Episode 11: Real Estate and how it’s holding up
Hi Friends. Thank you for tuning into another episode of Pandocap. We have a special guest today that I will introduce shortly but I wanted to start with why we are focused on this discussion.
Over the past few years our work culture has changed. We moved from an office culture where managers and leaders moved out of their offices and broke down barriers with their teams. Teams moved to sitting next to each other to create an inclusive co-working environment. For this approach to work, many companies had to remodel their current office environment and some had to relocate all together. In addition, the emergence of co-working spaces skyrocketed with the likes of WeWork. As the Covid quarantine started every company sent their employees home and many had to quickly adapt to their new work from home environment. Although what many companies did not expect out of this transition is how much they could accomplish. With a full staff working remotely, CEO’s are questioning how to manage their workforce once the shutdown lifts.
This is where Michaela Lalanne from Colliers International comes in to talk about how the real estate industry is shifting with the emerging new normal. She will describe how companies are navigating leases, co-working spaces and facilities.
Michaela can you please share your background with our audience and your journey to your current role?
I am a member of Occupier Services Bay Area (OSBA) based in San Francisco. I partner closely with corporate real estate tenants, ranging from start ups to some of the largest companies in the world, to help strategize and manage their real estate portfolios. I work with clients across the United States and globally. I moved into doing this because I wanted something more tangible in my career.
What are you seeing in terms of the expansion or contraction of office space?
There is not much expansion currently. In terms of contraction, companies are shedding space and particularly in San Francisco there had recently been over 600,000 sq ft of sublease space come onto the market which is around 40% of the SF market.
For those companies that need to have their workforce together, what are you seeing in terms of building safety and structure. Is Colliers advising companies through the leasing process on safety measures?
Safety standards across the board include having every other desk spaced out, sending only 20% of the workforce into the office, having walking traffic guidance in shared spaces, closure of reception and kitchen areas. Also, frequent temperature checks, with 1 -2 people in the elevators at a time, and frequent cleanings. Finally, the big question of concern is how to get people to the office safely if employees are using public transportation.
Are you seeing companies taking risks or complying with guidance and just defying orders because they need to get back to work?
We haven’t seen companies dismiss the safety guidance in our group. Companies are surveying their employees on their comfort levels on going back to the office, covering all their bases in terms of legal ramifications, while putting employees health and wellbeing first.
Finally what are your projections for the real estate markets and what are some of the new measures that you are seeing put in place?
Unfortunately, things are going to get much worse before they get better. In April, we saw 95% of rent collections but we consider May and June will be much worse. Real Estate is a slow market in terms of the speed it’s impacted and if you look at what’s on the market now, landlords are going to have to start lowering their rents in order to be competitive. It is going to be a tenant’s market where people are going to be able to demand shorter terms and lower rents. Companies are going to take a hard pause and wait and see before taking the next step in signing new agreements.
Going back to the office will definitely look much different!
Thank you again for joining us on this special edition of sharing expert advice on Pandocap.