Editor’s note: Ari Laniado is an advisor for Colliers International, where he serves on the leadership of the Tech Advisory Services team, in addition to serving as a licensed agent for the Office Practice Group out of Toronto. He offers specialized support for the business needs of high-growth and venture capital-backed companies. 

Due to the spread of COVID-19 and the immediate shift to work from home, the commercial real estate sector has undergone dramatic change within a short period of time, resulting in mass uncertainty across a number of sectors.

In this post, I will cover some of the recurring topics that we have been addressing from a workspace management perspective. I will also share some of the tips that our team has been giving clients about how to mitigate the impact of COVID-19 on your workspace needs and prepare your workspace for a new post-COVID reality. 

Commercial rent relief and deferral 

If your business has been negatively impacted due to COVID-19 and you are seeking commercial rent relief, simply withholding your commercial rent is not a viable option. While the actual regulation varies by geography, landlords have already begun taking tenants to court and seizing assets. The most effective way forward is to take a collaborative approach, working with your landlord to identify a solution that is mutually acceptable. 

As the majority of commercial office leases did not incorporate clauses to specifically protect tenants from a global pandemic, most landlords will hold the right to deny tenant requests at their discretion. That being said, it is likely in the best interest of your landlord to retain their existing tenants, and we are still seeing successful outcomes for tenants. For example, many landlords have been amenable to deferring rent in the immediate term, in exchange for an extension of your existing lease term, or an incremental increase in your rent over the remaining lease term. And remember, if you are having a hard time reaching your landlord or need some help negotiating, consider bringing in a brokerage to work on your behalf.

Preparing your office for a COVID-19 reality

Use this time away from the office to consider the impacts on future workspace utilization and establish updated workspace protocol for a safe return. Specifically, you will want to focus on the following items:

  • Capacity based on safe congestion and physical distancing of at least six feet
  • Estimated 50 to 60 percent capacity possible
  • Controlled paths of travel for reduced collision points
  • Assigned / dedicated desks (no face-to-face workstations or benching)
  • Rotation of employees and/or teams
  • PPE considerations

Many workspaces will be reconfigured to adhere to safety best practices. With health and wellness in mind, companies will need to decrease their office density to ensure there is enough square footage to provide a safe environment. Prioritize departments and teams to enable a staggered re-entry. Dynamic work models, such as hoteling, will need to be put on hold for the near future as companies seek to limit employee exposure. 

If you are looking to decrease office density, there are a number of options you can consider. Assuming employee numbers are status quo, you can reduce density by rotating staff, incorporating permanent work-from-home policies, and acquiring additional square footage. 

COVID-19 has led many companies to discover that certain departments can operate remotely with little to no impact on productivity. This is among the reasons why 74 percent of CFOs intend to convert a portion of their workforce to permanent remote work models once the pandemic is resolved according to new research from Gartner.

Having a workspace strategy that makes sense for your business as we come out of the pandemic will be critical. Regardless of when we get back to the office, this time can be well spent to consider how much space you will actually need, to put together an updated space plan, and to establish safety guidelines. 

Opportunities for office space

While it is hard to gauge the full impact on the commercial office market, whenever there is mass market disruption, opportunities will inevitably arise. Today, we expect to see a significant opportunity for sublease space coming back to the market. If you are coming up on a lease extension, consider negotiating a shorter term extension or exploring alternative flexible term options to ensure you are able to take advantage of the down market.

Whenever negotiating extensions or renewals, be sure to come to the table with hard data to support your case. If you do not have access to that data yourself, working with a major commercial brokerage will ensure you are armed with the market data necessary to secure the best terms. 

Going forward, subleasing out excess space is going to become much more challenging. If you envision your workforce declining excess space will become a larger liability. The integration of flexible workspace (such as coworking) or permanent integration of work-from-home are both means of mitigating the workspace risk your company is required to take on. 

Coworking’s role going forward

Coworking will allow businesses to better structure their workplace strategy going forward. As many companies face uncertainty and consider reducing on-site staff, coworking offers flexible workspace while unlocking supplementary meeting locations and satellite offices. 

The integration of flexible workspace offerings will allow businesses to reduce the risk of workspace commitments and provide companies the agility to take advantage of market opportunities resulting from the economic downturn. The flexible-term commitments of coworking will put businesses in a position to move quickly on market opportunities. This flexibility will allow businesses to wait for the dust to settle before committing to more permanent solutions. The flexible nature of the sector will also allow companies to seamlessly integrate remote work and flexible workspaces into their strategy. 

Unlike standard office leasing, coworking experienced an immediate and dramatic impact on business, due to the flexible tenant term commitments, high-density layouts, and shared communal space. The impact on the coworking sector has resulted in a favorable negotiation environment for tenants. Providers have already begun offering promotional incentives, making this the optimal time to explore offerings. For anyone negotiating in the midst of work-from-home, ensure that you clarify the office density and negotiate a floating occupancy to avoid playing a guessing game for your return to office.

When will the dust settle?

As of writing this, no one is able to predict an exact timeline for the return to work as normal (although it is already starting to happen in certain locations). We are working with decision makers across all markets to stay on top of the changes and ensure we are able to provide tenants with the most up-to-date information possible. If your business is in need of assistance, or additional insight in relation to your workspace, we are here to provide support.