Seismic Shift in Office: What’s Next

Originally published on June 14, 2023, by Kathryn Hamilton, CAE for NAIOP.

The sluggish return to the office, financing and liquidity, and new ways of approaching the office sector were the predominant themes of an elite gathering of c-suite office owners, investors and developers. The conversation, spearheaded by NAIOP and hosted last week in New York City, explored the challenges and opportunities facing the sector. 

Here are key takeaways from the event: 

Office can learn from other sectors. Look to the retail industry for rebounding inspiration. Despite being labeled “dead” just a few short years ago, retail has reinvented itself by transforming its business model – and it has worked. Office has the same potential for turn around by creating spaces that are an experience, not only a workplace. Flexible workspaces and formats are a must – hot desks, private office and conference rooms are needed, but not equally every day. Don’t underestimate the benefit of “network effects,” or after-hours networking events that are a real draw for tenants and reasons to excite employees about coming to the office. Class A product that offers amenity and community spaces continue to be quickly leased.  

Caution: Slow-cession ahead. With sluggish GDP growth of 1-2% and unemployment expected to elevate over the next two years, the economy is experiencing a slow and steady contraction without being considered a full recession. Positive absorption may not occur until two years from now, and structural changes in the capital markets will have a lasting impact over the cyclical changes. An over-abundance of venture capital was deployed into office in 2021, and now companies are right sizing with layoffs and pulling back. 

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