Download the Q3 2021 San Antonio Office Market Report
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Bringing Employees Back to the Office
In a July 2021 poll by Forbes, most Fortune 500 CEOs and other senior leaders said that they plan to have their workforce back in the office by September. But with the recent surge in the Delta variant, many have pushed back this timeline to adopt a “wait and see” approach. As decision-makers try to decide what is the best fit for their businesses; full-time back in the office, fully remote, or a hybrid of the two, they must think about the overall objective of their business and which format is the most feasible. In a survey of 2,404 businesses conducted by The Business Journals, as many as 65 percent of businesses plan on being in some type of hybrid format for the foreseeable future, where employees would have the choice whether to work from home or the office at least once a week.
Similarly, in Digital.com’s survey of 1,250 businesses, 39 percent of companies polled said that they would be closing some of their additional office space within the next 6 months. Many businesses are even allowing employees to set their own hours or to work from wherever they choose, but the overall consensus is that the vast majority of companies will still need office space.
Since the beginning of the pandemic, there has been a debate on the future of office space; many insist that with improvements in technology, work can be done from anywhere without affecting collaboration and productivity. Only time will tell if employees can remain productive at home, and studies have shown that it is better to have a healthy separation between life and work. According to Larry Feldman of Feldman Equities, in the companies that are opting for a hybrid format, we are expecting to see a net contraction of 10-20 percent in the need for office space, and in companies that plan to go back to the office full-time, we are expecting to see a 10-20 percent expansion in the need for office space, which should roughly offset each other in terms of demand for office space. Commercial real estate platform VTS Inc. found that national demand for office space rose 43.3 percent in Q2 2021, only 14 percent below the 2018-2019 average. Many landlords are implementing amenities such as “activated lobbies”, fitness centers, cafes/restaurants, laptop/Wi-Fi areas, advanced air filtration systems, and open floorplans to create an environment that will make tenants want to come back to the office. Many of them are also offering concessions and increased tenant improvements to make their lease terms look more attractive to tenants.
Only 13 percent of companies polled are expected to remain fully remote long-term, most of which are small companies (less than 100 employees), reinforcing the idea that the need for office space will always be there for businesses that want to establish a company culture and a sense of comradery amongst their employees. Many daily tasks can be done remotely but there is no real substitute for face-to-face interaction in a professional setting.
The amount of available sublease space in San Antonio and across the nation continues to drop, and we are continuing to see healthy rent growth. Businesses are back in the market looking for space, and there is a trend of returning confidence in the office sector. Most of the key metrics suggest that the worst has passed and that we are heading in the right direction.
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