The Office Market
For over three years I’ve been telling my clients ‘we still don’t know’ when asked about movements/trends in local, regional and national office markets.  They were getting tired of the same answer, and so was I.   In Q1 2023 however, fall out is well underway.  Rate hikes, non-repayment of debt, vast uncertainty, weak/downward markets, rapid vacancies, highly discounted asset trades all have increased significantly in the last 60 days.  Specific to office and what we’ve all been anticipating for over three years is happening quickly. 

One aspect of today’s market is that tenants are taking less space, but they are moving into Class B+ and Class A buildings in better locations and with more amenities.

Another dynamic is as pronounced as ever.   ‘The market here is a lot different than just over there’, and we could be talking just down the street.  What this means to a deal is that rates, deal structure, concessions, postures, competition, suite size, landlord appetites vary widely across the board.

On the subject of Work-from-Home, it’s morphing its way into Year 4, but new company and community cultures are settling in.  As we do life differently, how tenants and companies work in this new world is an interesting study to be sure.   The term “highly situational” used in my last piece, vague as it may be, really covers it all… size, quality, design, location, amenities and price. WFH policy can depend on culture, leadership’s political leanings, age of the workers, furniture systems and office design.

On the tenant rep side of things knowledge is king: 1.) building-to-building  2.) broker-to-broker 3.) landlord-to-landlord and 4.) local-area to local-area.

Lastly, we recognize how short and brief these emails are, and we hope it’s appreciated.

In our next piece we’ll highlight a few companies’ resolve on the new office – use, design, function and vibe.

As people have adapted to “the new normal”, it’s become clear that the norms of the past were in fact problems.

The number of the select few trusted people that worked from home has now exploded due to the Coronavirus.   For how long, nobody knows, but we are all doing life differently. Now, more people than ever before have been able to experience what it is like to carry out their role from the comfort of their own home or any various combinations between the home, office and with clients.

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The switch to home and hybrid is a major one. What will WFH look like look 3 years from now?

Interaction

Office interaction stops when working remotely. Conversations between colleagues become on-topic and work-related. This might seem like not a bad thing, especially when considering the increased-productivity numbers. However, without those connections and social interactions, lethargy and weariness can set in.

The majority of WFH advantages are clear, and some days you just want to get things done without distractions. On those days, we simply don’t need watercooler time.  But finding a balance and a hybrid and flexible model will prove essential over the long haul.

Intention

Ultimately you find a way to get work done. Maybe it’s a second wind at 9 pm.  Maybe you are sharp and focused on Friday, but never Monday.  Maybe management decides that WFH isn’t a good idea Monday or Friday in the summertime due to all the distractions.  Perhaps at a particular time of day, you sit in the kitchen near a window and in the late afternoon on a firm couch.  Julie likes WFH her way, but John’s way may be very different, But, they both are very productive.

Then there are the obvious challenges at home.   We can feel like we’re not getting much done or feel like we’re working all the time.

What we’re lacking is intentionality.

Apart from a dedicated workspace and strict schedule, we should learn how to create a mental space for home life and one for work life. Your daily commute, coffee break and lunch break go away with WFH. If you benefited from these. you might gather your thoughts before and after work or make phone calls that you wouldn’t otherwise. In place of, you can however add a short walk into your routine to give you that space.

Good work-life balance means discipline

Pre-COVID, it was difficult to leave their work at the office without bringing it home. When working from home, it’s even more difficult to switch off work-mode as it’s right there in your own home.

What’s required, therefore, is discipline. Some people might dedicate specific timeslots in the day or evening when they will not check emails, for example. Others will ensure that their evenings and weekends are for them alone. Regardless, people need to make decisions on their work-life balance that fit in with their family. Once we have decided on our personal rules, the hard part is sticking to them.

Trust and checking in with people

Even though many people enjoy working alone and in their own space, it’s important to keep in regular contact with colleagues, line managers and peers. This isn’t just good business sense, but it also benefits everyone’s mental wellbeing.

It’s often easier to email, and many people prefer this to picking up the phone. However, it’s good idea to vary your communications with your colleagues. Calling, video conferencing, or instant messages are all great communication tools that have their place in remote working.

Avoiding distractions

When you’re at home, you have all of your home comforts around you. There’s the coffee, the refrigerator, the television, your smartphone, social media, your comfy couch and even chores. Procrastination is much more likely at home, and you need to be strict and get into a good routine. If it means using site blockers, timers, the ‘do not disturb’ function on your phone, for example, go for it. Otherwise, half of your day could disappear in distractions. Thoughts of ‘just one more coffee’ or ‘I’ll just put this laundry away’ might lead to working later than you’d planned.

For executives, owners and managers, trust is essential. The company rank and file need to be able to carry out their work without the daily scrutiny of their line managers. It’s important to set clear guidelines from the beginning and have procedures in place to check in with colleagues without being too overbearing. The rank and file won’t appreciate constant monitoring. They might even work better if line managers demonstrate their trust in them.

Takeaway: WFH is situational

What works for some people won’t work for others and is very situational. There seems to be a generational divide between those who enjoy the experience and those who don’t. Younger people – those who’ve grown up with laptops in their homes, for example – seem to enjoy working in their own environment much more. For those over 50, it can often seem a bit more challenging to bring work, especially computer-based work, into the family home.

Ultimately, everyone is different. We all have different temperaments and likes and dislikes of how we want our working environment to be. If you have to work from home, you will find a way to get it done in a way that works for you. We might struggle with WFH for a week or even a few months, but it doesn’t mean we can’t work out the kinks. The transition is tough, but it’s worth persevering to find out what works.

Simply put, the leasing office or broker cannot advise you objectively. Their loyalty is to the landlord, and they are unfairly influenced.  Dual agency is a hot-button issue. While banned in several states, it’s still legal in California. The pitfall is an over-incentivized or unethical influence by the double commission. Disclosure alone isn’t enough.

Dual agency – an unsound practice

For the tenant, general principles render dual agency as unsound practice.  The broker’s focus is to increase building value through rent, occupancy and tenant obligations. Their job is to get you to sign the lease quickly because time kills all deals. Tenants should be aware of their rights and the responsibilities landlords have. You can view them here.

It would be unwise to negotiate aggressively on your behalf because this would sour their relationship with the landlord. It comes down to space, budget and the tenant’s level of confidence. A dual agent cannot focus on the lowest and the highest rent at the same time.

Where to find appropriate representation as a tenant – without dual agency

The listing broker’s true allegiance is to the landlord, a much bigger client. Essentially, tenants should use a broker that only deals will tenants and not landlords.

Commissions: All landlords pay transaction costs to keep their building occupied or attract new tenants. Word of mouth and advertisement doesn’t fill their building. The idea of saving money by not having representation or going direct is a misperception amongst small to medium-sized tenants.

When signals point to you staying and renewing, this is especially true. You don’t save by not having your own guy., and “dealing direct” with a “good relationship” doesn’t translate to a better deal.

Ready to commit to a real estate agent?

If you have chosen your real estate agent, ask to see their disclosure agreement. You should try to do this as soon as you can in the game.

Read the agreement and be sure to ask about anything you don’t understand – especially if you’re concerned that something in it alludes to dual agency. With this, you will have a better understanding of your working relationship and you can rest assured that the agency is working in your best interests.