If at least 20% of office workers decide to keep working from home, "that's a huge blow to office demand"
Yesterday the Real Deal published (broadcast?) an interview with Dror Poleg, author of Rethinking Real Estate, subtitled "A Roadmap to Technology's Impact on the World's Asset Class," and his business partner Antony Slumbers.
The summary is that they believe "the office market will begin to emulate the hotel market in terms of the way it's owned and operated," with branding companies like WeWork partnering with landlords to market office space. (Of course, WeWork, however successful at branding, was terrible at business.)
Most interesting to me was the exchange that began around 11:14. The Real Deal's Hiten Samtani noted that, given the coronavirus crisis, "New York City suffers from systemic challenges that might impact its attractiveness," including public transit and extremely high density.
"If I'm a New York City office landlord, or an office REIT [real estate investment trust]," he asked, "what I am thinking right now?"
"I think the question itself tells you how much trouble the office market is in," Peleg responded. Twenty years ago, he noted, you "couldn't really ask that question seriously": do people need an office?
Now we know many people can work remotely, some happier than others. "But if we see 20 to 30 percent are happy to continue" working from home, "that's a huge blow to office demand."
That reinforces my observation that a new ground-up office building, as has been proposed for Site 5 of Atlantic Yards/Pacific Park, has become ever less likely, at least until there's a vaccine.
It also raises questions about previously solid office space, such as at MetroTech in Brooklyn, developed by original Atlantic Yards developer Forest City Ratner and now owned by Brookfield Asset Management, which bought out Forest City.
That said, it's possible to convert some office space to residential use, though it's not simple. Stay tuned.
Crowding, not density
In a New York Times op-ed today, Cities Are Safe Places to Live, Even in a Pandemic, former New York City Health Commissioner Mary Bassett makes the astute observation that the issue is not density--other cities are dense, and have avoided huge outbreaks--but household overcrowding and other crowded settings.
Her solution is not wrong, but some elements are enormously expensive and complicated:
A turn to the suburbs (update)
Later, Bisnow reported The Pandemic Sprawl: Suburban Flex Offices See Wave Of Interest As Companies Decentralize:
The summary is that they believe "the office market will begin to emulate the hotel market in terms of the way it's owned and operated," with branding companies like WeWork partnering with landlords to market office space. (Of course, WeWork, however successful at branding, was terrible at business.)
Most interesting to me was the exchange that began around 11:14. The Real Deal's Hiten Samtani noted that, given the coronavirus crisis, "New York City suffers from systemic challenges that might impact its attractiveness," including public transit and extremely high density.
"If I'm a New York City office landlord, or an office REIT [real estate investment trust]," he asked, "what I am thinking right now?"
"I think the question itself tells you how much trouble the office market is in," Peleg responded. Twenty years ago, he noted, you "couldn't really ask that question seriously": do people need an office?
Now we know many people can work remotely, some happier than others. "But if we see 20 to 30 percent are happy to continue" working from home, "that's a huge blow to office demand."
That reinforces my observation that a new ground-up office building, as has been proposed for Site 5 of Atlantic Yards/Pacific Park, has become ever less likely, at least until there's a vaccine.
It also raises questions about previously solid office space, such as at MetroTech in Brooklyn, developed by original Atlantic Yards developer Forest City Ratner and now owned by Brookfield Asset Management, which bought out Forest City.
That said, it's possible to convert some office space to residential use, though it's not simple. Stay tuned.
Crowding, not density
In a New York Times op-ed today, Cities Are Safe Places to Live, Even in a Pandemic, former New York City Health Commissioner Mary Bassett makes the astute observation that the issue is not density--other cities are dense, and have avoided huge outbreaks--but household overcrowding and other crowded settings.
Her solution is not wrong, but some elements are enormously expensive and complicated:
But cities can do many things to reduce those risks. They can increase the frequency of buses and trains to reduce crowding. They can create more pedestrian spaces and room for walkers and bikers. Above all, they can build more affordable housing.Yes, we can get more space. Affordable housing isn't cheap--after all, the whole premise of New York is to live in a smaller space than elsewhere, while enjoying other spaces. And more buses and trains would be great, but how to regulate the number of people?
A turn to the suburbs (update)
Later, Bisnow reported The Pandemic Sprawl: Suburban Flex Offices See Wave Of Interest As Companies Decentralize:
Felicia Rubinstein owns a small, women-focused flexible office and coworking space in Darien, Connecticut, with 20 private offices and 16 coworking desks. She caters to Fairfield County businesses, but recently, she’s been getting Big Apple-sized inquiries.
Last week, a New York City-based company inquired as to whether she had room for 100 offices, she said. Within days, another company called to ask if she had 30 office spaces available. The company was permanently leaving the city, according to the person on the phone.
Her space, Hayvn, is an hour northeast of Manhattan, in one of the wealthiest ZIP codes in the country. It is also only about 50% leased today, she says, but she doesn’t have enough room to meet the sudden demand the suburban flexible office market has experienced since the coronavirus hit New York.
That's not definitive, and Robert Caruso of CBRE’s Stamford office described the increased interest in suburban office space as "an uptick.” But it's reasonable to see this as something of a trend.
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