The COVID-19 pandemic has challenged some of our fundamental assumptions about commercial real estate. Now that offices are public health hazards and remote work is proving (for some) to be so productive, companies face significant pressure about how to use their workplaces, not to mention how much use those spaces will actually receive. And with home delivery facilitating so many of our shopping needs, will brick-and-mortar retail ever return to relevance?
Preparing for the coronavirus’s impact on real estate requires front-end decision makers to not only understand what their financial obligations might be for their real estate, but also what rights they might have that could enable them to void or restructure a commercial office lease. The challenge will be getting that data from back-office teams where it’s often stuck in a data silo.
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With the right real estate tech, however, leaders can unlock that data before they start making hard decisions about commercial properties. Pinterest did this when it decided to abandon plans to lease almost half a million square feet of office space in San Francisco. The decision cost the tech company nearly $90 million in termination fees — a huge sum, to be sure, but one that’s presumably smaller than what Pinterest would’ve paid to lease the wrong space.
The Challenge of Commercial Lease Management
Like Pinterest, many companies will need to make complicated decisions about their corporate lease management to weather this pandemic’s impact on real estate. And with so much up in the air, the right steps look less obvious than ever.
Companies must make difficult choices about remote work:
- How viable is it long term?
- How do we blend on-site and remote work?
- What if things change suddenly again?
They also need to rethink their existing office space:
- How do we ensure social distancing?
- Do we need more or less space?
- Do new work environments hurt collaboration and productivity?
On top of all that, companies also need to question commercial lease agreements themselves:
- Can we restructure the agreements?
- Are lower rents possible?
- Is it a smart time to take more or less space?
A recent survey from Gensler showed that only 12% of workers want to be fully remote, while 70% want to spend the majority of the week in the office. This suggests that we won’t go 100% remote — but we won’t return to the office of the past, either. A “new normal” appears inevitable, and everyone will need to adapt.
That may not mean moving spaces or doing anything significantly different. But it will mean questioning everything about the current approach to corporate lease management — perhaps with the aid of the right proptech platform (or other emerging technologies in the real estate sphere).
Disruptive Real Estate Tech for Disruptive Times
The pandemic puts extra pressure on how companies utilize commercial real estate, but the situation wasn’t perfect before the pandemic, either. In 2018, well before COVID-19 had entered anyone’s mind, 77% of companies surveyed named space data accuracy as a primary goal for their real estate team. This isn’t surprising, considering that, globally, only 13% of organizations occupied their office space more than 80% of the time and 37% of workplaces were empty on any given day.
This data proves that finding the optimal use of commercial real estate has never been easy — the pandemic just adds another layer (or five) of complexity. That’s why proptech in all its forms will be essential. The real estate industry has historically been slow to embrace technology. At this tipping-point moment, though, there’s no way forward that doesn’t put proptech and real estate tech at the forefront of the industry.
With the right software in place, companies become proactive and prescriptive in normal times and adaptive in abnormal times. When the right people have access to the right data, along with the ability to communicate and collaborate around decision-making, real estate can promote growth. But without a proptech platform to enable those capabilities, questionable commercial leases and poor use of space can hinder growth.
This is the moment when corporate lease management finally goes digital. Will your company be an early adopter — one that uses real estate tech to come out of the pandemic stronger — or will you wait and see what happens?
About the Author
Andrew Flint is a co-founder at Occupier, a transaction and portfolio management software helping commercial tenants and brokers manage their real estate footprint. Occupier’s software helps teams make smarter, more informed lease decisions by centralizing the way they work; in turn, teams ensure alignment between their real estate decisions and business successes. Andrew has a wide breadth of experience in the sales and commercial real estate spheres and is currently based in New York City.