• Mon. Nov 28th, 2022

LA real estate brokers say businesses are delaying office downsizing


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Many companies have extended their work from home policies until 2020 and beyond, leading some to speculate that the days of physical office space may be numbered.

Then Amazon announced Monday that it plans to add 900,000 square feet of new office space in six cities, including the takeover of the former Lord & Taylor flagship department store in Manhattan.

As the second-largest employer in the United States, Amazon’s move arguably marks a turning point in how businesses envision a post-COVID future, but it’s not the only employer that has kept hope in the middle, either. pandemic for a return to the office.

“What we’re seeing is that while everyone’s talking about working from home, we don’t think it’s going to be nearly what we thought it was four or five months ago,” Ryan Harding, director executive general of Newmark Knight Frank’s Los Angeles office, said Cheddar

Following its own deals over the past six months, Harding said no company has downsized in the wake of the coronavirus. Instead, they have renewed themselves, moved or even enlarged.

Out of 19 deals since March, he said, about a third of businesses are expanding. The average deal size in Los Angeles has also tripled, from around 5,000 to 11,500 square feet, suggesting businesses are looking for larger, more flexible spaces.

That doesn’t mean the downsizing won’t happen in the near future, Harding said, but for now, companies are waiting for it. We are far from the feeling of imminent catastrophe that weighed on the commercial real estate sector at the start of the pandemic.

“At one point, someone told us that commercial real estate brokers might not have a job next year,” Harding said. “Now we’re looking at drops of maybe 10 to 15 percent, but we haven’t even seen that yet.”

Outside of downtown LA, similar trends are emerging.

A survey of Midwestern businesses by real estate services firm JLL found only 1% were considering moving away entirely, and most had already reopened, never closed, or had committed to returning to the office. between August and January.

The survey also found that only 19% planned to incur capital costs to modernize or expand their offices due to COVID-19.

While many businesses wait to see how the pandemic plays out before making major decisions, those who invest in their offices are doing so with a new set of priorities.

In general, this means more space, sun, air and accessibility.

“I think this only accelerates a trend that was happening before COVID,” Jennifer Frisk, senior general manager at Knight Newmark Frank. “Many surveys indicate that the number one amenity for employees is sunlight and fresh air.

There is also a desire for more flexibility, she added. While not everyone wants to commit to full-time remote work, having the option is a plus.

“It’s been proven that people want some sort of flexibility in their workplace, whether it’s at home part of the time or the ability to go back and forth,” Frisk said. “What we think is that the office will be used for all of those things that we realized we couldn’t get at home in the past five months.”

In other words, the office will serve as a meeting place for employees who wish to collaborate directly or take advantage of specific resources provided by the company. Office space, Frisk added, will have to change to accommodate this.

“There’s a good chance not everyone is going to the office all day, every day, but when we do, we’re going to make the most of it,” Frisk said.

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