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The pandemic’s effects on the workplace can offer lessons for the future

Jeff Engelstad

Jeff Engelstad

We’re all too familiar with hearing about businesses closing, offices shuttering and workers setting up at home as a result of the COVID-19 pandemic. But now that the commercial real estate industry has lived in this reality for more than a year, we can examine how the pandemic affected ongoing trends—and what that means for the industry moving forward.

Jeff Engelstad, a professor of the practice with Franklin L. Burns School of Real Estate and Construction Management at the Daniels College of Business, says that while COVID-19 has certainly presented new challenges to the commercial real estate industry, many of these changes began long ago, and the lessons we’ve learned throughout the experience can provide a glimpse into the future.

The working-from-home shift is a prime example. Engelstad says many organizations were already testing the waters of remote work as far back as the early 2000s, when suburban offices were thriving and fast internet connections were becoming more reliable. But COVID-19 caused it to happen rapidly and on a grand scale, whether these organizations were prepared for it or not.

“We were all forced into a grand experiment of working from home, and we survived and thrived,” Englestad said.

The general success of the work-from-home trial run will create a major change in workplace culture moving forward, Engelstad says. He predicts that even more companies will convert to a model where employees may work from the office for a few days a week, mixed with a few days of working from home.

“We’re not just going to flip the switch and we all go back,” Engelstad said. “Offices are going to have a very long-term structural change.”

That leaves the question: What can offices do with all of their unused space moving forward?

“There will still always been a need for offices and their presence, but we might just not need as much of it,” Englestad said. “It can be and has been converted into residential space, or it can be converted into a production facility, in some way.”

Evening shot of office building exterior with large parking lot

Englestad also says that single-story offices, rather than skyscrapers, could see a resurgence in popularity. Social distancing and a heightened awareness of sanitation will likely be lasting habits for many, so the perks of these spaces—convenient parking, no sharing crowded elevators—are becoming more appealing.

In addition to offices, retail has been another hard-hit sector of the commercial real estate industry during the pandemic. Online retailers like Amazon have been hastening the closures of big box stores for years, but with reduced capacity limits and the encouragement to stay home as much as possible, the pandemic has kicked that trend into an even higher gear.

“Retail has certainly changed in recent years, but had it been slowly, and now it’s much quicker,” Engelstad said. “Why go to the store when they have a website? Now we’re left with this box and everyone is getting stuff delivered to their door.”

Rather than let those shuttered spaces wither away, they can be repurposed to fit the changing needs of the industry.

“Delivery times are becoming almost instantaneous and in order for that to happen, the last-mile logistics people need to be there,” Engelstad said. “The infrastructure already exists, because that box is there, so investors are asking, ‘Can I go out in advance of Amazon and gobble up big boxes for next to nothing, hoping to turn them into fulfillment centers?’”

Ultimately, these questions point to how adaptability has become a key element for commercial real estate’s success in a post-COVID world.

“Any situation creates winners and losers,” Engelstad said. “There’s always someone who is going to figure it out. In the commercial real estate market, everyone is looking at next opportunity.”

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