Imagine investing a billion dollars on the purchase of office properties right in the middle of the worst Pandemic in 100 years. Sound a little risky? Folks like Onyx are doing just that. Onyx, along with a variety of other fearless developers in New Jersey, have been buying up huge amounts of office properties, many of them from the unraveling of NJ’s largest REIT, Mack-Cali.
Just how risky a proposition is this? Here we are one year into the Pandemic. At this late date, 90 percent of all the large office tenants continue to pay rent each month while employees at more than 70 percent of those tenant companies are not back in the office and have no timetable to return. It seems that just as the virus came along, new technologies arrived at just the right moment to enable employees to seamlessly work from home where they have all the data and connectivity of the office from the safety of their living rooms and are free to Zoom all day, every day. The billion-dollar question for Onyx and other developers is, will tenants choose to return?
The folks at Onyx think so. So much so, that they are completely renovating many of the office towers they have purchased with state-of-the-art facilities such as fitness centers, and new lobbies with coffee bars, WIFI and many huddle friendly spaces for impromptu team collaboration.
We think that in the next few months the return to the office, which we have labeled the elephant in the room, is about to come to the forefront.
On the one hand, by May it is estimated that the majority of the population will be eligible for the vaccine and that by September most of us will have had one.
On the other hand, we may find that employees working from home, enjoying zero commuting time and flexible working schedules are to some extent here to stay. In our February issue we pointed from a Harvard Study of 2018 on the utility of open landscaped offices that the majority of employees don’t like working in such a disruptive environment and that the productivity of those working in open benching style seating is way down. When employers do finally poll their employees about the desirability of coming back, we think they may be surprised at the results.
One thing we can safely deduce from all this is that, when we finally do return to the office, we may find that the nature of office space has really changed forever. Will this result in companies deciding to lease less space in the future and if so, what will that mean for those investing in the office of the future like Onyx? For the answer to this and other substantive changes, stay tuned.
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