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Howard Greenberg: Today’s normal and the new normal

16 Aug2021

Howard Greenberg: Today’s normal and the new normal

As of this writing, office attendance continues to be very low not only in Westchester, but generally in most markets. Remote work continues to be popular with many employees, as it eliminates the time spent commuting and increases personal time and flexibility.

The “hub and spoke” model (where large companies would open small suburban satellite offices so employees would not have to commute to New York City) that was touted early on as the preferred office model early in the pandemic has not materialized.

As large companies in New York City are now generally looking for their employees to come back to their main offices, I doubt it will. Early in the pandemic, many companies were researching suburban spaces as backup plans. But the quick success of remote working (and now the widespread push to return to NYC offices) now makes this concept a nonstarter. In any event, it would have meant leasing small spaces for short-lease terms, so there would have been no significant positive effect on the suburban commercial real estate markets.

The recent rapid growth of the Delta variant is concerning and is prompting both private and publicly held businesses to insist that their workers be vaccinated or be subject to stringent masking, social distancing and testing protocols.

Not too long ago, I anticipated that most businesses would be back to the office after Labor Day. Based on recent events, I am now pushing that back to at least Oct. 1. Whenever the “all hands on deck” return to offices occurs, it will almost certainly be in a hybrid work mode, where employees work two to three days per week in the office and two to three days remotely. I believe that this format will last for quite a while, but at least it will reinstitute in-person training, mentorship and collaboration, which have been missing during the 18 months.

As I speak to my clients and to others, business generally continues to be strong, and there are very few issues managing employees who are working remotely. The largest business issues I hear about relate to supply chain issues for those businesses that are product centric.

From a real estate perspective, space showings and leasing in Westchester are increasing. My colleagues and I are not exactly sure why, but many feel there is pent-up demand for space and tenants are interested in a “flight to quality” as building owners are sharpening their pencils to retain existing tenants and to attract new ones.

There is no question that Covid will permanently alter the office landscape. Pre-Covid, much of the last 10 years or so have been spent “densifying” office space — putting as many people in small cubicles as possible to reduce occupancy cost per person.

The realizations of how germs are spread through air circulation learned during Covid will now change this. But so far, office users are not demolishing their space and rebuilding it. The hybrid work model will automatically take care of this issue as only a portion of the workforce will attend the office on any given day.

In the near future at least, offices will be more like hotels. Every desk will be a “clean desk” with nothing left on its work surface at the end of the day. An employee in the office on Monday will be assigned a workstation for that day. The next day, another employee will be in that same workstation, after it has been cleaned and sanitized. There will likely be no more than 40 or 50 per cent of a full census in any office on any given day, automatically cutting the density in half or less. There may be a new paradigm for office buildouts in the future, but as most businesses are not back to the office in any meaningful way, it has not yet been created.

Building owners are investing in touchless technology for entry doors, restrooms and other areas, as well as upgraded HVAC systems to make employee occupants feel more comfortable indoors. New outdoor amenities (where possible) are also being developed to promote in-person interaction in a healthier environment. Cafeterias, fitness centers and common areas are being updated and refurbished to make buildings more attractive to employees who have been used to working alone at home.

There is no question that vacancy rates are increasing, as some businesses are reducing their footprints, with a very few deciding to go fully remote. There are also some coincidental events that explain this. For instance, there are two office buildings on Interstate 287 that are being held off the leasing market as their owners apply for approvals to demolish those buildings and construct mid-rise apartments on their sites. PepsiCo is letting its 378,000-square-foot lease run out this year at 1111-1129 Westchester Ave. as it was only meant to be used as temporary space while its Purchase headquarters campus was being completely refurbished. And Alliance Bernstein has vacated approximately 250,000 square feet of space at 1 N. Lexington Ave. in White Plains, pursuant to a previously announced relocation to Nashville, Tennessee.

I hope that we will all return to normal no later than early 2022 and that the economy continues its strong performance. Westchester is certainly in no worse shape than many of its competing suburban markets in the tristate area and its troubles are not of its own doing. Our efforts to reduce our office inventory through repurposing (i.e., to uses such as residential and medical) will continue to help, but the key question is how the world (not just the county) will change post-Covid.

Howard E. Greenberg is president of Howard Properties Ltd. in Valhalla, New York. He has been a prominent commercial real estate broker for over 35 years and founded his own firm in 1998. He specializes in tenant representation and corporate services for clients in Westchester and throughout the United States. He can be reached at (914) 997-0300 or at
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