With many states lifting their stay-at-home orders, real estate leaders are asking one critical question: What role does my company — and my properties — play? One thing is clear: How and where work is performed may change dramatically as a result of COVID-19.
Our recent PwC CFO Pulse survey shows that remote working continues to catch on as a viable alternative to the workplace. More than half of the leaders surveyed (54%) now say they plan to make remote work a permanent option for roles that allow it, up from 43% in our previous survey.
How this shift can affect real estate firms is difficult to pinpoint. However, there are a few things real estate companies should keep in mind, both when helping clients get back to on-site work and when evaluating how the real estate market is shifting.
Landlords should proactively reach out to their tenants about return-to-work (RTW) plans. Many companies have developed their action plans independently, possibly without input from their real estate provider. We recommend that real estate companies should be proactive in how they engage with their tenants. Start by asking them how many employees they may bring back and on what timeline. Offer to work with them on necessary details.
Tenants and landlords should share the responsibility for worker safety. Our return to work survey found that 47% of respondents say employers need to change workplace safety measures in order for employees to feel safe. To accomplish that goal, tenants and landlords should work together. For example, in office buildings with both shared and dedicated spaces, some landlords are thinking through their possible processes for checking in visitors and perhaps even checking temperatures, with tenants likely footing the bill. Some tenants are taking responsibility for cleaning and sanitizing their dedicated spaces. To achieve these higher cleaning standards, real estate companies may consider bolstering their janitorial staff and introducing rigorous cleaning and sanitation practices.
Additionally, our US CFO Pulse survey showed that 29% of leaders say they’re evaluating contact tracing tools, which can be viewed as an important way of managing COVID-19 transmissions.
Don’t expect to have every answer before workers return. You may not be able to have a process or protocol in place for every situation. For example, how do you determine who would be liable if an individual were infected with COVID-19 from contact at the visitor desk in a building with 10 tenants? Commercial landlords may have to address these types of questions with their clients and legal teams.
Be prepared with shut-down protocols should the need arise. For many tenants, the return to work may likely begin slowly, with a small percentage of employees. As time passes and companies gather data on employee health and safety, they should consider increasing the number of workers they bring into the facility.
However, even if initial RTW plans go well, there may still be the potential for a second wave of COVID-19 cases. With a vaccine still on the far horizon, real estate companies should stay flexible for the foreseeable future. Building owners should prepare for the possibility that parts of the country may be shut down again. In fact, worries about a potential new wave of COVID-19 infections top the list of threats to business recoveries — a concern for 59% of respondents in our latest US CFO Pulse survey. The findings indicate that the virus continues to set the pace for growth plans and risk outlooks, even as more US states move to reopen their economies, and more CFO respondents say financial prospects are improving.
Real estate companies should consider new offerings. With COVID-19 changing where employees work, companies are not sure how much real estate they may need and where they’ll need it. Real estate companies should start exploring new ways to serve clients. In the near term, they can help clients develop or refine their RTW programs. They are well-suited to help operationalize RTW programs; they have detailed, real-time operational data to help companies during their return.
In the recent PwC US Remote Work survey, only 19% of companies believe their office needs will stay the same over the next three years. About half (51%) of respondents are anticipating an increase in office space, and 30% are planning a decrease.
Of those planning to increase their office space, there are two key drivers:
Conversely, for those planning to decrease their total office space, the key factors are:
Whether companies are planning to increase or decrease their office space, one thing remains certain: Their needs will likely be changing due to COVID-19.
Real estate companies may want to partner with design firms. In the longer term, we may see an increased demand for global design firms, due to shifts in the kinds of activities that workers may want in the physical office. When companies bring employees back on-site, it will likely be for collaboration and socialization activities that are difficult to accomplish remotely. Design firms can help real estate firms think through how to reconfigure workspaces, build out appropriate social spaces and help develop workplace strategies. Joining forces with them, through a business partnership or joint venture, can help real estate companies stay relevant and strengthen their client relationships.
Tenants want more flexibility in leases. Lease arrangements will be an ongoing topic of discussion in the coming months, as some tenants may miss payments and many look to renegotiate their leases. Landlords should work with their tenants and think outside the box when it comes to leases. Many tenants could look for leases with shorter terms and more flexible options — for instance, leasing two floors with the option of a third. Another approach is to base rent on a percentage of sales — a practice already present in some corners of the retail industry.
Once employees start returning, client needs for their physical workspace should start becoming clearer. In the short term, employees may be greeted by a temporary reimagining of the office. Retail is already ahead of the game, using social distance marking in check-out lines and rotating available check-out lanes to accommodate cleaning. These types of accommodations may become the norm, as companies use caution tape and temporary signs to comply with safety protocols.
Longer term, employees’ needs may help shape how each workplace evolves. For example, what tasks and actions are employees doing in the physical office? What are their needs? What activities aren’t happening that were commonplace before the crisis? Some basics like collaboration and socializing can be expected, but only time can clarify the full needs of employees in a post-COVID-19 environment.
Real estate companies should not wait for this to play out. Employers are already balancing resiliency, agility and employee experience, and they may be looking for partners to help them figure out how physical space plays into their strategy. Real estate firms with the vision and flexibility to create novel, collaborative solutions with their clients could be better positioned to thrive in the post-COVID-19 environment — and to weather whatever the next storm brings.
1. Paul Hannon and Saabira Chaudhuri, “Hopes for a Speedy Recovery Dim,” The Wall Street Journal, May 12, 2020, accessed via Factiva, May 12, 2020.
2. Kelly Anne Smith, “Mortgage Payments Interrupted By COVID-19? The Federal And State Response,” Forbes.com, April 20, 2020, accessed via Factiva, May 12, 2020.