Tuesday, July 7th, 2020 July7th2020

Sell for More News: Offices expected to move back to the suburbs

Published on July 7th, 2020

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.


After flocking downtown to woo millennials, offices might be moving back to the suburbs.

Companies across the country have been adjusting to entire workforces working remotely. Many of these offices are sitting empty, if only to be frequented by janitorial staff and a skeleton crew of essential workers.

Zoom video calls are replacing what would typically have been meetings in conference rooms filled with colleagues.

Recently, Jack Dorsey’s Twitter and Square tech companies both said employees can work from home “forever.” Google and Facebook, meantime, have told employees they can work from home until the end of this year. Many others are expected to follow suit.

The suburbs may provide an acceptable solution

What was once a land grab for downtown real estate could pivot to be a rush to the suburbs, where space is plentiful and social distancing is much easier to enforce.

“Is office space going the way of retail in five years? That’s what investors are really trying to understand,” said James Farrar, CEO of real estate investment trust City Office REIT, which owns 66 office buildings in several major cities including Dallas, Denver and Seattle.

“I think you will see more and more tenants leave the city,” he said. “There will probably be more satellite offices, where people don’t have to be downtown. There will be more part-time working from home.”

And millennials might end up driving this trend — again

It’s been reported that 27% of adults in the U.S. are considering moving homes because of the Covid-19 crisis. But an even greater 43% of millennials, within that group, are considering a move. Many are looking to the suburbs and rural towns, the survey said.

Meantime, new recommendations from the Centers for Disease Control and Prevention on safe ways for employers to reopen their offices say:

    • Workers should commute alone (no subways)
    • Desks should be positioned 6 feet apart
    • Communal coffee pots and snack machines should be replaced with single-serve options
    • Windows should be opened to try to help regulate air flow
    • Elevator use be limited

That last guideline does not bode well for towering office buildings…twenty flights of stairs, anyone?

Is the work-from-home craze real?

Still, many experts agree that a permanent work-from-home setup is not ideal for many.

They say that it’s not working from home that people want to do forever…it’s the shorter commute they want.  They still want an office but they want that office to be closer to home.

For that reason, having satellite offices closer to their workforce is starting to make more sense for many businesses.

Also look for office users to seek first floor space…to avoid having to use an elevator.  And having outdoor space will also be increasingly important.

The downturn appears to have already started

Nine of the 10 largest office markets in the U.S. recorded increases in vacancy rates during the first quarter. Downtown vacancy rates increased by 30 basis points, while suburban vacancy rates were up just 10 basis points.

We’re definitely seeing more tenants coming out of the city looking for suburban space. But let’s be clear about what they’re looking for…smaller space…and shorter-term space.

A skeptics view

Some say companies have begun to question the need for physical office space at all, as the necessity of work from home provides a real-time and real-life look into a potential future with fewer workers in offices.

As firms reduce headcount and cut costs to weather the recession, office real estate will be at the top of the list to shed, and the pandemic concerns will be a convenient scapegoat.

(FREE PROMOTION) Find out how much your property is worth, for free, before you list it for sale. Get the blueprint to sell your property for the highest price the market will pay (click here)

How to get an unfair advantage.  Click here to join Sell for More Club today.

Own a business?  90% of business owners don’t know the market value of their business.  If you’re considering selling a business, click here for a free business valuation.

About Beau Beach, MBA CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 800-721-3287, click to schedule a call or Beau@soldbybeachwood.com