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Remote workers influence commercial real estate

Most workplaces across Texas and the rest of the nation shut down when the COVID-19 pandemic hit. While many lost their jobs, millions could work from home. Statistics show that after 2 ½ years, a significant number are still remote, at least part of the workweek.

Global consulting firm McKinsey & Company’s American Opportunity Survey says that 58% still have the option to work from home at least one day per week. Of those, 35% say they are full-time remote employees. McKinsey says its research translates to 92 million American workers who spend less or no time in the office.

The impact on commercial real estate

While most workers remain in a traditional office setting, at least part of the time, the remote worker trend impacts owners of commercial real estate. Many large buildings and office parks are entirely or mostly vacant as employers adapt to work-from-home opportunities for employees.

At the same time, some larger employers, including Apple and Amazon, have required their workers to return to the office and are leasing more space to accommodate them. Tesla owner Elon Musk issued a ban on remote work earlier this summer. So, what does this portend for the future of commercial properties?

Steps CRE developers can take to maximize opportunities

Today’s market has many uncertainties, but opportunities exist for developers amidst these trends. Here are some strategies to consider:

  • Remodel existing properties: Companies want updated spaces with common areas, quiet zones and cafeterias to attract and retain top talent. Investing in these upgrades sooner is smart.
  • Focus on ESG: Many companies and their shareholders embrace environmental, social and governance (ESG) goals when searching for properties. They want clean, energy-efficient and modern workplaces for their employees. You may be able to take advantage of tax breaks to make these upgrades.
  • Lease extra space: Developers with tenants who are downsizing can also benefit from retrofitting large buildings to accommodate shrinking office staff and leasing the remainder. The added revenue can more than offset renovation costs.

Leaseback opportunities are expected to increase

CRE developers could also benefit from changing attitudes by companies over buying office properties. These turbulent economic times are leading many new and existing companies to reconsider being locked into 30-year mortgages. For them, leasing and flex space might be better than owning.

Some companies are putting their properties up for sale with the intent to lease them back to help free up capital for reinvestment. Developers can benefit from buying these properties, especially as real estate sales shift in favor of buyers with cash.