Remote Workforce Trend Poses Another Challenge to Office Property Owners

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The concept of “creative destruction”[1] has been around for decades and it is still a relevant and important topic in American business today. While the name itself has a negative connotation, it is the key driver of economic growth and is, in many ways, responsible for the wealth and prosperity we enjoy today.

Americans have more access to goods and services than ever before. A growing percentage of us enjoy luxuries only available to those at the very top of the income scale just a few years ago. Clear examples of creative destruction are easy to spot. Think about what Walmart did to corner grocery and local drug stores, what Home Depot did to the neighborhood hardware store, or what Amazon has done to brick-and-mortar retailers.

Smartphones, flat-screen TVs, computers and a variety of other high-tech gadgets are ubiquitous because of advances in manufacturing processes and technologies that have brought prices down on just about everything we buy. With a simple voice command, you can get groceries delivered to your front door in an hour. If you want to learn more about anything, you can just ask Alexa. You can even get a college degree without leaving your living room, so long as you have a laptop and an internet connection.

Leveraging Tech Reduces Need for Space

Creative destruction is also changing the way America works. Armed with a smartphone, laptop, and an internet connection, many office-based workers have left the building…literally. Millions of employees around the country and in just about every business sector are able to get the job done without spending all day every day in the office. This new remote-driven culture has allowed businesses to occupy less space, spend less on interior improvements and focus more of their resources on innovation, growth and making sure that valuable employees remain happy enough to stick around.

This trend is forcing building owners like you to take dramatic steps not to become the victim of creative destruction. The last thing you want is a half-empty building that lacks the appeal to attract today’s growing businesses. So, it is vitally important for you to make sure that your property has the built-in features and amenities to attract the kind of tenants you are looking for. This may require new marketing strategies and significant capital investment to achieve. Let’s take a closer look.

Study Your Competition

First, walk competitive properties to see how other owners are responding. Consult with a real estate professional to get the details on how transactions in competitive buildings are being structured. Many of today’s businesses, especially in the tech sector, are growing fast and so is their need for space. It may be that you can find a way to offer flexible lease terms that would allow a company to expand or contract within your project.

Perhaps you should consider adding amenities like outdoor seating or a fitness center that would help your tenants retain good employees, or convert some hard-to-lease space into a common area conference center that could reduce the amount of space each of your tenants need to lease. This would accommodate tenants who have an intermittent need for more space when their remote workers come in for company functions.

Go Spec

Another option is to build out some of your vacant space as so-called spec suites that you can lease out on flexible terms. This will require capital investment before you have tenants signed up and that comes with a level of risk. But it will allow you to respond immediately to those who need space right away, which is often the case for a company that is making rapid changes to their workforces, both traditional and remote. Spec suites are usually built with an open-space design to appeal to a large cross-section of businesses that typically occupy space in the local area.

Generally speaking, tenants are leveraging technology to grow their revenues and reduce space needs at the same time. So, you should also anticipate that your existing tenants may also like to downsize when it comes time to renew their leases. That makes the need for good and ongoing communication with each one of them of paramount importance. Anticipating their needs and being proactive with potential solutions will give you the opportunity to move them within your project before they decide to move somewhere else.

Divide and Conquer

You may also need to be willing to break up larger spaces and accept shorter-term leases, which will add an additional level of cost and risk to your investment. That said, keeping your space occupied is the primary goal and your willingness to be flexible on lease term could increase your long term occupancy. When you do encounter tenants willing to sign longer-term leases, you may want to reach a bit further than necessary to secure their long term occupancy, stabilizing your rent roll in the process.

Stay Dialed In

The remote worker phenomenon is probably here to stay. You can add to the list of challenges you face as a property owner every day. To optimize your results, it’s important to stay informed regarding the latest trends, newest technologies and innovative services you can access to increase your competitive position in the market. That may require further capital investment in your property, which adds risk. But, standing still while the market moves ahead is not a good option. To learn more about what can be done to optimize your building’s performance, please give us a call at 949-668-1110. We have the experience and the resources to lead you in the right direction.

[1] Creative Destruction refers to the incessant product and process innovation mechanism by which new production units replace outdated ones. It was coined by Joseph Schumpeter (1942), who considered it 'the essential fact about capitalism'.