I want to spend the next few posts talking about life post-pandemic. I know at this point it seems like we are NEVER getting out of this pandemic but I think there is now some real hope for optimism. I will even go on record here and say that I will be enjoying a cold beverage with friends on a packed patio this summer!
March 13. That was the last day Chelsea and I were in the office. We’ve been back a couple of times since then for an hour or two but it’s almost the 1st anniversary of WFH. As it happens, I had to use my office about 3 weeks ago because of internet issues. If you’ve been downtown lately, you’ll know it’s like that scene in any apocalyptic movie where there is no one around. There are more posters and social distancing floor decals than people. Even a year later it’s still jarring to experience.
The past year has been really tough on the office building economy. Not just the giant building owners, but also all the food court franchisees, restaurants, bars and stores that built up around these complexes to serve the tens of thousands of people working within these buildings. I doubt many are feeling too sorry for Oxford or Brookfield but please take a moment to think of the small businesses that have been absolutely crushed because of COVID shutdowns.
The first 6-9 months of the pandemic were filled with plenty of stories about the “death of the office”. You can read some of them here, here or here. After that, the tone changed, as many people have reached a breaking point after being stuck at home for what seems like an eternity. More and more comments from company leadership are about a full return to the office. I think this piece does a good job of catching a bunch of differing opinions on the future of WFH vs return to the office.
I believe a lot of the recent push to have employees return to work has been driven by the narrative of “they don’t like working from home anymore”. Sure the novelty of not having to traipse to the GO station or the TTC has probably worn off for many, and for parents, has been replaced by a sense of dread of having to cram work into the short window that the kids are at school.
Underlying all of that is that we are near the end of winter and while it’s been a very mild winter, with nearly everything locked down since Christmas, there has really been little incentive to get outside. We all have cabin fever. It’s normal at this time of year but has been accentuated by being locked in a home for months. We can sense spring right around the corner so I expect this feeling of being trapped will begin to subside.
With vaccinations slowly ramping up here and the US being very close to being fully vaccinated by late June, we are going to have to really start planning what return to the office looks like. I do think the forced shutting of offices has awakened a much stronger urge for people to cut down on commuting. If you’ve avoided rush hour on the 401 or the Yonge/Bloor station crush for over a year, you’re really not going to enjoy experiencing it again for 5 days a week. And for some people, WFH has some real benefits like flexibility and fewer office distractions.
I also don’t think permanent WFH is the way to go for many of us. The office environment fulfills a social need for some employees, and it’s also very important for teams that require a lot of collaboration on projects under development. I’m not even mentioning the offices that are run by those micro-managers.
The inherent conflict between full WFH and full return to the office doesn’t have to end in victory for one side. This is why I think there will be a real push for a more hybrid model similar to the “hoteling” style used by many tech companies for years. Giving employees the choice to work from home or office as they see fit has great benefits to morale and productivity. It also allows them a chance to work with coworkers and collaborate when needed.
What does this mean for the office building economy though? Well, of course it means that fewer people in general will be in the building than before. I think offices will transition to mainly being used for client-facing business and less for operations. Fewer people means the number of restaurants and food courts will shrink as revenue won’t be the same, but these types of business will still be needed. The services in these buildings (dry-cleaners, hair salons etc) have a lot of potential outcomes and I think this is the most interesting place to watch in the next 3 years.
The building owners like Brookfield and the REITs? They’ll be fine, especially if they own the top level buildings. People will still pay a premium for the best locations and that will never change. Overall office rent payments have been remarkably strong this past year because no one wants to give up the office just yet. I think larger tenants will downsize their operations space but I don’t believe the core will hollow out. New businesses and new tenants will move into the city over the next 5 years and slowly soak up those vacated spaces.
I’m becoming more and more positive that we are nearing the end of the lockdown phase of COVID. The virus won’t disappear but vaccination rates are going up every day. The opening up of our economy is badly needed. The now-empty towers in cities everywhere will again start to fill up very soon and many will still continue to work from home. This is fantastic news and one of many reasons to be looking forward to the rest of the year.