in today’s economic climate? To learn more from Truist financial and commercial real estate advisors about opportunities for growth, check out our Purple PaperSM: “Imagine tomorrow. Build it today.”
Sources
[1] Work-at-home after COVID-19—Our forecast. Source: Global Workplace Analytics, accessed February 25, 2022.
[2] Telecommuting trend data: Updated June 22, 2021. Source: Global Workplace Analytics, accessed February 25, 2022.
[3] How many people could work from home. Source: Global Workplace Analytics, accessed February 25, 2022.
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