CREJ

Page 6 — Office & Industrial Quarterly — March 2021 www.crej.com OFFICE MARKET UPDATE INTERIOR ARCHITECTURE acquilano.com 303.893.5355 acquilano.com / 303.893.5355 Locally owned and operated since 1986, Acquilano Inc. is celebrating its 35th year in business! Thank you Denver for your support over the years. We look forward to helping our community safely return to the workplaces we love. O ffice workers are facing a new environment and reshaped daily routines. Some large tech firms have announced a full transition to remote work, raising questions over the future of the traditional office model. For the vast major- ity of companies, office space will remain essential to their operation, though many will adopt a more flexible model that allows for some days to be remote. Uncertainties weigh on property performance. Companies put long- term commitments on hold as they await greater clarity, pushing the national office vacancy rate up. More sublease space will come to market at discounted rates as firms seek to offload unused space, par- ticularly in denser downtown cor- ridors and larger markets. New realties are shifting buyers’ concerns. The need for office space still is apparent and highly desired among the majority of workers, which will continue to attract inves- tor attention. While it is more dif- ficult to locate available assets and acquire lending, buyers are search- ing for properties designed for a post-pandemic world. Smaller markets and suburban areas are poised to benefit from the shift in demand characteristics. The workplace will be more flex- ible. With reentry into the work- place still on the horizon, firms and employees are finding new ways to manage in a virtual world. It is estimated that about 37% of U.S. workers could plausibly do their jobs from home, which will lead to a greater adop- tion of a hybrid model that allows for partial remote work. In a recent survey of office- occupying firms, 82% will allow par- tial remote work because employees are demanding more accommoda- tions in an uncer- tain environment. Independent work can be done at home, while the office will be a space for collabo- ration and meet- ings. Offices will become larger to make more room for workers following 10 years of condensing the traditional private suite from roughly 250 square feet to just under 200 sf. Secondary and tertiary mar- kets are becoming popular. In the years leading up to the pandemic, employers were adding more office space in secondary and tertiary markets to access a larger talent pool and lower expenses. While most markets in the second quarter registered softening demand, some smaller metro areas remained more stable. The pandemic will accelerate the movement to smaller markets and suburban areas as businesses transition to a more decentral- ized hub-and-spoke model. This has been highlighted recently by Health crisis redefines submarkets attractiveness Brian C. Smith, CCIM, SIOR First vice president, investments, and director, Healthcare Real Estate Division and National Office & Industrial Division, Marcus & Millichap Please see Smith, Page 18