A recent New York Times report acknowledged that commercial real estate developers and investors are looking to convert properties vacated during the COVID-19 pandemic into other uses. Converting some of these abandoned properties into office space was perhaps one of the more surprising proposed new uses given the rising work from home trend that was born out of the pandemic.
Businesses began to institute work from home policies in March when the pandemic hit. Since that time, more companies are looking to keep their remote work option in place even after COVID-19 pandemic is considered to be over. In April, a Gartner, Inc. survey revealed that almost 75% of the Chief Financial Officer respondents said they were considering moving at least 5% of their previously onsite workforce to permanent remote positions after companies are permitted to let employees return to the office.
Meanwhile, larger technology companies are following a similar trend. Google announced this summer that its work from home policy would extend through at least July 2021. Twitter is letting its employees work from home indefinitely. Businesses are in part embracing the remote work model because they’ve found employees have remained just as productive as they were in the office. Additionally, businesses are seeing the potential real estate savings that could come with leasing less space.
So, at a time when more companies are considering staying at home instead of returning to the office, is it wise for CRE developers to turn vacated properties into office spaces? Amazon appears to think so. The company recently announced it plans to create 3,500 new technology and corporate jobs in six metropolitan areas and invest more than $1.4 billion in new offices.
“People from all walks of life come to Amazon to develop their career – from recent graduates looking for a place to turn their ideas into high-impact products, to veterans accessing new jobs in cloud computing thanks to our upskilling programs,” Amazon Human Resources Senior Vice Beth Galetti said when the announcement was made. “These 3,500 new jobs will be in cities across the country with strong and diverse talent pools. We look forward to helping these communities grow their emerging tech workforce.”
Other CRE companies appear to be following Amazon’s lead, according to The New York Times. Real estate services firm DJM Capital Partners and private equity firm Gaw Capital Partners announced plans to overhaul the Hollywood & Highland entertainment complex in Los Angeles and turn existing retail into approximately 100,000 square feet of creative office space.
Meanwhile, Hudson Yards owner Related Office Development is changing its plans for the New York-based center’s anchor tenant. Originally, an 188,000 square foot Neimann Marcus store was going to be Hudson Yards’ anchor retail tenant. The company has now said the store will become, “the most exciting office opportunity in New York City.”
“Nobody ever lets a crisis get in the way of creating opportunity,” Sheila Botting, Toronto-based CRE firm Avison Young president of the professional services practice for the Americas told The New York Times. “I think for the real estate community, this represents a moment in time to think about current assets, how they’re being used and what future options might be.”
Joe Dyton can be reached at firstname.lastname@example.org.