The COVID-19 pandemic caused an uproar in the office area. Companies sent their employees home. Offices were empty. And tenants wondered how much office space they would need even after the end of the pandemic.
Today? The office sector is still confronted with considerable uncertainties. But there is also hope. And all those companies that were considering losing huge amounts of office space? That didn’t happen.
Andrew Urban, vice president of business services for the Colliers Indianapolis office, knows the office market both at his home base in Indianapolis and across the country. And he has good news for office building owners: He said he was seeing signs of increased activity across Indianapolis, both in the form of residents and exterior towers walking the downtown streets and investors looking for new homes for theirs Looking for dollars. This has positive effects on the office market.
“People at this point are eager to get back to their normal lives,” said Urban. “Six or nine months ago it was a different story. But you’re talking to people now and they’ll itch when things look normal again, with some adjustments of course. “
Urban focuses on the office market and signs leases all over the world. He also works with companies in Indianapolis. What changes has he seen in the office market since the COVID-19 vaccines were introduced?
He says there is a difference today between urban office markets that have had tighter bans and home orders and those that haven’t.
He compares markets like Indianapolis and Dallas, where COVID-19 restrictions weren’t quite as strict, with places like New York City, which closed more tightly. Politics aside, Urban says, the cities where the restrictions weren’t as strict now see their office markets stronger.
Urban warns, however, that the severity of the downtime isn’t the only reason certain office markets are thriving today.
“When you peel the onions, lockdowns and masks aside, there are other things driving the markets that have fared better,” said Urban.
These factors? Markets with population growth, lower taxes, and lower cost of living are generally seeing a stronger office market today, Urban said.
“The larger cities that have long been the kings of the hill haven’t had these positive results lately,” said Urban.
Also, not all tenants are the same. Urban said law firms were some of the first tenants to return to the office, with mid-sized or boutique law firms taking the lead.
“When you think of law firms, they generally have more space per lawyer,” said Urban. “They built in social distancing. Lawyers often have their own offices. That makes it easier to have the space that everyone wants today. We have seen the end of the office market accelerate. “
Then there’s the fact that the law remains largely an apprenticeship business, Urban said. New attorneys who have just graduated from law tend to work for a partner. This partner looks after the young lawyer. It’s difficult to nurture that mentorship without face-to-face interaction, Urban said. This need for collaboration and mentoring has also encouraged law firms to return to the office earlier.
There are also some companies that are now taking a closer look at how much office space they will need in the future, Urban said. Many large companies ask realtors how best to use their existing office space. They are considering shrinking the space they rent or possibly moving to new locations. You commission studies and analyzes in the workplace.
Then there are companies that have already implemented work-from-home policies and remote strategies, Urban said. They’re not considering major changes as they optimized their office space needs long before the pandemic.
And for now? Most of the talk about companies installing hybrid work schedules and breaking down their existing office stays just that.
“We haven’t seen companies make these dramatic commitments to shrink their space and reinvent their workforce,” said Urban. “You didn’t sign those 10 year contracts. We haven’t seen that yet. There was talk. But it doesn’t lead to bigger business. “
Urban said that many office contracts are generally on hold. There were short-term renewals. But for the most part, companies are holding back to do big office deals.
“Companies don’t want to sign this 10-year deal until they see the rest of this pandemic play out,” said Urban. “Better to play it safe and come back when you’re ready to make those decisions.”
This leads to the big question: How will the office market and the way people work change after the pandemic? Is it going to change at all?
Urban doesn’t have a crystal ball, of course. However, he anticipates that the office market will go through a cycle in which at least some of the employees will work from home. But in the long run, most office workers will return to their office buildings, and many of them return to this room five days a week.
“Some companies will make changes. Most of them are not going to take any really dramatic steps, ”said Urban. “That will go with the way we get out of this pandemic. We’re not going to wake up one morning and go back to January 2020. Joe Biden won’t appear on NBC saying, “Hey. We’re done.’ It won’t happen that way. It is the same with the office market. There will be a period of three to five years in which companies need to optimize their workspaces and work environments and get them right. “
Even without the pandemic, the office market will face challenges. For one, there is a demographic shift in the US workforce, said Urban. The workers of the baby boomer generation are nearing the end of their careers. They are starting to retire in greater numbers.
This will open the door for a new generation of business leaders with different styles of work and leadership, said Urban. There’s also the continued growth of technology that will transform the way companies use their workspaces.
The Gen Z workforce will also be smaller than the Millennial workforce, Urban said. This could pose challenges for companies as they compete for the best workforce available.
“In conversation with companies and HR managers, I noticed that the future-oriented are affected,” said Urban. “If you look at the number of high school graduates and college graduates, it is falling. You can’t do more of this younger generation. Our demographics are our demographics. How will companies get Gen Z employees to work for them? You have to reinvent yourself. “
And in Indianapolis itself? According to Urban, activity in the office market is still lower than it was before COVID, which is not surprising. He also hears rumors from some companies that they may move from urban to suburban locations. But Urban hasn’t seen many companies actually take this step.
“We’re likely to see a greater number of three- and five-year renewals that companies will eventually buy before they have to make major decisions,” said Urban. “Some companies could make small enhancements to allow people social distancing. Overall, however, activity in Indianapolis remains somewhat declining. But it’s starting to accelerate. “
Urban has to look out of his office window to see this. Five months ago, he could park anywhere in downtown Indianapolis and still get to his office. Now, looking out of his office window, he sees no available parking space in any direction.
“We see more people back,” said Urban. “Are we already seeing normal traffic at rush hour? No, but I’ll say we’ll see life return. “