Three New Realities of the Post-pandemic Commercial Building Industry

The way we interact with buildings has changed dramatically in the past twelve months.

I don’t just mean the months of working from home, and the shift towards virtual teams - although that has upended the global commercial real estate market over the past year. But for the first time, the general public has been thinking critically about the buildings in which they spend time, and asking themselves “is this a safe and healthy space for me to be in?”.

The commercial real estate and property management industries are facing many hurdles in how to proceed in this new reality; these are uncharted waters with very little precedence. Here, we break down some of these new realities, their impacts, and what solutions will continue to drive industry growth.

Office buildings will see a reduction in tenant populations, while flexible use-of-space solutions will increase in relevance

As global vaccination distribution unfolds across 2021, we’ll start to see a staggered return to office environments. That likely can’t come soon enough for building owners and landlords. Many office buildings have been nearly empty for months, and lease renewals remain top-of-mind for many owners.

Working from home has changed our collective perception around the utility of having an office space. A 2020 Global Workplace Analytics report found that 68% of respondents are very successful working from home, with both employees and managers expressing satisfaction in work output during that time. However, the desire to work from home indefinitely is quite low, with the same survey seeing only 16% of respondents wanting to abandon offices entirely. The new consensus seems to be a shared-location setting - working partly at home, and partly in an office environment.

What does this mean for offices? Firstly, it points to the need for workspace use flexibility. If employees are at home half the time, then employers don’t need as much floorspace per employee. Co-working spaces will continue to see a rise in relevance (even WeWork’s crash and burn can’t dampen the rise in demand for flexible work environments). For companies that continue to lease their own space, desk-sharing and common-use workstations are likely to increase in relevance, while the need for individual private offices will reduce.

The good news is that commercial office properties are going to remain relevant, even if landlords need to shift their lease agreements. But the value proposition for tenant attraction and retention has changed, and landlords will need to adapt their sales strategies to promote flexible use-of-space solutions. Offering space with a smaller square footage may be in higher demand, as workplaces shift to a hybrid in-person / work-from-home schedule.

Building health and sick building syndrome are now a permanent concern

Before 2020, very few people thought about the quality of the indoor air around them, how it impacted their health, and whether there was a heightened risk of airborne transmission. That perspective has been permanently changed, in large part to COVID-19.

Sick building syndrome has been a longstanding consequence of spending time in buildings that aren’t healthy for its occupants. Symptoms can include anything from headaches and nausea to respiratory ailments, and have a negative impact on productivity. Some potential causes include poor ventilation, a high count of volatile organic compounds or formaldehyde, or biological contaminants like mould, bacteria, and viruses.

This last point was particularly sobering in 2020. While it is still not conclusive on COVID-19’s transmission efficacy in indoor spaces, building science is well-established that viruses spread more easily in buildings. Buildings with conditions that generate sick building syndrome are also at a higher risk of viral transmission, including COVID-19.

Increasing air exchange rates, better air filtration, and more frequent cleaning schedules have become a priority in 2020. Combined with social distancing and travel bans, these solutions have had the unintended but positive effect of reducing other illnesses, such as influenza. There is a direct correlation between a clean and healthy building and reduced illnesses - including sick building syndrome. Now that we’ve spent the last year enacting these healthy practices, property managers should keep them in mind as a way of ensuring their tenants’ safety.

Implementing energy efficiency solutions is good for a building’s short-term and long-term value proposition

The real-estate economics of COVID-19 have been nearly catastrophic. Commercial building asset values have decreased, while some economists are predicting that 2021 could be an even worse year for the industry. As a dizzying number of small businesses close their doors, the number of vacant properties is increasing. In the meantime, those properties continue to consume energy and cost building owners money.

There is good news on the horizon as vaccination rollout increases and the economy moves into recovery mode. At some point in 2021, new businesses will be establishing themselves, and new lease agreements will follow shortly thereafter - with a large supply of available spaces for those businesses to consider.

What will give one commercial space an advantage over another in attracting and retaining new tenants? In addition to cleanliness and health improvements, energy efficiency retrofits is a key marketing and financial tool that real estate owners can use. These retrofits significantly reduce a building’s operating costs. These savings can then be passed onto tenants as more affordable rent - undercutting the competition on rental rates. More commercial tenants are looking to demonstrate their corporate values by leasing space in a sustainable building, while increased building regulations and net-zero building plans are becoming more common in both Canada and the United States.

Investing in energy efficiency solutions has the positive short-term effects of reducing operating costs and increasing tenant attraction and retention rates. In the long-term, it will likely help future legislative and building code compliance and increase asset value, as well as the building’s operational lifecycle.

ioAirFlow can identify solutions to help buildings become more energy efficient. If you’re conducting energy audits  and want to be able to identify more problems and propose more solutions, get in touch with us and learn how we can help you.

By: Matt Schaubroeck, CEO, ioAirFlow