Google, others are adding office space in anticipation of great returns

Since January 2020, Google’s parent company Alphabet has spent about M 100M to expand its U.S. commercial real estate portfolio, including a $ 28.5 million office purchase from Sunnyvale, CA. At the height of the epidemic.

Most recently, Alphabet announced in January that it would spend $ 1 billion to set up a campus-like office in London.

“We will personally introduce new types of collaboration areas for teamwork, as well as create more holistic areas for improving wellness,” Ronan Harris, managing director of Google UK, wrote in a blog post. “We will be introducing Team Pods, which are flexible new space types that can be rearranged in multiple ways, focusing on team needs, supporting collaboration or both. The new renovations will also include outdoor covered workplaces to enable them to work in the fresh air. ”

The goal, Harris said, is to provide employees with flexible space with facilities to return to the office, while many of them still acknowledge wanting to work from home “a few days a week.”

Google Office Space BDG Architects 2021

Google plans to give its UK office a quiet area for separate focused work – and an interactive art installation to support employee wellness.

The trend of office expansion goes beyond Google. In 2019, before the Covid-19 epidemic, U.S. companies purchased 60,346 commercial properties, according to Altus Group, a commercial real estate firm. That number dropped to 57,174 in 2020, but recovered to 78,354 properties last year.

And in the first quarter of 2022, companies have already bought 22,423 commercial properties. If this trend continues, the number of office buildings purchased this year will surpass the number of buildings snatched in 2021.

“The numbers match Google’s growth in office space storage, so the Great Regency doesn’t seem to be affecting companies that value office space,” said Ray Wang, vice president of data operations at Altas Group. “We’ve seen a lot of activity among tech companies that they’re not just buying, they’re leasing more space. Amazon and Facebook, they are all adopting expansion strategies.

Desk booking graphic edited Robin Powered, Inc.

On average, the number of employees booking at their company desk has increased in the last three months.

The United States initially dropped 138.4 million square feet (MSF) of office space after COVID-19 was declared a global epidemic. The data shows that as the workforce becomes more agile, more businesses are starting to reduce their space. According to a 2021 report by real estate firm Cushman & Wakefield, in the face of uncertainty about what the hybrid workforce will look like, property owners and occupants have begun offering short lease and sublease terms.

Short lease terms have become the right thing to do as companies now seek to reclaim that space.

Office sublease inventory declined for the second consecutive quarter, according to the latest report from Cushman and Wakefield.

“There is no future,” Cushman & Wakefield said in a recent report. “Most organizations believe that the office is now a place for building culture and inspiring creativity and innovation.”

Based on 90 U.S. markets tracked by Cushman and Wakefield, total leasing in the first quarter of 2022 increased 19% from Q1 2021, and four-quarters of rolling leasing activity increased 41% from a year earlier. Class A office space leasing has accelerated even faster; This is an increase of 47% per year. With a total of 349 million square feet of leases in the last four quarters, the United States has returned 1.4% above its pre-epidemic historical average, according to the firm.

“One thing I would say, one size fits all. If someone tells you that everyone is shrinking in the wake of the epidemic, that’s not true, “said David Smith, head of occupancy research at Cushman & Wakefield.” Companies are rethinking how space is based. They are concentrating on collaborative spaces and spaces of different sizes. We see companies looking to expand their portfolios. This is a good time to do it. We’ve seen it with other recessions – lock space in the long run with better rates or discounts. “

Weekly office usage rate edited Robin Powered, Inc.

Office usage rates have risen as Covid cases have decreased.

As companies begin to figure out what a hybrid workforce would look like, many are expanding their square footage to create safer and more attractive workspaces that allow more space between desks, “hot desks” (sharing desks), large lounges or break areas. . And larger outdoor spaces. They are also hedging their bets that their workforce will continue to grow over time as their business expands.

“Over time, there is more openness to return to the office than there was a year ago, and Google and real estate owners are looking at what kind of opportunities people will bring back,” Wang said. “With technology companies, they’re growing and they’re expecting that growth. They have decided that potential real estate down the road is needed to meet their strategic objectives.

“The bottom line is that companies focus on flexibility.”

According to Jones Lang Lassell IP (JLL), a commercial real estate and investment management services firm, the technology industry remains the dominant lease driver until the end of 2021, representing 21% of Q4 activity. Hi-tech companies added about 3.3 million square feet of leased office space in the last three months of 2021.

“It’s not just a technology company,” Wong said “Some companies are expanding in anticipation of growth or rearranging their space requirements with what may be needed in three to five years from now.”

Last month, the average occupancy rate on the Kastle System’s back-to-work barometer rose to 40.5%, up from 39% in November 2021. This is the highest rate since March 2020, and the back-to-work barometer has seen the benefit of occupying each city. (Barometer measures occupancy rates in 10 metropolitan areas, including New York City, Chicago, Houston, and Washington DC)

Kastle Systems is a managed security provider of more than 10,000 companies worldwide; It uses employee badge-swipe data to determine workplace occupancy.

According to Peter Miskovich, managing director of JLL, in a new line, companies are now choosing to lease new or renovated buildings on old stock, which is more likely to be converted into residential space or senior living or assisted living facilities.

Phil Ryan, JLL’s U.S. director of research, says corporations are adopting a more collaborative space or “hot-descking” model, where desks are shared depending on the designated office work day.

Office use is slowly increasing, primarily because employees’ fears of COVID-19 are diminishing and companies around the world are making certain levels of office attendance mandatory, says Robin Powered Inc., a software vendor that enables employees to book desk time.

According to a new report by Robin, U.S. employees work an average of 4.9 days off work per month, up from 3.7 days in December 2021. “… good to see a slow and steady build, even the Omicron variant slowed growth in this segment in January,” said Eric Lani, Robin’s product analytics manager.

According to Robin, both the United States and Europe saw an 18% increase in the total number of office workers in the first quarter of 2022 compared to the last three months of 2021.

“These numbers don’t tell the whole story,” Lani said in a blog post. “Despite the consistent growth rate, the average daily occupancy rates are very different for the two regions. US businesses feel 25% office capacity while Europe sits at 35%, which is why EU team members work more frequently from office.”

The bounce rate – the percentage of people who came to the office only once in a 30-day period – dropped to 18% in the first quarter of 2022, the lowest since the spring of 2021, indicating that people are returning to the office more consistently, according to Lani.

Office traffic is not just limited to employees. The average company welcomes about five guests per month. According to Lani, the most common guest types are participants at corporate events (20%) and customers (15%).

According to David Lewis, CEO of OperationsInc, an HR consulting firm in Connecticut, companies that want people in their cubicles should focus on carrots, not sticks. In other words, let employees discover the benefits of staying in their office instead of forcing them to stay there.

While office attendance remains below pre-epidemic levels, according to Cushman & Wakefield, it continues to revive until March, when redesigned workplaces may drive additional demand throughout 2022.

Robin Powered’s study found that employees who had a positive experience when they first went to the office came up with about 10% more than the negative experience.

Office recovery will be distinguished by the quality, class and type of submarket of the building. To date, suburban submarkets have recovered somewhat quickly, and demand for Class A office space is high. Class A offices are the most prestigious building, competing with the average rent for a certain area for Premier Office users.

Google Office break space BDG Architects 2021

A place for Googlers to take a break for a coffee break or a quick one-on-one visit to the sound-protected booths at the company’s UK office.

“Officers want a quality experience in the office,” said Smith of Cushman & Wakefield. “They want better air quality and outdoor access and they want to be in the best place. All of these things are more important in a fast-paced work environment and for staff to make the office successful and productive. “

Copyright © 2022 IDG Communications, Inc.

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