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ALBUQUERQUE, N.M. — Before the COVID-19 pandemic reached New Mexico in March, co-working company FatPipe had 90 people working remotely at its Albuquerque and Rio Rancho locations.
By the height of the pandemic, however, FatPipe chief operating officer and director Lisa Adkins said just three workers were coming into the Albuquerque space, after the company allowed workers to sever their leases.
Founder Stuart Rose added that the numbers have begun to recover as offices around the state have begun reopening, but said it will likely be a while before things return to pre-virus normal, if they ever do.
“Our takeaway … is that people largely don’t know what they’re going to do in the future,” Rose said.
While offices like FatPipe, which rents space to workers on a monthly basis, may be hit harder than most by economic impacts associated with the pandemic, they aren’t the only ones adjusting to a new normal.
The pandemic has quickly reshaped the office experience in Albuquerque and across the country, forcing a large number of workers to work remotely rather than coming into the office every day.
At companies like Albuquerque architecture firm Dekker/Perich/Sabatini, the vast majority of the 180 workers at the firm’s main Albuquerque office have continued working remotely even after offices were allowed to partially reopen at the start of June, either out of caution or because workers prefer the experience of working remotely.
“Everyone’s been so effective working from home,” said Andrea Mayhew Hanson, a principal in charge of workplace strategies at the firm.
While the new approach provides workers with more freedom and less time stuck in traffic, it also has some real estate experts concerned that companies could be left with a lot of empty office space if some or all of their workers don’t come back in person.
The SIOR Commercial Real Estate Index, which tracks industry activity nationwide, fell 16% in the first quarter of 2020. Lawrence Yun, senior vice president and chief economist for the National Association of Realtors, wrote that office space has been hit harder than industrial space.
“Leases will likely become more short-term, and businesses may opt for smaller office spaces so they are not faced with high rent costs if another health crisis emerges,” Yun wrote.
If workers opt to continue working from home even as the economy reopens, these impacts could linger. Investors as prominent as Warren Buffett have discussed the possibility that the virus could reshape the American office market for years to come.
Despite the challenges, however, Hanson of Dekker/Perich/Sabatini said she expects office design to evolve with the times, with more space for individual workers, more usable outdoor workspace and smaller conference rooms.
“We believe we’ve got answers that are smart, and solutions that are smart,” Hanson said.
The pandemic could have the unintended consequence of loosening what has been an increasingly tight market for office space in Albuquerque.
By the second half of 2019, Albuquerque’s office vacancy rate stood at 17.2%, its lowest point since 2008, according to commercial real estate firm CBRE. Jim Chynoweth, managing director for CBRE’s Albuquerque office, said most available buildings are older and rundown, meaning that the vacancy rate for newer space is significantly lower.
“We have an abundance of space nobody wants,” he said.
Even with prices on the rise before the pandemic, Chynoweth said there was still a significant gap between the rents that Albuquerque is able to support and the cost required to build new office space without a tenant lined up. That dynamic contributed to the shortage of office space, he said.
Reilly White, an associate professor at the University of New Mexico’s Anderson School of Management, said the virus put a damper on what was shaping up to be a promising year for new office development in Albuquerque and other markets. The pandemic’s shutdowns forced companies to close and left many unable to pay rent, leaving landlords with less liquidity than usual.
As a result, White said the return on investment for office developers has dropped precipitously in the past several months, making lenders and investors more reluctant to provide financial backing for office projects.
“This is going to be a slow recovery in that market,” White said.
Many local real estate watchers say rumors of the demise of office space have been greatly overstated, particularly in markets like Albuquerque. Scott Whitefield, managing director with Colliers International’s Albuquerque office, said he expects the city’s office market to avoid the carnage expected in larger cities.
Compared to cities like New York and San Francisco, a relatively small percentage of Burqueños take public transit to work, which may make workers less reluctant to return than those who work in denser environments. Whitefield said this makes it less likely that the local office market will see a sharp rise in vacancies.
“There will be a change, we will adapt, and business will continue,” he said.
Whitefield and Rose also agreed that working from home is starting to wear thin for some employees, who miss the experience of collaborating with colleagues without a computer screen in the way.
“People miss human contact,” Rose said. “They like the sense of community that comes about in an office or a co-working space.”
In the short term, some companies are working to make their workers comfortable and safe as they start to reopen their offices. Rose said FatPipe has added new technology to its New Mexico facilities to help keep sick tenants from infecting others.
He said pulse oximeters – small devices that snap onto the fingers and measure the oxygen levels in blood – will be available for use. The devices have been used to help people track their oxygen intake and ensure that they aren’t dealing with subtle lung problems associated with the virus.
Adkins said the company has also added scanners that test workers’ body temperatures, as a way to keep those with a fever out of the facility.
Whitefield said Colliers is building up its support system for its own employees, which will include counseling for those who need it. And Hanson said Dekker/Perich/Sabatini has gone so far as to examine its HVAC system to optimize the airflow in the office.
“We can’t keep you completely safe. … But we’re doing everything we can and using the science that’s available,” Hanson said.
How the coronavirus will reshape new offices down the line is anyone’s guess, but Hanson said she expects new offices to allocate more square footage per employee than existing buildings might, with some offices potentially gravitating to more individual office space, rather than open floor plans.
She said large conference rooms may be reconfigured into smaller, more numerous spaces set up for teleconferencing.
Finally, Hanson predicted that new office buildings could use outdoor space better in the wake of the virus outbreak, using patios and courtyards as work spaces, rather than just rest areas.
“The true outcome is that we’re going to see healthier buildings,” Hanson said.