Are Corporate Headquarters Doomed?

Image by Jacques GAIMARD

While still in the middle of the coronavirus crisis, trends are already emerging for relocating, diversifying and redesigning office space.

Spring 2020. Business districts worldwide are abandoned in a hurry, busy high streets and city centers turn into ghost towns as (almost) everybody is confined at home, teleworking. The global lockdown is supposed to be a short break, so we are all looking forward to the day when we can go back to normal.  

A few months later, we must admit a more significant change is going on: The coronavirus crisis may have changed the commercial real estate industry, especially the office space market, forever. Remote work is now the norm, as initially people were forced to telework. But it turns out that, after seeing the benefits of working from home, many prefer it.

Ironically, some of the abandoned office buildings are brand new and really green construction, designed for the future, with lots of outdoor spaces and gardens, highly efficient and sustainable facilities, iconic headquarters used for a few weeks before the lockdown. It’s the case for Outdoor retailer REI and its newly finished headquarters in Bellevue, Wash. Now, the company is looking for a buyer, aiming to cut costs to deal with the current gloomy prospects. This time, we are not talking about obsolete buildings being left for a better working environment. This is about brand new facilities being abandoned in an unforeseen shift to working from home.

But is this shift real, or just until the pandemic crisis is over? Are corporate headquarters doomed? Are we going to recover the joy of working in a special place, in an iconic environment, in a busy business district? 

Recent studies confirm the same trend in many business districts: After the initial requirement of telecommuting, many employees who have the option to return to the office are choosing to continue working from home. We don’t know if this trend will last or if it’s just because of the pandemic (fear of crowded downtown areas and commuting hubs, partial lockdowns, closed restaurants, facilities and attractions in the city center, difficulties of all kind, and caution in general). Still, for the moment, it’s a fact, and it’s more noticeable in North America than in Europe.

According to a recent survey in New York City, 85% of office workers remain at home. The same is happening in San Francisco, with Silicon Valley companies leading the way on remote working. Also, in London and, to some extent, in other European capitals.

In London, the abandonment of the city offices had begun before the COVID-19 crisis, with the Brexit scenario — many companies relocating staff to continental Europe as a result. In addition, many companies were also already planning to cut 20% of their office spaces, opting for telecommuting and delocalizing. The lockdown didn’t start the trend. It just sped it up.

We can already see the first consequences of this trend in the deserted business districts and some city centers: businesses relying on commuters are forced to shut down. 

If the big company headquarters disappear, will the city services and the lively environment they generated in business districts also disappear? What will happen in the long run to restaurants and cafes, fashion stores and delicatessens, hair salons, gyms? Are all these businesses going to close down when (and if) people decide to work from home?

From an urban planner’s point of view, nothing is as apocalyptic as it seems. In fact, the demand for these services is not disappearing; it is only relocating. Relocating workspaces into new, smaller clusters is the first step. Wherever the activity moves, there will be opportunities to open new businesses. Small hubs will soon appear in the suburbs and satellite cities surrounding the metropolis. Whether they will be specialized hubs (shopping and restaurant streets in residential neighborhoods, etc.) or mixed centers remains to be seen. Still, we can already see a growing interest in office space on a smaller scale in suburban areas surrounding big cities.

How about continental Europe? The panorama is more varied here and not as harsh as in the US and UK. A June 2020 survey by Laborde Marcet estimated a 30% reduction in European companies’ office space due to the consolidating trend of online working — and the influence of the pandemic??.

In Spain, office and commercial renting prices have gone down roughly 50% in recent months. Barcelona suffered more than Madrid because many businesses in the city center (shops and restaurants) were also relying on international tourists. At many companies’ headquarters, only 50% of the employees have come back to work

In Madrid, ING Bank has just moved their Spanish main office to a new building , but only 20% of the facility is currently used.

In Germany, office space demand is registering the same trend, with a less dramatic decrease as people work from home 2-3 days a week. 

In Paris, the same effect is noticed: 40% fewer people travel daily to its business district, La Défense. In this context, local policymakers and urban planners are already exploring the complex transformation of offices into homes

Meanwhile, in Australia, urban planners propose to make empty office spaces available for “creative ventures” aiming to refresh the business districts, babysitting them until the businesses come back.

Yet, supposing we are not facing the doom of the corporate headquarters as we know it, the question still stands: How will the office area look when we go back to it? 

Major architectural changes are expected: hot-desking and the trendy coworking clusters have a problem in their shared facilities, with few private workplaces and too much semi-public shared facilities. Just a few months ago, hot-desking seemed like a viable green solution for the future, like the coworking clusters with shared office space,

However, in the post-COVID work environment, sharing isn’t the best option. Employees need more private space at their workplace, such as six-feet working stations, more open spaces, and different work routines. Buildings will just have to adapt like they always do. But adapting means allowing much more room for every workplace and sectoring some of the common spaces. Maybe the company headquarters’ estimated office space needs will need to be revised. The existing buildings might not have as much spare room as we might think. 

The good thing is, the newer and greener structures are also more resilient and suitable for many different functions and activities, and they will easily adapt to the new office requirements.

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