The future of downtown office work? It’s time to “reinvent and reinvest” – Twin Cities

When Kris Nelson researched locations to start an all-age gym specializing in training young people, he searched the subway before finding significant and affordable airspace in the old Macy’s department store building in downtown St. Paul. Its gymnasium opened in early January, around the same time the Midwest Reliability Organization, an energy regulatory agency, began expanding from a 3/4 floor to a full floor at Infor Commons. near.

The 20-story Osborn370 building on Wabasha Street has signed five major new leases in the midst of the pandemic, filling 22% more of one of the tallest buildings in the city center.

At Wells Fargo Place, an equally curious thing happened after the pandemic forced downtown St. Paul’s offices to fire their workers home: three large existing tenants all signed 10-month lease renewals. at 15 years for 117,000 square feet of office space. A new tenant – Hilltop Securities, an investment firm – has leased 7,000 square feet. One law firm, on the other hand, reduced its space by a third, or about 1,500 square feet, after realizing efficiencies in the age of working from home.

“I think it’s very industry specific and it’s very company specific,” said Patrick Skinner, general manager of Wells Fargo Place, which offered its three small restaurant tenants free rent all the while. throughout this summer to keep them afloat during the pandemic. “We have another tenant who could occupy a full floor next year. We are really optimistic at the moment.

In St. Paul, downtown building owners hope these words will prove prophetic. As white-collar jobs shifted to remote work during the pandemic and restaurants suffered devastating losses, some experts still see reasons for optimism in the office and commercial market, even in downtown areas that have lost retail businesses and have been taken in by an era of an almost eerie pandemic calming down.

It may seem incongruous with Target Corp., Minneapolis’ largest downtown office employer, which announced last week that it would be leaving its headquarters in the downtown building, reducing by a third the footprint of its downtown offices, which is 1 million square feet, while not laying off any employees. This means more people are working from home and will continue to do so.

But experts predict that while the era of working from home is sure to have a lasting impact on the future of office spaces, nowhere will it be as dire as many believe.

“This economy is about to explode, in a good way,” said Chris Leinberger, founding managing director of Places Platform LLC, in a recent presentation to CEOs of St. Paul. “We… expect the office market to return. There has been a bump in the road, but it’s not going to wreak havoc on the office industry.

JOB GROWTH MAY EXCEED REMOTE WORK

That’s because healthy job growth could more than make up for lost office rentals. With the rollout of COVID vaccinations at an increasing rate, rather than abandoning offices altogether, many companies will switch to a hybrid model where workers come to the workplace two or three times a week for team meetings. person and meetings with clients. New creative uses of vacant commercial spaces, such as gymnasiums, will find increasing demand in city centers that have already become heavily residential.

Even the downsizing of Target’s offices will make room for new, smaller businesses.

“Today’s news from Target was neither a surprise nor a cause for concern,” said Jonathan Weinhagen, president of the Minneapolis Regional Chamber of Commerce, in a social media post Thursday. “(Organizations) that want to be an ’employer of choice’ need to offer more flexibility. It can mean that they need less space. City centers that want to remain dynamic will have to reinvent themselves and reinvest. We are ready!”

In October, the Greater St. Paul Building Owners and Managers Association’s annual market report measured the overall office occupancy rate in downtown St. Paul at 91%. That number had risen from 89.85% in 2019, in part because of a large vacant office structure – Cray Plaza – which abandoned the office market altogether. Yet more office space had been added in recent months than absorbed by the residential market, a rare feat for the downtown area.

“There have been a lot of new leases signed over the past 12 months,” said Joe Spencer, president of the St. Paul Downtown Alliance, a consortium of companies that works closely with the city. “Innovation has enormous value when colleagues and teams are together in an office. (If not) how many emerging leaders were identified in a Zoom call? How do you get people into this environment? “

MORE: Downtown St. Paul flexes its muscles during pandemic

“The watchword for office workers will be the flexibility that emerges from this pandemic,” Spencer added. “Before the pandemic, 20% of people had flexible working hours. Coming out of that, it will probably be 80 percent of the population. But it will not be “nothing”. There are some things you can do from anywhere – I don’t have to be in the office to resend emails. Despite the somewhat extreme attitudes towards office space, modeling suggests that employment growth alone will offset the 0.25% to 0.50% office absorption. Job growth would be four times higher.

FACE TIME NEEDED

In a recent presentation to the St. Paul Downtown Alliance, researchers from global real estate company Cushman and Wakefield and Places Platform presented survey data that reveals that workers – especially young people – are feeling increasingly secure. more disconnected from their business and don’t feel learning new skills.

In a place management focus group, one company noted “they’ve hired hundreds of new people and never met them except on Zoom,” Leinberger said. “It can’t go on forever. We baby boomers have done quite well in this recession in terms of satisfaction, but Gen Z is crushed. They have no one to talk to, and they have no one to mentor them, and they can’t raise their flag high enough when everything is on Zoom. They don’t have those side conversations before and after meetings where we all know a lot of the work and where new ideas emerge.

Presenters likened innovation, teamwork, and corporate culture to a sink, and companies that made the switch to 100% remote working have drawn – and now uncovered – from that sink for months. . A hybrid model – where employees come to the workplace two or three days a week – could help replenish the well, if that time is managed appropriately.

In other words, workers who walk in and out of a physical office every day settle into their routine and stick to their cubicles. Workers who work completely remotely are also disengaged from their peers. A limited number of face-to-face meetings and managed workdays seem to inspire more effective group dynamics. “When you’re in an office 100% of the time, engagement with your coworkers is limited,” Spencer said. “When you’re away from the office, engagement is limited. There is a peak in between.

That said, if given a choice, most workers would likely work from home on Mondays and Fridays, which wouldn’t change the amount of office space needed. “The function of place management is more important today than at any time since the 1980s,” said Leinberger.

Jose C. Birney