Reopening the Workplace: Thoughts from Inside the IndustryBy Michael W. Hurwitz | May 20, 2020
As nonessential companies and businesses that were required to close during the COVID-19 crisis begin to reopen and allow employees and workers to return to the workplace, there are clearly many practical implications that employers, landlords and others must consider before reopening their doors. The coronavirus has had a devastating impact on our economy and has affected every sector of the real estate industry. Considering this, how will landlords, tenants, consumers, and businesses alter their behavior and actions, and what challenges will they encounter as we move to restart the economy?
Dr. Anthony Fauci, the Director of the National Institute of Allergy and Infectious Diseases, as well as many other health and government officials, recommend avoiding large gatherings and maintaining at least a six-foot distance from other people to reduce the risk of coming into contact with those who knowingly or unknowingly are infected with the virus.
Employers will have to develop industry- and employer-specific social distancing standards to protect employees and further adapt their workplace to implement social distancing best practices. They should become familiar with guidance published by governmental bodies including the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Administration (OSHA), in addition to local and any industry-specific guidance.
Addressing these challenges, Michael McMahon, EVP, Portfolio Management & Director of Taxation at RXR Realty, one of the largest office landlords in the New York tri-state area, said: “It’s pretty clear that things will change. Even something as basic as entering the building will be different; self-opening or self-rotating doors will be more prevalent and become the new standard. Thermal cameras will scan people as they enter, potentially denying access to anyone with an elevated temperature. Destination dispatch elevators will become the norm, limiting passengers to promote social distancing. Start times for work shifts will be staggered to help avoid building occupants having to wait for elevators. Reception areas will shrink or disappear as many companies will not be allowing visitors soon. Hallways may even be turned into one-way lanes with floor markings indicating the direction of pedestrian flow.”
Break and board rooms, workstations, restrooms, and other high-touch areas will all be redesigned to reduce the gathering of individuals. Clearly the new normal office space will look and feel different.
For example, KPG Funds, a real estate investment firm, has announced the launch of the first “Frictionless” office building at 446 Broadway in New York City. The building will have multiple “hands free” features that allow access to office space from the street without touching anything. These features include:
- a mobile access control system, which includes a front-door card reader accessed by smartphone that automatically opens the door, as well as elevator floor-by-floor and stair tower control readers for secure access;
- an elevator system that provides tenants with a “hands free” experience and the ability to email access control credentials with ease; and
- an intercom system that includes a large, illuminated audio/video main entrance panel, an LED display monitor on each floor and smartphone integration capabilities.
However, tenants in a boutique/capital-backed building like this will certainly pay a hefty price. It will be interesting to see what Class B and C buildings do to attract and retain tenants. Safety is paramount, and if you are the owner of a building with one small elevator and no security, how can you ensure the safety of your tenants? That is a challenge they will have to address.
In the aftermath of the COVID-19 crisis, many people have learned to enjoy working from home for various reasons, including a new work-life balance, saving time and money commuting to and from work, and the increased productivity involved with remote working.
While companies in technology, financial services, insurance and other industries can successfully allow employees to work remotely, telecommuting is difficult if not impossible for healthcare professionals, manufacturing workers, emergency responders, grocery store clerks and delivery people, all of whom have been deemed essential personnel.
According to Francis Greenburger, Chairman and CEO of Time Equities Inc. (TEI), “The new normal will most likely involve more work from home options on a part-time basis. Businesses will still want staff members to assemble at a central work site to exchange ideas, collaborate, discuss results, and meet with business prospects in both formal and informal settings. TEI will continue to create co-working spaces and amenity lounges in our building to provide options for fixed-lease tenants, who need temporary expansion spaces and informal meeting and gathering spaces. These spaces will be designed taking into consideration social distancing protocols.”
Jes Staley, CEO of Barclays, believes a big, expensive city office “may be a thing of the past.” Staley said his bank was reevaluating how much office space is needed and added that in the future, retail branches could be used by investment banking and call center workers, thereby ending long commutes for some workers.
Although the new normal will limit in-person group gatherings, there will likely be a happy medium of working remotely from your home office and participating in virtual meetings and trekking into the office to collaborate with others.
Technology has increasingly been playing a significant role in our daily lives. Technological innovations have grown exponentially in the last few decades and have created a shift in the work culture. Working from home too has been gaining momentum over the past several years (especially with millennials), and many companies have been increasingly accommodating it. Clearly, technology will play a significant role in the success of companies and their employees working remotely.
According to Dell Technologies CTO John Roese, as published in ZDNet, the new normal will include more remote working, stimulate a home office innovation wave, deploy more edge computing devices in homes to enhance home infrastructure, and require more automation, immersive experiences and robotics.
Debbie Davidman, Chief Information Officer at Marks Paneth LLP, remarked: “Technology has been one of the bright spots in this whole pandemic. The workplace is everywhere and anywhere, only limited by a robust internet connection. But be alert because the cyber enemies are out in force preying on vulnerable networks. Implementing a multifaceted cybersecurity program that includes both applications and employee cyber training will be an absolute requirement in our ’new normal’.”
The best way to secure electronic devices is to use complex passwords and change them regularly, enable multifactor authentication, keep your systems updated with the latest security patches and use only trusted Wi-Fi services.
According to Dean Boyer, Director in the Technology Services Group of Marks Paneth LLP, data can be leveraged to orchestrate a stronger coronavirus recovery: “Data is the key to unlocking your organization's new normal. By analyzing data, your organization can begin to predict how your business will perform in the future. Most organizations lack the analytical maturity to have their team of data scientists build intelligent prescriptive models that highlight the road to success. The alternative is smart enterprise performance management, or S-EPM, that can be utilized to develop comprehensive planning, budgeting, and forecasting models. Organizations that invest in data acquisition, performance planning and artificial intelligence will have the optimal opportunity for a swift recovery.”
Hospitality industry professionals must determine the most effective mechanisms and processes to deliver safe and sanitary guest experiences to restore consumer confidence and ensure their survival after this shutdown. This will require demonstrating that it is safe to travel and visit hotels, restaurants and other crowded facilities by adopting practices aimed to prevent the spread of the coronavirus, including stringent social distancing, enhance cleaning and other employee and guest safeguards.
It is very clear that companies are focused on the safety and well-being of their employees and guests. For example, Francis Lively, CEO and President of The LCP Group, commented: “We are primarily focused on hospitality investments. As such, we are maintaining strict social distancing guidelines throughout our hotels from check-in to check-out. Our services have been modified to accommodate the new normal, including limited housekeeping services during a guest's stay and converting dining to a grab-and-go model.”
Kevin Detz, EVP/Operational CFO at Aimbridge Hospitality, had this to say about the new normal: “Aimbridge is preparing for the new normal and is cognizant of the health and welfare of our guests and employees. We are working with all our brands to create consistency in protocols that are effective and instill consumer confidence. This includes social distancing at check-in and enhanced cleaning efforts. We want our guests to decide how much interaction they have with our employees. For example, we have adapted our housekeeping protocols so that if guests do not want an employee to clean their room, we will honor that request.”
And Michael Keilman, a Managing Director at Lawandy Advisors, said: “Regarding business travel, hotels and hospitality, there will be a total paradigm shift in how business is conducted. The market has proven that technology like Zoom meetings, webinars and FaceTime are acceptable and economically wiser. Why would I spend a day traveling to a meeting in Chicago when I can conduct five in a day via Zoom? I believe the lower-end business hotels will take a major hit and need to be repurposed throughout the country. When the markets recover, most corporations will be looking to cut costs related to travel, office space and salaries.”
As we begin to travel down the long and winding road to recovery, many drastic and unforeseen changes will occur that will cause major disruptions in the way we live, work and play. Landlords in New York City are already preparing for the effects of the downturn, as tenants are likely to request lease concessions or abatement. William Landsberg, Associate at the Kaufman Organization, notes: “It is no secret that the New York City leasing market has been largely impacted by COVID-19. There has been a 50% decrease in leasing volume from Q1 to Q2, and nearly a two-thirds decrease in year-over-year volume dating back to last April.”
We are likely to see many more short-term deals in the next six months to three years in private spaces. Having 100 different hands on the same coffeemaker in a WeWork workspace may be a thing of the past. Landlords who are not open to discussing shorter flexible terms will probably have a harder time doing deals.
Although many of us are looking forward to returning to the old normal, those days are behind us now and we will have to adjust to a “new normal.” I, for one, am looking forward to the days of face-to-face client lunch meetings and resuming personal interactions.
As we move into uncharted territory with the lifting of the stay-at-home directives, employers can be proactive rather than reactive. Start planning for the return to work so you can maintain a safe and clean workplace when employees return. Staying informed about government orders and regulations is essential to preparing for the new normal. New York City has withstood enormous challenges before—and we can adapt and respond to the challenges of the COVID-19 pandemic with thoughtfulness and planning.
About Michael W. Hurwitz
Michael W. Hurwitz, CPA, MST, is a Partner and REIT Group Leader at Marks Paneth LLP. Mr. Hurwitz brings more than 30 years of experience and a versatile set of skills acquired through working for both public and private companies in the real estate sector. His industry knowledge spans a vast number of areas including real estate tax issues, public and private real estate investment trusts (REITs), opportunity funds, portfolio restructurings, acquisitions and dispositions, partnership... READ MORE +