What is the future of office space? Is hybrid work here to stay? Will we ever see the type of office space utilization rates that we had prior to the Covid-19 pandemic? These questions are difficult to answer, but a look at my personal situation could provide some insight.

I started my professional career in San Diego in the early ’90s. I joined CBRE, the large real estate services firm, as an analyst in their Financial Consulting Group. The office was a second home to me. Not only during regular business hours, but sadly during evenings and weekends as well. I am dating myself a bit, but this was before laptops were commonplace; if I remember correctly, I got my first laptop a year into the job.

The office was where my files were located, not just computer files, but physical files with all the info I needed to do my job. At this time, computer programs could not be remotely accessed, so I also needed to be in the office to utilize the tools that were required to do my work. More importantly though, the office was where I learned from my experienced senior co-workers. I learned from their example how to conduct myself in meetings and on conference calls, and how to interact with colleagues, clients, and other professionals. One of the most significant factors that I attribute to my professional success is the time I got to spend with co-workers who ultimately became mentors to me, and many times those interactions came from impromptu meetings, conference calls and client visits that were I not in the office, may have never happened.

Fast forward to today. I believe that hybrid work has changed my life for the better. I have found that 6:30 to 8:30 in the morning are two of my most efficient hours for work – especially if you are not spending them getting ready for the workday and commuting. With the extra time I have throughout the day, I am doing more physical exercise and have taken on additional hobbies, which have dramatically improved my work/life balance. I don’t necessarily need an office to efficiently do my job anymore, as my files and programs are in the “cloud” and readily available wherever I am physically located, and with the advent of Zoom® and other means of communication, I feel connected to my co-workers, and believe we still have the same types of synergies we had when all together in the office each day.

In my informal poll of friends and colleagues, I do not really know anyone who goes into an office five days a week anymore or is planning to do so in the future. Of course, I am in a different stage of my career, and I do get concerned about the professional development of young professionals just getting started. But one thing that I’ve learned is that young people adapt to thrive in a changing environment, and I don’t believe this time will be any different. And, in my discussions with young professionals, they seem to be the most vocal that hybrid work is here to stay.

The office vacancy rate is at 19% according to brokerage firm JLL, higher than during the Great Financial Crisis of 2008 – and that vacancy rate is likely heading higher. If recent headlines in the Wall Street Journal are any indication, we are not going back to the way things used to be.

KPMG, the global accounting firm, is downsizing their U.S. headquarters in Manhattan from 800,000 to 456,000 square feet, a massive reduction in space, showing that they believe hybrid and remote work are here to stay. Lyft Inc., the ridesharing app, is making a similar move by subleasing 45% of the 615,000 square feet they currently occupy. This after telling their more than 4,000 office employees in March that they could work remotely indefinitely. And large financial institutions, like pension funds, are selling office buildings as a changing work environment raises the prospect of lower demand for many downtown offices.

And when employers try to mandate a back to the office routine, employees often revolt, as seen by a recent petition of Apple Inc. employees after being told they would need to be in the office at least three days a week (this after a similar revolt earlier in the year at Apple). These are just three examples of companies dealing with hybrid work and office space during a quiet week in late summer. There are countless stories of other companies facing the same issues.

Selected headlines in the Wall Street Journal, August 2022:

While I do not believe that we are witnessing the death of office space, the pandemic has certainly turbocharged an evolution that had begun years ago, sparked by moves for greater work/life balance, remote work, cloud computing and other factors. It will be interesting to see how the chips fall, but my bet is that hybrid work is here to stay, we will never utilize office space like we did prior to the pandemic and office space as we previously knew it is forever changed.

Scot Eisendrath is Managing Director of Pathfinder Partners. He is actively involved with the firm’s financial analysis and underwriting and has spent more than 20 years in the commercial real estate industry with leading firms. He can be reached at seisendrath@pathfinderfunds.com.