What? Old school desks work better than WeWork playgrounds? Reinstalling private offices into the growing hordes of ghostly buildings might be worth a try.
By John E. McNellis, director of real estate development firm McNellis Partners, for WOLF STREET:
The office market is grim, heading towards the gloom. According to Newmark, the national vacancy rate in the third quarter topped 17.6%. Downtown Oakland is at 21.3 percent, while San Francisco leads the pack at 24.1 percent. With almost no traditional financing available and supply and demand spread wider than the Grand Canyon, the nationwide office market is at best dormant.
Those praying for her wake (basically, everyone in the estates) need office staff to come back. That’s why some office owners are quietly praising Big Tech’s mass layoffs, hoping that the thousands of now-unemployed engineers will herald a buyer’s market for talent, one so strong that employers can insist that the office be in fact a part of the company. Office work. Some landlords might welcome another dot-com crash, likening it to a Covid vaccination: bad side effects at first, but a much better chance of survival in the long run.
Layoffs could have an impact. JLL reports a slow return of workers to San Francisco — occupancy is up 40 percent since Labor Day — and BART ridership is up slightly.
This big picture scenario is likely to hit some street level speed bumps. As it happens, I walk by one of our office buildings in Palo Alto every single day. It’s been rented out entirely to a tech company, but there’s rarely anyone inside. Last week, a bearded man in mismatched sweats was passing his master key as I passed. I noticed that the building seemed empty most days, and asked about occupancy.
The technician replied, “Maybe five percent.” “Six, seven guys on average. We are more efficient at work than at home.”
“truly? more effective? Does management agree to that? ”
“Maybe not, they want us to go back. But it doesn’t happen. During Covid, we’ve learned to love the quiet at home and the interior is really noisy.” He pointed to the long rows of tables, the typical common working floor plan with dozens crammed side by side. “We only come when we can’t work at home. Or when we need to cooperate, but that’s bad if anyone else is around.”
“Way too noisy. We need smaller rooms so that three or four of us can get together and work without interruption.”
Oh, you mean like actual offices? Just what this tenant took away when he rented the building.
“Yes, exactly. Desks where our small teams can congregate, maybe some for two, some for four.” Google does that, he added; I discovered that its architects hated working cons, and they’ve remodeled its interiors to add more offices since then.
In suggesting that being forced back into the office would lead to a Fallujah house-to-house war with the staff, the technician jammed another pin into the coffin of the office. He said engineers now prefer Zoom to in-person meetings. why? Because focusing on the numbers on your screen is much more effective than staring awkwardly over someone’s shoulder at the office.
But should the sales and marketing guys come back? Don’t they get together to pound their chests, trade lies about their deals and shoot in the break room? Nay, he swore that they wouldn’t come either, and that, if anyone, it was the finance and accountant people who turned up so reluctantly at headquarters.
Finally, he points out, Covid has effectively transformed Silicon Valley from the suburbs to urban areas, freeing up techies to move farther away, to towns where they can buy four-bedroom homes, to homes they can no longer move from. Even if the office space is as comfortable as home and more fun than a free beer, a two-hour drive would be a deal breaker.
In double-checking that certainty with another technician, I asked what it would take to get the Generation Z back downtown. “Own offices, man. Microsoft gives it to everyone.
What? Old school desks work better than WeWork playgrounds? And did it take the virus for everyone to figure it out? Generation Z’s insistence on being immersed in the past is really ironic, but reinstalling private offices in the ever-growing hordes of ghostly buildings might be worth a try.
Written by John E. McNellis. He recently published O’Brien’s Law: A Romantic Thriller, set in 1970s San Francisco.
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