The coronavirus pandemic has sent many employees from their regular offices to working at their kitchen tables and home offices amid social distancing guidelines.
What does this large-scale test of remote working mean for the demand for the future of the American office space once the coronavirus crisis passes? Will there be a paradigm shift in office needs in the future as companies keep its employees working from home?
Nationwide insurance company last month became one of the first large companies across the country to make the COVID-19-inspired shift.
The Columbus, Ohio-based insurance giant said it is closing offices in a half-dozen markets across the U.S. — including one in Chesterfield County — and instead having thousands of its employees in those offices use a permanent work-from-home model by November. After having 98% of its employees working from home since mid-March, Nationwide determined it doesn’t need all of those offices to continue to serve its policyholders.
The decision affects the insurer’s 40,000-square-foot claims office split on two floors in a building in the Boulders office park in Chesterfield, where it has 100 employees.
Financial services giant Morgan Stanley’s CEO said during an interview with Bloomberg TV in mid-April that the company could operate with “much less real estate” by having more of its employees working from home in a post-pandemic future. “We’ve proven we can operate with effectively no footprint,” James Gorman said after a large portion of its employees worked remotely.
Twitter CEO Jack Dorsey told workers on May 12 that they can continue working from home “forever” even once the pandemic is over.
And some major businesses in the Richmond region, including Capital One and Elephant Insurance, have extended their work-from-home policies, while other area businesses such as Genworth Financial and Altria Group say they expect employees to continue working remotely for “the foreseeable future.”
Will the pandemic-induced shift toward remote work have long-lasting impacts on corporate office space use and demand?
“There’s going to be shifts,” said Jeffrey K. Gronning, chief investment officer at the Columbia Property Trust, a New York-based publicly traded real estate investment trust that owns a portfolio of office buildings in New York, San Francisco, Washington, D.C., and Boston.
“I think the jury is out as to exactly what they are,” Gronning said during a Zoom conference meeting on May 6 sponsored by the Virginia Commonwealth University’s School of Business. “But clearly, work from home, everyone is doing it. It is a massive experiment.”
Will the shift to remote work become a long-term trend once the pandemic passes?
“I think some companies will choose to have some or all of their workforce work from home,” said Duke Dodson, the founder and CEO of Richmond-based Dodson Property Management. “How drastic is that going to be? I don’t know.”
Joe Marchetti Jr., managing director at commercial real estate brokerage Colliers International’s Richmond area office, said he does not see Nationwide’s decision as a sign of a fundamental change in the use of office space.
Businesses use their offices to fill needs for collaboration and creativity, adding that he doesn’t see that need going away.
Lee Warfield, president and CEO of Henrico County-based commercial real estate brokerage Cushman & Wakefield | Thalhimer, said the pandemic gave companies an opportunity to assess how things went in a work-from-home environment.
“Companies that were prepared with the appropriate technology platform and have businesses models suited to a WFH [work-from-home] environment have been able to maintain productivity,” Warfield said in an email. “Those companies may shift permanently to WFH to reduce overhead.”
But that atmosphere may not work for all companies, he said.
“Many businesses require face-to-face interaction and have struggled to maintain worker productivity in this temporary WFH environment. They’ve learned that traditional office space is what’s best for them,” Warfield said.
The pandemic could lead to other changes within office buildings, such as the addition of ultraviolet light in HVAC systems to kill germs as well as increased use of automatic doors that employees don’t have to touch in order to open.
“I think that’s the kind of stuff you will see the paradigm shift on and not the reduction of the need for office space,” Marchetti said.
The pandemic actually may boost the demand for more office space given the need for social distancing guidelines, Warfield said.
“Workplace requirements need to consider social spacing standards. If this becomes a permanent trend, space needs will grow as more square footage is required per worker in order to appropriately distance,” Warfield said.
Whether more companies will shift to remote work is a good question but a tougher one to answer, said Robert W. Taylor, executive director of the VCU’s Kornblau Real Estate Program.
“I think it’s too soon to answer that question,” Taylor said.
While some employees like the independence of remote work, Taylor added others miss being able to walk right over to speak with their coworkers or their boss.
“I think it’s going to really depend on the nature of the type of business it is,” Taylor said. “I can see where some back room operations or people who don’t need that [office environment] could perhaps do that remotely.”
Tony Beck, the senior managing director at brokerage CBRE’s Mid-Atlantic region, said every company’s situation is different.
“We have found that working remotely from home has its benefits for some organizations, but other organizations have to have face-to-face interaction. Our culture is we want to be around people,” Beck said.
But Beck believes companies will evaluate their office space going forward. Some could decrease space if employees work remotely. But others will increase space if companies need a bigger footprint in order to give workers more space to provide adequate social distancing.
“For a period of time, you might have half work from home and half work from the office,” Beck said.
A survey by the Society for Human Resource Management released this month found 64% of employers reported that their salaried workforce worked remotely for most of the time amid the coronavirus crisis.
Still, most employers saw the surge toward remote work as temporary and expected the percentage of remote employees in their workforce would trend back down to pre-pandemic levels within six months, the survey found.
Richmond area companies are adjusting to a new model of remote working.
Capital One, the region’s largest private employer, will keep all of its offices closed here and across the U.S., the United Kingdom and Canada through at least Labor Day.
At Dominion Energy, about 50 percent of its employees across 20 states continue to telework. “We are compiling lessons from this experience that will guide us in a post-pandemic world,” spokesman Ryan Frazier said.
Henrico-based Altria Group, the parent company of cigarette maker Philip Morris USA, will continue to have many salaried employees work remotely for “the foreseeable future, but there are no discussions on closing facilities or [having] permanent work from home,” spokesman Steve Callahan said.
Genworth Financial also will keep its employees working remotely for the foreseeable future. The insurance giant said the remote working arrangement has been successful in achieving its goal of protecting the health and safety of workers while continuing to serve its customers.
“While we believe it’s premature to make long-term decisions on this topic, we continue to evaluate this ever-changing situation as more information becomes available,” spokeswoman Julie Westermann said.
Elephant Insurance has more than 650 people in the Richmond region with about 98% of them working remotely from home.
The Henrico-based auto insurer said May 12 that it is planning to reopen its headquarters sometime after Labor Day for a small number of essential employees. But the majority of Elephant’s workforce will have the option to continue to work from home until the end of the year.
Automotive retailer CarMax Inc. said the company is evolving its workplace to meet the needs of the future while reconfiguring its physical work environments for an eventual return of employees. The chain has three corporate office locations in the Richmond area — two in downtown Richmond and its headquarters in Goochland County.
“We plan to have physical offices in Richmond for the foreseeable future,” said Diane Cafritz, CarMax’s chief human resources officer. “This is a great opportunity to innovate how we use our office spaces and virtual work environments to drive collaboration, culture and community. We have a dedicated team focused on our next generation work environment.”
The coronavirus crisis has opened the door to companies having the need to occupy less office space , said Doug White, the co-founder of Gather Workspaces LLC, the fast-growing company that designs, builds and operates collaborative workspaces in the Richmond area and Hampton Roads.
“Through the COVID experience, many employers have learned that their employees can work remotely,” White wrote in an email. “This means that the employer can save the cost of providing an office in a commercial building.”
Columbia Property Trust’s Gronning said during the online Zoom conference that perhaps companies will not want to have high-rise corporate office buildings that pack 30 employees into an elevator to get to their floor. Perhaps they will want low-rise buildings where people can walk up and down the stairs to get to their office suites, he said.
“While working from home is great, you miss the interaction, the collaboration. We’re social animals. People want to be together, and the place for them to be together is in an office environment,” Gronning said. “Its nice to be here on the screen with you all, but that’s not the same as being in meetings, reading people’s body language, collaborating and making deals.”