The Impact of Work-From-Home and Hybrid Offices on Real Estate Trends

For many, the COVID pandemic was an unprecedented opportunity to live wherever they wanted

Whether the wealthy were fleeing to their second homes or families looking for a lower risk environment, coronavirus migration has been a significant disrupter for cities with smaller cities, towns, and communities initially benefiting. So how has this changed the real estate market, and will it last?

“Residents of America’s largest cities are looking for more space, but they also want to live where the restrictions to manage the pandemic may be less burdensome in their daily lives,” David Greenberg, Founder, and CEO of Updater. “Additionally, there’s been widespread acceptance of remote work. For many Americans, this is an unprecedented opportunity to live wherever they want.”*

But in many cases, this is just an amplification of trends that already existed. New York City, for example, was losing 376 residents per day to domestic migration in 2019, according to the U.S. Census Bureau’s latest survey of population shifts.*

Impact of New York City’s Migration to Connecticut

In Connecticut, Litchfield County was the initial beneficiary as buyers hunted for getaway options yet planned to keep their residence in New York City.

“Litchfield [County] got on the bandwagon last year real early — their May last year was big. That’s when they apparently hit Litchfield first. … It’s a lot of [people] who want to have a reclusive second home in the country.”

~ Paul Breunich, CEO of William Pitt Sotheby’s *

Connecticut owners of expensive estates took the opportunity to cash out in a hot market, with many downsizers moving into luxury apartments closer to the shoreline.

Those looking to permanently leave the city may have taken more time to investigate their options, for as we head into the summer of 2021, sales continue to accelerate. Buyers, particularly near the Long Island Sound communities, appear focused on remaining within commuting distance, perhaps predicting a future hybrid work arrangement, and expecting to make multiple trips weekly to New York City.

Is Hybrid a Short-Term Fad or a Long-Term Trend

The primary concern for returning to the office is that of health safety. However, many believed that employees look forward to collaborating in person once their employers implement adequate safety measures. Social distancing, encouraging vaccinations, temperature-checking before entering a building, improving building air quality, and advanced HVAC technology are combined and assumed to provide a safe work environment. Every business plans for the “Great return to the office” — getting people back to the office regularly.

Unfortunately, not everyone wants to go back to the office full-time. According to one study, 40% of people are thinking about leaving their current employer, and we are likely facing nothing less than a talent revolution. While younger workers may feel that remote work hurts their career growth*, older, more experienced workers are willing to take a pay cut to have choice and control over when they will be in the office. To address the concerns of both groups, a hybrid arrangement, where people spend 2, 3, or 4 days in the office and the rest working from home, appears to be a healthy compromise.

While life is beginning to return to a recognizable version of “normal” for many fully vaccinated people, there is still a large percentage of unvaccinated people for many reasons. To comply with nondiscrimination laws, private employers must provide a “reasonable accommodation” for employees who choose not to vaccinate due to disability, sincerely held religious beliefs, or pregnancy.

The United States Equal Employment Opportunity Commission Guidance offers examples of reasonable accommodations. These include, but are not limited to, requiring unvaccinated employees to wear a face mask, to work at a social distance from coworkers, to work a modified shift, to get periodic Covid-19 tests, to have the opportunity to work remotely, or to accept a reassignment of their work duties.

Therefore, we know the future of work will be hybrid, with many people working from both the office and from their homes. Even companies that want full-time in-office workers will have to adjust due to regulations and because talent is scarce.

Incorporating WFH or Hybrid into your Home

Every employee had a different Work-From-Home (WFH) experience.

Some had large homes with dedicated work areas, and some had to share their space with roommates or children. While some people enjoy not having a commute, others miss it and the separation of work and home life.

In addition, many employees miss the camaraderie and socializing of working with others in the office. Many factors influence employees’ desire to come back to the office, and while all these factors matter, but not all do to the same degree.

Employers develop Workplace Strategies to outline hybrid schedules and workplace accommodations and reconfigurations based on the percentage of employees in the office on any given day.

Satellite Offices

Some businesses with employees that cannot work from home but are hesitant to work full-time in the office have a “satellite” branch office that is physically separate from the organization’s main office. The satellite office is usually in a strategic location outside the city or in a small town close to most of the team members’ homes and other potential local recruits. These offices are outfitted with technology for virtual communications with the main office and furnished for a small team to meet and collaborate locally.

Apartments with Work Centers

Other employees left the city and moved into luxury apartments in the suburbs. Especially with people coming out of New York City, they’re coming because it’s a good value. You can rent a two-bedroom apartment here for less than you can rent a one-bedroom in the city.* A recent trend for these apartment complexes is the addition of club rooms, lounges, or private workspaces to address the needs of the Work-From-Home employee.

When residents spend a more significant percentage of their time working remotely, their relationship with their residence changes

Luxury Apartments Adapt to Work-From-Home

Long before WFH became the norm, the number of people that did some work from their home was steadily increasing. Side-gigs, day-trading, and semi-retirement all had people working in their homes. In the last decade, Building and Land Technology (BLT), a leading developer in Stamford and Norwalk, CT, has built over 3,800 apartments in Stamford, remaking much of Stamford’s Harbor Point. But their latest development, Escape, has been attracting people from New York, downsizers, and empty-nesters looking for a combined work/home environment and want that modern luxurious energy and lifestyle.

BLT created Escape, similar to Allure – BLT’s other waterfront property, by working with designers, architects, and customers to identify different ways to accommodate WFH – Zoom rooms, private office additions, roof-top patios, and BBQ / fire-pits for outdoor gatherings. BLT knew that the resident’s satisfaction with being at home during their workday would influence their overall experience of living at Escape. It important that the residence makes them feel welcome as residents and as remote workers.

Escape

Allure Rooftop

How Stamford's BLT Adjusted to Tenant’s Lifestyle Changes

With practically everyone suddenly working from home last March, residential buildings went to 100% occupancy 100% of the time. Some commercial buildings stayed occupied, yet others went to 100% Work-From-Home. So how would BLT keep all tenants happy?

Since 2020, the BLT residential properties have added a new feature to attract and retain tenants – Amenity rooms converted into coworking workspaces for Work-From-Home employees. “Amenities were previously busy only on the weekends, when tenants wanted to host a dinner party or reserve a space to watch a movie. Over the past year, the extra spaces have become essential for tenants looking to break up the monotony of working all day inside their apartments.” Said Ted Ferrarone, Co-President of Building and Land Technology. “Now, we build these spaces out. They’re almost like workspaces, and this will be all filled with tables and desks.”*

Beacon Great Room, courtesy of BLT

Workspaces, courtesy of BLT

Workspaces with Wifi, courtesy of BLT

Club Rooms, courtesy of BLT

Many luxury resident apartment buildings have been eliminating business centers in favor of more thoughtfully designed spaces like the “Living Library”. Areas that function much like a coworking space, but in a setting that is more private for residents, with a dedicated space to work, network, and socialize, according to Mike Handler, Co-President of Building and Land Technology.

COVID's Effect on Commercial Properties

Because employees were concerned for health safety, BLT worked with some leading scientists to develop ways to redesign their commercial workspaces. Many of these temporary changes have been so effective that they are staying permanently, such as increased ventilation and filtration, UV sanitation, and Bi-polar ionization.

“Fresh air technology, such as increased filtration and disinfection, have been adapted through-out our portfolio.” says Mike Handler. BLT redesigned their headquarters at 1 Elmcroft Road in April as a post-COVID prototype. They started with this building as the structure is unique. It is a “groundscraper” or a skyscraper laying on it’s side where employees can “drive-to-desk”. Workers can avoid public transit by driving and parking on the same level where they work, sidestepping elevators and other potential cross-contamination threats.*

BLT partnered with tenants and scientists to enhance the office experience. One universal concern was how to engage with outside visitors. So, BLT built “the cube” in their lobby – a conference room made entirely of glass for employees to meet with guests. It boasts the latest technologies to collaborate with remote and in-office employees and is constructed out of glass walls,which are continuously disinfected with Far UV technology.

BLT also re-arranged the cleaning cycles from evenings to daytime so tenants could see the cleaning of their workspaces. Some changes were symbolic tactics to make anxious employees feel safer, and some, such as employee education, bringing in hospital-grade testing, and vaccinations, yielded significant gains. An underlying concept was to be open to being wrong when learning about the virus. One such example was discovering that thermal scanning was not a valuable tool to identify infections.* We’ve learned that temperature-based screening, such as thermal imaging, is ineffective at determining if someone definitively has COVID-19 because, among other things, a person with COVID-19 may not have a fever. Last spring, some protocols were put in place that we wouldn’t recommend today because the scientists know more about how COVID is transmitted. “If you take the advice of scientists and apply it to technologies and training of employees, you can certainly get back into the office effectively and safely,” says Mike Handler of BLT. With all their changes, 1 Elmcroft Road has had over 150 employees working safely and successfully in the office full time since last August.

“Of course, there are trade-offs. Improved air filters shorten the life of mechanical systems and energy usage increases dramatically. 30% fresh air is against all previous building design where we sealed building envelopes to control air flow and reduce energy costs.” Mike also identified that “… it’s a lot cheaper to have people sitting closer together, now costs will increase as we de-densify.” He concluded that businesses would probably need to focus on furniture’s flexibility to allow for changes in density. “What we’ve experienced is a dramatic improvement in terms of our ability to collaborate and get work done. I don’t think there’s any doubt in our minds that getting back in the office has been a positive step.”

Due to COVID, most employers know the loss of an employee’s productivity when they are not in the office and cannot connect remotely. And unfortunately, 2020 will probably not be the last time a viral pandemic impacts all our lives. Yet, the lessons we learned, the changes implemented in the previous year, and the adaptations of our lifestyles will continue to evolve, as will our residential and commercial real estate properties.