How COVID is creating opportunities in the suburbs

[the urban politician]

July 02, 2020
How COVID is creating opportunity in the burbs
Far-flung office parks are suddenly looking more attractive—or so building owners hope.

John R. Boehm

If ever there were a moment for suburban office landlords to get the attention of companies in the city, it's the reopening of the local economy from the COVID-19 pandemic.

Businesses based downtown are suddenly grappling with many employees afraid to use public transportation to commute. The prospect of long waits for office tower elevators could dissuade workers from returning to the city in full force. And in the backdrop, millennials—the talent group companies moved downtown to attract in one of the tightest labor markets on record—appear to be buying suburban homes at a faster pace, some having proven they can be just as productive working remotely as in the office.

The confluence of challenges to the urban workplace is shaping the best opportunity many suburban office owners have had in years to generate demand after a decade of companies fleeing big suburban office parks for downtown. And many are getting aggressive to seize the moment.

"Suburbia is getting a fresh look," says Ralph Zucker, president of Holmdel, N.J.-based Somerset Development, which is turning the 150-acre vacant former AT&T campus in Hoffman Estates into a $200 million mixed-use destination anchored by 1.2 million square feet of offices.

https://www.chicagobusiness.com/comm...F574048D0528BA

[the urban politician]

Probably Chicago has seen among the greatest central area rebirths over the past 20 years as a result of forces that preferred city living.

I do agree with others that central city living will remain appealing, but the fears over using public transportation are continuing to be a BIG problem. Whether we want to admit it or not.

And as long as that is the case, suburban office parks are going to start getting a second look by employers. This is a boon for them, but bad news for central business districts, office rents, as well as residential rents in downtown and transit-adjacent areas.

[iheartthed]

This premise doesn't really make sense. The office is one of the most outbreak prone places in society. It doesn't matter whether it's a suburban office park or downtown office tower.

[the urban politician]

Originally Posted by iheartthed

This premise doesn't really make sense. The office is one of the most outbreak prone places in society. It doesn't matter whether it's a suburban office park or downtown office tower.

.......so why would that mean that the premise doesn't make sense?

[SIGSEGV]

Originally Posted by the urban politician

.......so why would that mean that the premise doesn't make sense?

Because as soon as offices are safe to go to (vaccination, effective treatments, disappearance of COVID, whatever), then public transit will also be safe, making that a moot point.

[The North One]

We're really still doing this... we're still acting like there's some kind of urban reckoning because of this virus.

Because office parks are totally not enclosed spaces with circulated air, noooooo.

[BillM]

Office parks as in working outdoors? I can see that as long as the weather is nice.

[the urban politician]

Originally Posted by SIGSEGV

Because as soon as offices are safe to go to (vaccination, effective treatments, disappearance of COVID, whatever), then public transit will also be safe, making that a moot point.

The premise is that that the virus is creating "opportunities" in a forlorn suburban office market that weren't there for the past several years.

How is that premise proving to be incorrect?

[the urban politician]

Originally Posted by The North One

We're really still doing this... we're still acting like there's some kind of urban reckoning because of this virus.

Because office parks are totally not enclosed spaces with circulated air, noooooo.

I don't think there is an "urban reckoning" per se, but I think suburban office parks, which were literally languishing, are seeing a new life because of this. I mean, we can't always like the news but we can accept it.

Anyhow, you are missing the point--it's not about the enclosed office that is the issue--it's about the transportation.

People are eschewing transit for their cars right now, and that definitely benefits suburban office parks over downtown towers. Plus, in a more horizontal office layout (as opposed to office skyscraper), people are less likely to crowd into elevators, which is another concern.

While this may ultimately end when we finally cure ourselves of Covid-19, it's happening and it is reviving the suburban office market.

[MonkeyRonin]

Originally Posted by the urban politician

People are eschewing transit for their cars right now, and that definitely benefits suburban office parks over downtown towers. Plus, in a more horizontal office layout (as opposed to office skyscraper), people are less likely to crowd into elevators, which is another concern.

Office workers are largely eschewing the physical office entirely right now though. Once the current work from home arrangements start to fade away, it'll be because COVID no longer poses a threat - thereby making both office spaces and public transit safe to use.

I agree this is a good opportunity for office parks owners to try to drum up some new business, but I wouldn't be confident in much of anything panning out for them, particularly in the long term.

[iheartthed]

Originally Posted by MonkeyRonin

Office workers are largely eschewing the physical office entirely right now though. Once the current work from home arrangements start to fade away, it'll be because COVID no longer poses a threat - thereby making both office spaces and public transit safe to use.

I agree this is a good opportunity for office parks owners to try to drum up some new business, but I wouldn't be confident in much of anything panning out for them, particularly in the long term.

Yeah, good luck to them, but I think, over the long term, this will encourage even more office consolidation in city centers. If more people move to permanent remote work, companies will trade large suburban offices for smaller footprints in a better location.

[the urban politician]

Originally Posted by iheartthed

Yeah, good luck to them, but I think, over the long term, this will encourage even more office consolidation in city centers. If more people move to permanent remote work, companies will trade large suburban offices for smaller footprints in a better location.

Accepting your logic, it seems it would be to the contrary.

If more people work remotely, a high cost office locale will be meaningless.

I mean, why pay the high rents of a downtown office if it doesn't add value? Prior to Covid the value was having access to the largest and most talented workforce in the region.

But if large numbers of people are working from home.......?

[hipster duck]

If anything, I’d be bearish on suburban office parks compared to downtown. Here in Toronto most of the big financial services companies have their headquarters in downtown office towers, but relegate a lot of back office work to offices in the suburbs.

I can see a lot of companies deciding to continue these jobs as remote work in the future, rather than leasing office space.

[iheartthed]

Originally Posted by the urban politician

Accepting your logic, it seems it would be to the contrary.

If more people work remotely, a high cost office locale will be meaningless.

I mean, why pay the high rents of a downtown office if it doesn't add value? Prior to Covid the value was having access to the largest and most talented workforce in the region.

But if large numbers of people are working from home.......?

The jobs most likely to be shifted to 100% at home will be back office and middle office functions. Creative work and anything requiring customer/client interaction, including upper-level management, executives, and C-suite will have to spend at least some time at the office.

For instance, take Discover Financial. Right now they're located in some suburban Chicago office park. If they were able to significantly reduce their office space requirements, would they be more competitive for specialized talent by remaining in suburban Chicago or moving to downtown Chicago?

[austlar1]

I know two different high-earning professional friends (in their late 40s or early 50s) who hold partnership status in "Big Law" firms with offices in Manhattan. Both own beautiful homes upstate, one in Woodstock and the other in Columbia county. They (and their spouses) started living full time upstate at the start of the covid crisis. Each couple has now decided to give up apartment homes in Manhattan with plans to work full time from their country homes. Supposedly one of the law firms is "rethinking" its need for massive amounts of office space with an eye to creating smaller work environments that involve even higher-ups utilizing temporary office space on an as-needed basis in the belief (perhaps not fully tested) that most work can be performed online from home with an office support staff geared to serving their needs. One of my friends anticipates staying in a hotel on those occasions when he needs to be in the office, and as he is a devotee of good hotels, he is rather looking forward to it. Since he rarely meets face to face with clients, he thinks this arrangement will work long term. His partner, an architect, has similar plans, but he was working from home mostly prior to the health crisis. The other lawyer and his fund-raiser spouse are similarly optimistic about remaining in the country and continuing their high earning careers. I am not sure what this speaks to in general, but I suspect there is a trend emerging from this work-at-home experience that will seriously impact demand for office space going forward in big cities and even in smaller cities.

[dc_denizen]

idea: turn the suburban office parks into small-scale manufacturing centers .

[llamaorama]

All these articles about how COVID is going to make everyone want to live in the suburbs seem to be written by people who are only familiar with cities like NYC or Chicago.

New York and I guess to some extent Chicago and SF, are uniquely dense and crowded, expensive, etc, basically these are very inconvenient places to live and yet there are tons of rich and powerful people who do it.

So you have both strong push factors, a pull factor in the form of long-established upstate rural retreats favored by the upper crust since the days of Rockefeller, AND the people involved all have money to satisfy their desires AND are exactly the kind of people who get their opinions reflected in the Times.

What's missing is that the majority of US cities are low density and the majority of housing inside the urban core is actually still just single family homes with sometimes very generous yards. In most US cities you can get on a freeway and travel at a high rate of speed and therefore live somewhere on the edge and into the core city quickly. The majority of jobs in most US metros is not in huge office clusters and downtowns and their business communities are usually a niche for certain industries. Urban living is either a lifestyle choice or its low income folks in concentrated poverty zones, depending on whether the neighborhood was gentrified a lot. A lot of urban people in most metros reverse commute, and a lot of mass transit infrastructure is utilized for more than just suburb-core peak hour commuting.

What I predict is that while Manhattan and Chicago could be in trouble and some beleaguered office parks in the suburbs could get a new lease on life, the change isn't going to be as radical in cities like Austin. There isn't a huge downtown business community and a lot of office workers are in things like state government, they work in a medical facility or on the UT campus, etc, which might resist WFH for a while. Dense neighborhoods in Austin are gentrified areas whose residents probably drive a car to work in Round Rock already.

[JManc]

Originally Posted by dc_denizen

idea: turn the suburban office parks into small-scale manufacturing centers .

Depends what is being manufactured; something that requires a degree of skill and is relatively high tech, sure because it can sustain a middle class workforce and not erode nearby property values.

[the urban politician]

July 07, 2020
Tech firm lists its whole Loop office for sublease
Snapsheet joins the growing list of downtown companies looking to shed space amid the coronavirus crisis.
DANNY ECKER

A fast-growing Chicago tech company is offering its entire Loop office for sublease, adding to the wave of downtown tenants looking to shed space amid the coronavirus crisis.

Insurance claims technology firm Snapsheet listed its entire 52,165-square-foot floor at 1 N. Dearborn St. on the secondary market after making an increasingly common discovery among local tech companies: remote work is working well.

"We've found that we're just as productive and innovative as we were when we were in the office," said CEO Brad Weisberg, noting that about half of its employees had been working remotely even before COVID-19 set in. "We're just preparing for the future and preparing to scale nationally and internationally. We'll always have office space in downtown Chicago, but we don't need that much right now. We're just exploring our options."

Snapsheet joins a growing list of businesses in the city that are reassessing their office needs as the pandemic has bludgeoned the economy and thwarted momentum for a downtown office market that began the year on a roll. After Illinois enacted a stay-home order in late March to try to contain the outbreak, a steady stream of companies leasing new offices in the central business district and planning new hires began giving way to firms looking to reduce their office footprints amid mass layoffs or to account for more employees working from home or remotely more often.

https://www.chicagobusiness.com/comm...ffice-sublease

[the urban politician]

I find this trend concerning.

I mean, it sort of threatens the whole concept of cities. Even when we are past the Covid crisis, there seems to be an awakening that interpersonal relationships within a physical office are perhaps.....not that productive.

Not good