Last Monday, Fox Business ran a story exploring an idea we’ve previously discussed on our blog: the use of commercial real estate to supplement a shortage of housing. This isn’t a revelation for anyone in our industry. In fact, our CEO, founder, and principal broker Harout Keuroghlian predicted the move just weeks into the global pandemic of 2020. We decided to go straight to the source, so asked Harout to take some time to share his perspective. What we got was an expert analysis of what we can do with all of this office space for sale. And, perhaps even more importantly, how quickly we can do it.
JohnHartCRE: There’s so much office space for sale ever since the Covid-19 pandemic. And the media is acting as if the demand for office space is going to remain at this lower level. You don’t think it will return to where it was before?
Harout: When it comes to office space, we’ve definitely built more than we need. And we’re also in desperate need of housing. Do I think demand for commercial space will stay this low forever? No, but I also don’t see it returning to pre-Covid levels in our lifetime.
JohnHartCRE: It’s surprising to hear you say that since you’re such a proponent of working in the office!
Harout: Let me clarify something: I believe working in the office is crucial for collaboration, creativity and a general atmosphere of teamwork. But I also recognize that not every role in a company requires those skills. Most roles in our particular industry, however, require collaboration and working closely with others.
JohnHartCRE: Don’t you think Zoom and similar apps make it easier to work from home?
Harout: Easier? Sure. But Zoom is not an ideal substitute for face-to-face collaboration. It worked well enough when we had no alternative. But do you think that companies like Apple or Google are going to grow with 100% of their workforce working from home? So, to bring it back to your original question: yes, people are going to slowly begin returning to offices. They already have. But we’re still going to be seeing a lot of office space for sale as we realize what jobs can be performed at home versus the jobs that require frequent collaboration and creativity.
JohnHartCRE: So, just so I understand, what kind of jobs do you consider adequate to perform from home?
Harout: I’m mostly talking about call center positions; roles like that which aren’t heavily collaborative. Why would I need to rent out a call center when those jobs could so easily be done from home?
JohnHartCRE: So you think that leaders who value working from the office also recognize, in certain circumstances, the benefits of working from home. And because of this, we’ll still see lots of office space for sale with the idea of repurposing it as living space?
Harout: I think that business leaders learned a lot from an event as all-encompassing as the Covid-19 pandemic. Specifically, it taught us that we could do more with less. And it also pushed us to quickly learn how to be more efficient with digital connection. Zoom is a fantastic alternative to phone calls and conference calls and a wonderful tool for traveling professionals. I’ve seen people go from having three meetings a year to three meetings a month because of Zoom. Again, it’s a poor substitute for face-to-face connection. But it’s more efficient for everyone if roles that require little to no collaboration are performed at home. Leaders that recognize this may still want to pull the majority of their workforce back to the office. But even then, we’ve become too proficient at outsourcing for the commercial space demand to reach pre-Covid levels.
JohnHartCRE: So, I’m assuming commercial real estate agents will want to take advantage of the current climate by pointing out the habitability of office space for sale?
Harout: Well, the demand for living space is opening up a huge opportunity with condotels.
JohnHartCRE: Condotels?
Harout: It’s basically just what it sounds like: a combination of a condo and a hotel. Some units can be purchased outright like a condo. Others can be rented like hotel rooms. But I think we’ll see a lot of creativity when it comes to repurposing excess office space. I can easily see a lot of commercial high rises becoming luxury housing in a few years.
JohnHartCRE: How do you see the changing demand for commercial space impacting agents who primarily work with commercial properties?
Harout: In the short-term? We’ll feel a major push to transact. With the demand for repurposing commercial spaces, we’ll see more and more office space for sale. And obviously it’s going to be up to commercial agents to move these spaces off the market.
JohnHartCRE: What about long term?
Harout: I predict that any radical market inconsistencies will level out in about five years. Like I said, offices are still going to be needed.
JohnHartCRE: How easy will it be to repurpose all of this office space for sale into habitable units?
Harout: It’s actually a pretty simple process. But it probably won’t be quick. It’s very rare to find buildings that use a significant portion of their interior for structural integrity. So construction teams need to come in and basically bulldoze through the partitions. Then, you’re left with this structurally sound exterior shell and you can do whatever you want with the interior.
JohnHartCRE: So, it’s easy but it won’t be quick?
Harout: Yeah, it’s not exactly a quick solution to the housing problems we’re facing. For example, a lot of these commercial spaces that are ideal for repurposing are only partially vacant. This means you need to figure how to move the remaining tenants out before you even begin to consider how to move people in. It’s not going to happen overnight. Therefore, it’s not an immediate remedy to the housing crisis. But it’s something.
