Bart Waldeck, Tango’s chief marketing officer, has a ringside seat in the global debate over when workers should make their post-pandemic return to the office.
That’s because the Dallas-based firm’s real-estate, lease-accounting and facilities software platform helps commercial real-estate tenants do everything from choose the right location to manage office repairs.
Even with this insight, according to Waldeck, who lives in the Chicago area, it remains unclear what the “new normal” will be for workers. He says leaseholders are in “a holding pattern” as they try to figure out how to develop a hybrid-work model that provides them with the flexibility that workers are demanding.
Waldeck shares his insight on current and future commercial real-estate trends amid the continuing shift to remote/hybrid work.
Remote Report: As offices begin reopening to workers, are some of your clients having second thoughts about giving back space they leased?
Bart Waldeck: The smart companies are in a bit of a holding pattern. They want to wait to see what hybrid work means for the organization, so they’re not ready yet to make big decisions about divesting from space. If a new lease is coming up for renewal in the time frame we’re in right now, many of them are looking for ways to [reduce their rental space] potentially. [However,] most occupiers are stuck in these leases for five, 10, 15 years. To answer your question from a speculation perspective, you [might see] anywhere from 20 to 30 percent potential reduction in square footage.
RR: Is the space glut affecting the lease payments office tenants pay?
BW: It depends on the market. I know, for example, New York City has a vacancy rate of around 15 to 17 percent, which is the highest it’s been in the last several decades. And they are looking to convert some of the downtown Manhattan office space into residential [properties] because that is needed. So that’s what’s happening in New York and the other major markets like San Francisco and Chicago and Dallas and Boston. So rates are down slightly, but it’s not what you would think it would be.
RR: Are most of the companies that are giving back space in the tech or financial services sectors?
BW: [Tech companies] have dramatically different return-to-work policies. Some, like Microsoft, are requiring employees to be [in the office] much more. Same with Google and Apple, and then you look at, for example, Facebook or Salesforce. They’re saying you can work from wherever, so it kind of depends on the company. Morgan Stanley and some of the other large banks want their employees to come back to the office because they think that’s an important part of [their corporate cultures], so they won’t be shedding as much space.
RR: Is demand currently stronger for “A space”? Can you also define the term?
“A” spaces have been insulated more [from market conditions], but the “B” and “C-level” space is where you’re having more of the vacancy and subletting going on. There’s a similar dynamic in the retail industry as well, when it comes to shopping centers.
The term is based on the desirability of the space. Is it located near amenities and other areas of attraction? Is there some type of critical hub of companies that make the area very desirable? For example, here in Chicago, we have a warehouse district on the west side of Chicago that McDonald’s just relocated their global headquarters there from the suburbs. Everybody’s there, so that has driven rents up, because it’s a very hip area.
RR: How are office buildings faring in city centers versus the suburbs?
BW: There’s been an uptick in the desire for more suburban space. Some office occupiers are going to a hub-and-spoke type of strategy to reduce their footprint in a central business district. Then they’ll have more satellite offices out in the suburbs, closer to where their employees live.
Because commute time and the elimination of it were a big kind of “aha” moment for many people in the pandemic, it allowed people to realize that it’s a big waste of time. Harvard Business Review estimated that there were 89 million hours saved per week by eliminating the daily commute to the office.
What about big office towers versus smaller offices? Are businesses worried about elevators?
The increase in vaccinations and the CDC’s [recent] guidance that says vaccinated people don’t need to social-distance or wear a mask has started to relax some of the anxiety many folks have had about riding elevators. That said, we do have some clients who are scheduling people to come in at different times and reduce their occupancy on any given day. Some of our clients are going to do a one week in the office and three weeks remote.
When are companies expecting workers to return to the office? What differences will people notice?
As vaccination rates have gone up, we’ve seen an acceleration of the planning of the return to the office. Most companies are targeting an after-Labor Day time frame. So the intent has picked up to try to get people back.
Where you work will be driven by the purpose of what you’re trying to accomplish. If you need to focus and do some individual research and work like that, you likely will not go into the office because it reduces your productivity and focus.
We’re going into purpose-built space, and away from hoteling [wherein employees reserve office space on an as-needed basis]. The big trend is something called “a neighborhood.” It’s a set of seats and different types of space to come in and use as you need it. And it’s with people that you work with typically.
What sorts of amenities are companies getting now that they haven’t before?
It’s everything from having applications as we have here at Tango, where you can reserve space, you can book catering or you can order an Uber. There can be a gym. There are different kinds of cafes and different types of spaces that offer amenities that fit this other [kind of] work.