Despite intense pushback from companies, remote work appears to be here to stay – at least in some form. Approximately 27% of workers do so remotely all or some of the time, and 16% of companies are fully remote. This is partly due to a considerable boost in productivity; 55% of respondents noted that they worked longer hours when remote, and one company, Prodoscore, reported a 47% increase in productivity when they switched to remote work.
Given that over 97% of remote workers don’t plan to return to the office, this has led to a serious struggle in commercial office real estate. It’s expected that the reduction in office expenses will remove $800 billion from the industry, which is of great concern to investors who would like to retain their profits even during these difficult times.
Fortunately, flexibility and adaptability can significantly benefit any investor who wants to delve into commercial real estate in the era of remote work, including those purchasing office space.
Workshare Spaces Are the Future
Some things simply cannot be done over Zoom, even for more traditional in-office companies that have now gone remote. Large, essential planning meetings work best in person, while a lot can be lost through laggy connections when working to build company cohesion and train workers on intricate concepts before implementing a new software or product line.
This is why many companies – and investors – are looking at shared workspaces that multiple hybrid organizations can utilize. It’s especially common in areas directly outside major cities, such as the suburbs of Washington, DC, Chicago, and New York. For example, you might purchase one of these flexible workspaces with a DSCR loan in Virginia, where policymakers, think tanks, and nonprofits meet to discuss pivotal issues in a more affordable space than downtown DC.
Apartment Conversions May Be an Option for Some Locales
In recent years, a lot has been discussed regarding converting empty office buildings to apartments, hotels, or short-term rentals. The concept has a long history: many factories were converted into office or living spaces in Rust Belt towns when industry moved out of these cities, taking advantage of the unique facades and large open-air spaces common in older manufacturing facilities.
Unfortunately, though, not every office building will make a good conversion, especially if there are strict zoning laws in the city or it is tightly wedged against other buildings. A large floor plate would mean that, if you were to break the floor into different apartments, some would be entirely without natural light: a highly unattractive prospect to potential tenants. Newer office buildings also generally have central air and heating, which would be incredibly costly to convert to single-unit temperature control.
Office buildings with a good potential for conversion include older buildings built before the rise of central HVAC units, such as those from the turn of the century; these properties maximize airflow in individual units, making it possible to install window air conditioners for residents’ comfort. A building with a central courtyard generally has a narrower floor plate and windows on every side, which increases natural light and makes it easier to segment the floor plan into units.
Mixed-Use Buildings Can Be an Attractive Choice
The 15-minute city has become a trendy concept among urban and suburban residents alike; this form of city planning emphasizes accessible districts where the average person can walk, bike, or take public transportation to nearly everything they need within just 15 minutes. This can include office space; being nearer to everything they would need might entice workers back to the office, knowing that they won’t have an hours-long commute and can easily pick up groceries on their way home.
As such, investors looking to buy commercial real estate might consider looking closely at multipurpose buildings that blend retail and office space. They may have the first few floors devoted to shops and then several floors of offices or conference rooms; this enables you to enjoy rents from multiple retail tenants, and it can be an attractive option for companies with a hybrid work model.
While it’s much rarer, you can sometimes find complexes with residential, office, and retail spaces across several closely connected buildings.
Don’t Count Out Office Real Estate for Good
While it’s inappropriate to entirely jettison the concept of buying office real estate, investors need to think creatively about their options and consider the potential of a building for shared spaces, conversions, or multiple uses.
Each office building is unique, and careful assessment of its possible uses – both from a logistical and legal standpoint – will serve an investor well when deciding how to best leverage the space.
It’s also entirely possible that the pendulum may swing against remote work in the future: getting involved in office real estate now may prove a boon later when workers find they miss the community and activity of working amongst their peers.