Flight to Quality: How Office Space is Adapting to a Post-Pandemic World
By Bradley Sampson
The “flight to quality” trend in office is often mentioned in headlines, but why? The reasons should guide tenants in their search, and help landlords reposition their office assets. Put simply – office space needs to compete with the comforts of working from home. It also needs to address the (few) downsides to remote work. It must offer a solution to the distractions of working from home, and the lack of boundaries between work and the rest of life. It needs to aid communication rather than hinder it, and offer a sense of community.
The “flight” from office has gone on for years – only accelerated by the government shutdowns in response to Covid. Companies continue to implement their hybrid work schedules – taking half as much space as they required historically.
For office tenants today, “quality” means quite a few things. It means a short commute from home, a fitness center, on-site food and beverage or the presence of nearby retail amenities. It means outdoor space, natural light, access to public transportation, and bike storage. Quality means tech infrastructure such as high-speed internet, fiber connectivity, and state-of-the-art audio-visual equipment. Smaller tenants want access to a professional conference room with modern technology. Sustainability is also growing in importance for tenants – from sustainable building practices to low-impact building materials, energy-efficient lighting, and reduced water consumption.
Tenants also want flexibility, but it can be taken too far. For example – “co-working” space is flexible, but the office quality is hurt by the distractions & noise, the lack of privacy, limited space, insufficient equipment, and the inability to personalize a workspace. These problems are innate to the co-working or shared office concept. The same issues also apply to companies with hybrid office or even open floorplan designs. See The Wall Street Journal’s recent article: “Inside Meta’s Push to Solve the Noisy Office”. These spaces are fashionable in appearance – but aren’t a solution to the other distractions present at home.
The over-supply of office space in Greater Boston gives tenants the leverage to go where many of these features already exist. For landlords in the area – amenities don’t necessarily need to be in the building – but to have them locally is becoming a requirement for those tenants who have a choice. If an office building doesn’t have the quality that tenants now need, then it’s a value option in the marketplace and must be priced accordingly in order to lease.
Investors are following the lead of tenants in this flight to quality. Buildings that match current consumer preferences give landlords the ability to actually attract & keep office tenants, stabilize cash flow, and de-risk in an uncertain economy.