With demand for new office space at historic lows, developers and landlords are turning to technology and innovative design to lure employers back to the workplace.
Upgraded air filtration systems, touchless doors and bathroom fixtures and UV antiviral lighting are just a few of the features Patrinely Group is building into the new Hewlett Packard Enterprises headquarters in Houston as a response to the coronavirus pandemic. CEO Robert Fields told a panel at the National Association of Real Estate Editors 2020 Conference this is the cost of doing business after COVID.
“It’s a few bucks a square foot, but in the grand scheme of things, it’s not overwhelming to our project costs,” Fields said.
Katie Walker, associate principal at STG Design, said the pandemic has caused clients to rethink their space planning strategies. For years, employers have gradually reduced the square footage per employee, but now the latest buzzword in office design is “dedensification.”
Where employers were shrinking their offices to 150-square-feet per worker, that spacing average is already now approaching 200 square feet. Employers are rethinking how they safely provide break room spaces and areas for collaboration.
That was a high priority for Charlotte-based Crescent Communities, which was developing its own new headquarters office, according to Managing Director Sager Rathie.
“So many of us have been working from home for quite some time, and the appeal and having of having truly collaborative, engaging space is just ever more important now than it’s ever been before,” Rathie told the panel. “So as people are actually in the office they want to maximize that approach so we looked at all the different avenues and spaces we have collaborative space and by frankly trying to figure out and understand how do we ensure that we’re utilizing it the best way we can for the benefit of all employees.”
In downtown Orlando, new office construction has ground to a halt while developers of mixed-use towers, like Society Orlando and DXV Central, seek to eliminate the use altogether.
Fields said Patrinely took the opposite approach: to move ahead with new class A office construction they hope will give them a competitive advantage in leasing. The firm had started construction on the 568,000-square-foot mid-rise office complex in Houston before landing Hewlett Packard as an anchor tenant, but the company also commenced construction on spec office towers in Denver and Salt Lake City this summer, during the height of the pandemic.
The 30-story tower in Denver was originally designed with express elevators. “But what we didn’t have was kind of a touchless call button feature, so we’ve upgraded the system to allow to an app-based system, which is really cool,” he said. “So when you’re on your floor and you want to call an elevator now, you can call it from an app, as opposed to actually having to use the call button in the elevator lobby.”
Office building operators have also been forced to respond to the public health crisis, which includes increased staffing for cleaning and sanitizing surfaces. Chip Watts, president of the Institute of Real Estate Management, said his organization has issued a pandemic guide for real estate managers, but rules and regulations will vary according to jurisdiction, so it’s critical that building managers communicate directly with tenants and users.
“Communication is going to be key,” he said. “We have to over-communicate how we’re operating the building, so that when tenants walk in they’re inundated with information. Tenants are thirsty for information because they want feel comfortable that they’re coming into a safe environment.”
Yvonne Baker, managing partner for Franklin Street in Orlando, told GrowthSpotter that while some markets are rebounding, she doesn’t expect to see any new spec office construction in Central Florida in the near future.
“In real estate there’s always winners and losers,” Baker said. “Texas is a big winner in this thing. A lot of companies are moving from California and New York to these other markets like Houston and Austin.”
Some Orlando users are returning to the office. Baker said Franklin Street is now back in its office at 20 N. Orange Ave., and she just signed a lease for 3,400 square feet in the same building.
But several large office users are canceling their leases. “Liberty Mutual is giving back 100,000 square feet. And Disney had one building in Celebration is was leasing. It was 100,000 square feet, and they’re giving it back,” she said. “When you have huge pockets like that, you can’t justify building a new building.”