What? Do old-school offices work better than WeWork parks? It may be worth trying to reinstate private offices in the growing legions of ghost buildings.
By John E. McNellis, principal at real estate developer McNellis Partners, for WOLF STREET:
The office market is bleak and headed for bleaker. According to Newmark, the national vacancy rate in the third quarter topped 17.6 percent. Downtown Oakland has 21.3 percent, while San Francisco leads the rest at 24.1 percent. With almost no traditional financing available and a demand supply broader than the Grand Canyon, the nationwide office market is hibernating at best.
Those who are praying for their awakening (basically everyone in real estate) need the office workers back. This is why some office owners are quietly applauding Big Tech’s mass layoffs, hoping that the thousands of engineers now unemployed portend a buyer’s market for talent, one so strong that employers can insist they the office really is part of office work. Some owners might even welcome another dotcom crash, comparing it to a covid vaccine: nasty side effects at first, but a much higher chance of long-term survival.
The layoffs could be having an effect. JLL reports a slow return of workers to San Francisco (occupancy increased to 40 percent since Labor Day) and BART ridership is up a bit.
This general scenario is likely to hit some speed bumps at street level. I happen to walk past one of our Palo Alto office buildings every day. It’s fully leased to a tech company, but there’s rarely anyone inside. Last week, a bearded guy in mismatched hoodies was swiping his key ring when I walked by. I commented that the building seemed empty most days and asked about its occupancy.
“Maybe five percent,” replied the technician. “Six, seven guys on average. We are much more efficient working from home.”
“In fact? More efficient? Is management okay with that?”
“Probably not, they want us back. But it’s not happening. During Covid, we learned to love the tranquility at home and that interior layout is very noisy. She gestured toward the rows of long tables, the typical coworking floor plan that crowds dozens side by side. “We only come when we can’t work at home. Or when we need to collaborate, but that sucks if there’s someone else around.”
“Too loud. We need smaller rooms so that three or four of us can meet and work without interruptions.”
“Oh, you mean like real Offices?” Just what this tenant had ripped off when he leased the building.
“Yes exactly. Offices where our small teams could be grouped together, maybe some for two people, some for four.” He added that Google is doing this, realizing that their engineers hate working side by side and has been ever since. redesigning its interiors to add more offices.
By suggesting that forcing a return to the office would lead to a house-to-house war in Fallujah with the employees, the technician drove another thumbtack into the office coffin. He said engineers now prefer Zooming to in-person meetings. Why? Because concentrating on the numbers on your own screen is more efficient than awkwardly looking over someone’s shoulder at the office.
But the sales and marketing guys must be coming back? Don’t you get together to beat each other’s chests, trade lies about your deals, and have drinks in the break room? No, he swore that they don’t get in either, and that, in any case, it’s the finance and accounting people who show up reluctantly at headquarters.
Finally, he noted that Covid effectively transformed Silicon Valley from suburban to urban, freeing up techies to move much further afield, to cities where they could afford four-bedroom houses, to slums from which they can no longer commute. Even if the office space was as comfortable as home and more fun than free beer, a couple hours drive would be a deal breaker.
Double-checking these certainties with another techie, I asked what it would take to bring Generation Z back to center. “Private offices, man. Microsoft gives them to everyone.”
What? Do old-school offices work better than WeWork parks? And did it take the virus for everyone to figure that out? That Generation Z insists we plunge into the past is truly ironic, but it’s worth trying to reinstate private offices in the growing legions of ghost buildings.
By John E. McNellis. He recently published O’Brien’s Law: A Romantic Thriller, which takes place in 1970s San Francisco.
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