The new commercial real estate reality: Office spaces after the pandemic
Wednesday, September 23, 2020
The effects of the pandemic have created a bleak outlook for the commercial construction sector: nonresidential construction spending in the U.S. fell 1.2% in July and predictions indicate that commercial vacancy rates will rise to 20.2% by 2022.
These changes have been caused by new regulations, dictating how we work, shop and exist in public places. With no clear end in sight to the pandemic, all construction stakeholders need to reimagine how office spaces can function in this new commercial real estate reality.
This will involve new design considerations that take into account physical distancing measures, new building types, and new construction strategies to keep projects on time and on budget. These strategies will be crucial to helping the office real estate sector emerge from the pandemic.
Changes to Office Spaces
With each state experiencing different degrees of closures, and some states coping with new waves of closures as a result of a spike in cases, the impacts of COVID-19 on the commercial sector change dramatically depending on location. Although we saw large scale office closures in cities like New York at the end of Q1, we are seeing offices opening up again now.
On the other hand, states such as Texas experienced minor closures, with restaurants and bars being the most impacted. Every day, spikes in new cases are emerging, as many states open more businesses and public spaces. This means that commercial property closures continue to change week to week.
Across all states though, there are some sectors that may never go back to functioning as they did before the pandemic. With many businesses offering remote working options for their employees, office and co-working spaces will be greatly affected as we move into Q4 of 2020.
The co-working model thrives on common areas, but with physical distancing orders in place indefinitely, shared spaces are not ideal anymore. There is also the issue of getting people into office buildings. Most towering skyscrapers were not built to accommodate physical distancing and getting people into them on elevators can be a logistical challenge. Many companies are choosing to combat this with shift work and reduced capacity on the floors.
Another change for offices will be the perks associated with working for some companies. For years, technology companies have offered free food, café and kitchen facilities and communal entertainment areas. With more space needed for physical distancing, and enhanced measures in place for cleaning, these perks may soon become obsolete.
Cafeterias will also now face challenges due to the design of the space and the flow of traffic. This could change recruitment processes moving forward, with employers unable to use these perks to attract talent.
In order to help the commercial construction industry emerge stronger after the pandemic, special consideration needs to be given to processes that drive speed-to-market and reduce construction costs. Due to supply chain issues, new work practices, and design changes, cost management principles will need to be employed on sites to help keep projects on budget.
Considerations will need to be made for managing on-site personnel with new physical distancing and health and safety requirements. This includes temperature checks at each construction site. Although this may seem minor, these new measures can lead to delays in the long run. This is due in part to the need to manage shifts and ensure that proper distance can be maintained between teams. Since it will be hard to predict what the future will look like, construction management will have to plan far in advance to ensure that measures are sustainable.
In order to prevent severe delays because of the reduced number of employees allowed on job sites at one time, modular and off-site approaches will become increasingly important. With fewer people on-site, there are fewer tasks being completed in conjunction. By employing modular approaches, more tasks can be completed at one time.
On-site, large structures can be put into place, while in factories, components of each building can be built out. This can increase the number of people who are able to work on a construction project at a time, as they will be in different environments. This can help speed up timelines. But even with these approaches in effect, it will still be important to limit the number of people on site to only essential personnel.
New building design concepts will also emerge in response to the pandemic. For example, instead of open-concept offices, there may be a shift in demand for closed office spaces. This can allow for increased protection between staff while working. Companies also may need to consider larger office spaces overall to help keep staff members physically distanced and to allow them to feel safe.
Most guidelines advise maintaining at least six feet between people, which means that the square footage needed per person will increase. It also means larger communal spaces, such as hallways and elevators. This will drive up the prices for many office spaces, especially in larger cities. It may also see a downward trend on cost of rental per square foot in order to lure potential tenants.
For construction companies, emerging from the pandemic successfully will mean finding differentiators to make the company stand out. Organizations will start to appreciate construction firms that value health and safety and can come to the table with inventive design strategies to keep staff safe when working in an office. It also means that construction firms need to take the health and safety of their employees seriously.
Sites that report cases of COVID may need to close down. They’ll also need to be deep cleaned, which will increase construction costs and potentially lengthen the project timeline.
After the Pandemic
Although no one can accurately predict the changes that will remain after the pandemic, there is no doubt that some precautionary measures may become the norm. Even as businesses reopen, there may be people who are reluctant to resume normal activities.
Delivery services for restaurants and grocery stores may reduce the necessary square footage for physical locations. Remote working will reduce the need for coworking and office spaces. At this point in the pandemic, it can be hard to tell which changes are temporary and which may become permanent, but changes will be inevitable and commercial rents will need to be reduced in order to lure in tenants.
For this reason, commercial real estate construction firms need to understand the implications of the pandemic and implement long-term strategies to help the industry rebuild. By ensuring projects are delivered on time and under budget, trust can be renewed in the industry. Implementing health and safety measures for construction projects and altering the design on new builds can also help ensure projects are not delayed and are usable in a post-pandemic environment.
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