How Viable Is a Physical Office Space These Days?

By Andrew Martins,
business.com writer
|
Aug 24, 2020
Image Credit: sl-f / Getty Images

Thousands of businesses went from physical to virtual work environments since March because of COVID-19. What is the future of physical office spaces?

As the novel coronavirus continues to gum up the workings of everyday business in America, companies are considering their reopening strategy. With many people having worked fully remote for the last six months, many of those same companies are wondering if reopening a physical office space – and incurring monthly expenses like rent and utilities to do so – would even be worth it.

Office closures are becoming the norm

As of mid-August, parts of the country will have been under state-mandated quarantine for six months. While that means different things based on the number of confirmed cases of COVID-19 and the political wills of elected officials in each state, the fact remains that large swathes of the U.S. economy have been largely reduced compared to the same period last year.

Employers are hurting, and though the government has tried to step in to assist in the past, the potential for additional aid from Washington D.C. is on temporary hold until September, leaving business owners to make some tough choices. While that has led to mass layoffs, triggering a massive spike in unemployment claims in recent months, other business owners are looking to cut other operational costs.

With 55% of the workforce no longer coming into the office while states pushed to "flatten the curve," a report conducted by Motus earlier this year estimates that approximately 11 billion square feet of office space was suddenly left vacant. Despite those vacancies, business owners were still left holding the bag for their ongoing office costs, losing approximately $54 billion in the process.

The issue of paying for physical space you don't need isn't just an American issue, as small business owners from around the globe have had to deal with the problem during their lockdown. Patrick Garde, co-founder and technical director of ExaWeb, said his company has been fully remote since mid-March, but since they renewed their lease last June, they've had no way of getting out of their lease for a nearly 646-square-foot office space for 10 people.

"[The cost] affects our bottom line because we pay rent monthly, and it somehow affects our cash flow even though we rarely use the office," he said.

For small businesses, these unavoidable costs can often be too much to return to the old status quo. After conducting a cost-benefit analysis to see if keeping a London office open was financially worth it in the long run, Helen White, co-founder of houseof, said the perks of having an dedicated space don't do enough to outweigh the costs.

"These last few months have certainly led us to reassess office space requirements long term, and we have put in place a long-term remote working policy while retaining our office space," she said. "It's very possible that future hires for our team will also work on a blended remote basis, depending on the type of work they're doing. Ultimately, it comes down to the individual, their personal working preferences and where they feel as though they can do their best work."

Earlier this summer, The Washington Post reported that nearly half of the country's big companies failed to pay their rent in May, with some warning they "will not be able to pay rent for months." This was taking place with massive retail chains like Bed, Bath & Beyond, H&M, and even movie theatres like AMC and Regal. Recently, some high-profile office closings highlighted a potential paradigm shift in the workplace – the days of physical office space are numbered for many companies. Especially for smaller businesses that don't pull in nearly as much revenue as those larger corporations.

"Office demand has drastically shrunk, [and] most companies are in a wait and see mode," Adam Segal, CEO and co-founder of Cove, said. "This has led to every organization reconsidering the role of the office and its place in the future of work moving forward."

Are dedicated office spaces still necessary?

As more businesses conduct their own cost analyses for either keeping or moving into an office space, the question of whether such a space is even necessary will inevitably come up. After being proven for months that employees can fulfill their responsibilities at home, that question will likely become more commonplace. For many small business owners, however, the answer is a mixed bag.

Andres Lares, a managing partner at the Shapiro Negotiations Institute, called having a dedicated office space a "nice to have, but not a need to have" for their job. Still, he admitted that there are both pros and cons for maintaining a cohesive office environment.

"Remote work is efficient – possibly more efficient due to the many tools we use, such as Teams and Zoom, so we continue to stay well connected. However, being in person at an office does have some benefits," Lares said. "Deeper relationships are built in person faster. People collaborate at a higher level. In the perfect world, we would do both as we did before – mainly work from the office but have the capacity to work remotely and do so from time to time for added convenience."

For many businesses, the question doesn't even fully revolve around the necessity of an office space, but rather the needs of the employees. After spending months at a time cooped up in their home, it's easy to understand why many workers would realize they prefer their old dedicated office space to the kitchen table they were forced to share with the rest of their household.

Without an official place to meet with clients in a conference room or a dedicated location to add to your company's perceived legitimacy, some said they felt office spaces were absolutely necessary moving forward, despite the fact that they could continue operating without one.

"The problem is that not everyone wants to work from home or remotely and that sometimes, you really need an office when you want to invite someone over for a meeting," said Dmytro Okunyev , founder of Chanty. "While video conferencing is fine, some of the best deals we've ever made were done in person. So, in order to make the best of both worlds, we are not giving up on office space altogether. We are merely downsizing and giving everyone a choice to work where they feel at their most productive."

By using that tactic, Okunyev expects the company will save money for office space while still providing an official space.

Ultimately, the answer as to whether your business still needs a dedicated office space comes down to the business's specific needs. Regardless, what happens next over the next few years for office spaces as a whole will remain largely affected by COVID-19.

The future of office spaces

As the world continues to climb its way out from under the malaise of COVID-19, businesses are going to have to adjust to the new normal that came from having to let their workers operate remotely. In many industries, it was the first time that people were able to see how well they could complete their responsibilities away from a dedicated office space.

While companies lost money on their empty office spaces, remote workers acted as a potential net positive for American business. Previous studies have shown that productivity has a chance of going up in a remote work setting, and despite the growing pains that come from switching to a completely remote workforce, a study from Global Workplace Analytics (GWA) estimates that the U.S. economy would massively benefit from a major adoption of remote work.

According to researchers, the U.S. economy would receive an infusion of approximately $700 billion per year in savings if the country's "telework-compatible" employees could work from home half the time. That kind of windfall would be comprised largely of $500 billion per year in "real estate, electricity, absenteeism, and turnover and productivity" savings, researchers estimated. That amount of yearly savings translates to about $11,000 per employee. Furthermore, researchers at GWA also estimate that the national productivity would increase by "5 million man-years, or $270 billion worth of work" and give consumers back up to two to three weeks' worth of free time per year,  thanks to their reduced commute.

Looking forward, White said the future of her company's office space will be vastly different compared to the way things ran prior to the COVID-19 pandemic, with office visits becoming "an occasion and a treat."

"Our trip to the office is not a time to sit at a solitary desk in silence but to interact with our co-workers," she said. "This means banks of desks, and their lighting schemes are becoming redundant."

With a focus on potentially switching to a hybrid office/work-from-home model, Cove said companies could bring about a fundamental change to how workers do their work.

"The future of the office is unlike anything we have traditionally seen," he said. "Previously, there was a strong emphasis on an everyday desk or office. Moving forward, companies will, by and large, take a remote-first approach that enables employees greater flexibility to choose when and where they work. The office will largely morph into a place to come together, as opposed to being the required 9-to-5 everyday solution."

One area that Cove said could very likely remain, despite the need for physical distancing, is the open-office layout. Though the cubicle may make a brief return in some form as a safety precaution for people starting to get back to the office, he said the open plan is an "efficient use of space, but a bad use of space" if it's the only way you're using the entire square footage.

"In a world where there is less-dedicated desking, the open plan will provide one of many options from which to work, including private closed doors, spaces for calls and meetings, along with more informal spaces to gather like kitchens and work lounges," he said.

I am a former newspaper editor who has transitioned to strictly cover the business world for business.com and Business News Daily. I am a four-time New Jersey Press Award winner and prior to joining my current team, I was the editor of six weekly newspapers that covered multiple counties in the state.
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