Before the pandemic, TextUs had an office in downtown Boulder where half of its employees worked, while the rest worked remotely.
And then, well, you know what happened.
Everyone was sent home and traded commutes for virtual Zoom meetings, open work spaces and office buzz for home offices with roommates and pets, lunches out with colleagues for whatever wasn’t moldy in the fridge.
Nearly two years later, work at TextUs, a text messaging service for companies to converse with customers, is still fully remote. By the time its five-year office lease finally ended in December, no one was going in. The flexibility that came from pandemic necessity allowed TextUs to recruit worldwide and existing staff became more productive, CEO Martin Payne said. Business thrived and the company raised $22 million in December from venture capital investors.
But there was a downside.
“People just missed seeing people,” Payne said. “We would do ad hoc get-togethers, more social really, just to say ‘Hey, let’s get together and enjoy some appetizers and drinks.’ … And people kept remarking, ‘It’s so nice to be able to see each other live and to work together.’”
Next week, TextUs starts a new office lease — at half its old rent — at the WeWork at the Tabor Center in downtown Denver. It’s a smaller space and showing up is not required. It’s there for those who find it more productive to collaborate in person. Only about half of its nearly 60 employees even live close enough to commute to Denver.
TextUs’ future office also seems to be the future of the office. A survey by commercial real estate broker CBRE found that 87% of office clients intend to allow a hybrid approach, which means fewer people in the office each week and, possibly, less office space.
“What we’re really seeing is employers saying we’re going to try and kind of step into this and see if we can implement some remote work and if that doesn’t work, we haven’t changed our footprint all that dramatically,” said Anthony Albanese, senior vice president with CBRE who specializes in the downtown Denver office market. “I think 2022 is going to be this test for a lot of companies but it will certainly come with more in-office interaction.”
Who’s in, who’s at home?
The office isn’t going away, despite how many companies abandoned their leases in the pandemic — or at least tried to by offering their space for sublease. At the end of last year, about 24% of downtown Denver’s total office space was vacant, up from 18.6% a year earlier and 16.5% in 2019, according to CBRE data.
Companies that pooh-poohed remote work prior to the pandemic now have a comparison about what it was like to have people in person and virtual. That’s leading to decisions being made about how to use the office more efficiently and possibly reducing how much office to lease.
“What it comes out to is about one more day per week in a remote location instead of an office,” said Katie Kruger, who leads CBRE’s Front Range operations as senior managing director. Before the pandemic, U.S. office employees were working remotely about a half day each week on average. “That could be if you had a doctor’s appointment in the morning one day so you didn’t come in for half a day. We’re seeing that go up to two days a week on average.”
Companies that move to a hybrid workplace could reduce their office square footage. In Denver, CBRE research forecasted that by adapting to workers who split time inside and out of the office will result in a 9% reduction in space use per employee. Albanese said it’s probably 10% to 20% on average nationwide but because of the growth in workers, that doesn’t necessarily translate to a reduction in square footage.
CBRE offers clients a tool to help them figure out how much space they need. Albanese said he works outside the office 30% of the time so three people on similar work schedules could share two desks at the office. The utilization tool helps companies solve that puzzle.
“A lot of companies have done so many employee surveys and said to employees, tell us how to do it. But the employees don’t know. They don’t know what’s right for their career paths,” he said. “It’s going back to employers to say, no, it’s really on us to help our employees and figure out the right types of work environments, and they’re starting to put those plans forward.”
CBRE turned its Denver headquarters into a hybrid work zone six years ago. Corner offices for executives were eliminated, replaced by meeting spaces and couches for more collaboration — and a view. Personal desks disappeared, as “hoteling” workstations with monitors, a keyboard and a phone offered drop-in employees a place to park for the day and check out when they were done. Private offices are also available — first come, first served.
Fast-growing Guild Education, which connects a company’s workers to training and education opportunities, now has hoteling options for its own drop-in workers. It adopted a “heads up” and “heads down” strategy. Heads down means everyone works remotely. Heads up means there’s a choice, or hybrid mode. The company is also leasing more office space today than in 2019.
Many employees still have a dedicated desk that they can decorate with family photos and personal tchotchkes. Some remote workers stop by the office to take advantage of amenities like The Beehive, Guild’s early childhood education center next door to its downtown Denver headquarters.
As Guild continued to see business boom in the pandemic — it recently added Kohl’s, Macy’s, Target, Waste Management and others — it also continued to ramp up staff, hiring 700 people in the past two years. The company, which now employs 1,300, added a third floor at its headquarters inside Republic Plaza just before the pandemic began. It added a fourth floor in the fall of 2020.
“This combination of philosophies allows for more flexibility, maintains ideal parts of a hybrid workforce, and allows us to follow public health recommendations as they continue to evolve,” Guild spokeswoman Ricki Eshman said.
Office space ouch
The office market is still topsy-turvy in Denver. Some larger companies did close offices permanently, like California pre-fab construction company Katerra, which shut down its Centennial office after filing for bankruptcy last summer. WeWork closed four locations last February, giving up 217,000 square feet in Denver, the Denver Business Journal reported.
The pandemic also saw some new commercial construction pause for a bit, and non-residential commercial building permits drop in 2020 and remain flat in 2021. According to the city of Denver, the number of commercial building permits issued overall recovered from a low point in 2020. Residential projects, however, did better last year than before the pandemic.
Chris Gleissner, who manages the review of major projects for the city of Denver, said he doesn’t recall any office projects that stopped outright.
“We saw the bulk of what was already in the door, even if they did take a pause to take stock of where they were, still push forward into permits and vertical development,” Gleissner said. “I was surprised at how quickly and robustly it bounced back from down in the pandemic. But I don’t want that to sound like the spigot totally was turned off and nothing was going on. We certainly never stopped. It was just (lower) levels of busy.”
New office space contributed to higher vacancy rates. The completed 595,000-square-foot Block 162 at 15th and California streets, which moved in its first tenant in December, is about 20% leased, and that’s less than where developers had hoped they’d be by now.
And the amount of space available for sublease, which peaked in October at 1.9 million square feet, is still 2.5 times higher than before the pandemic, according to CBRE data.
Office landlords are dealing with a lot of empty office space.
But you can’t blame the pandemic for everything, said Albanese, with CBRE. Before 2020, mergers in the oil and gas industry resulted in a lot of vacant offices, which contributed to the sublease market. Office space was also underutilized by at least 10% so rethinking how to make use of the office again is certainly on everyone’s mind, he said.
And it could be worse.
There are more people in Colorado’s workforce than ever before, according to state Department of Labor and Employment data.
And businesses continue to relocate to the state, or expand here. Since the pandemic began, nearly two dozen companies picked Colorado for new headquarters or a place to expand operations. In downtown Denver, New York cloud-service firm Datadog leased 25,000 square feet at Republic Plaza, and Cincinnati-based medical researcher Medpace Inc. subleased 47,546 square feet at 717 17th St.
Last quarter, Robinhood, the Silicon Valley commission-free stock trading service, committed to 120,000 square feet at the new One Platte building overlooking Interstate 25.
Robinhood is a remote-first company, said Anupriya Ghate, a company spokeswoman, and there won’t be an in-office requirement for most of its 3,400 employees. But the local office will be there as the company hires more people in Colorado. The company has said it plans to add 791 jobs in Denver.
“Some teams will need to live within a commutable distance to an office location due to regulatory and business reasons, and a small segment will still need to come into the office. All employees will have access to our offices located across the country,” Ghate said in an email.
Is this the office of the future?
The newest office buildings are seeing firsthand how those changes are being implemented. At Block 162, there are zero interior columns inside the new 30-story building at 675 15th St. That offers tenants a clean slate to design from glass window to glass window.
Many Block 162 tenants took less space than they occupied before, in part because of how efficient the building’s floor plans are, said David Haltom, a senior vice president of Patrinely Group, the building’s owner and developer. “But it’s also influenced by the feedback they’re hearing internally about a desire to work from home and their efforts to organically solve for that by allowing some sort of rotating work from the office/work-from-home flexibility.”
It probably didn’t hurt that the building has the latest and greatest amenities, including an 11th floor “Sky Terrace” that opens to an outdoor patio with fire pits and lounge areas. At the same level, there’s a gym, social areas and conference rooms. The first floor of offices sits above 11 stories of parking and retail, so every office floor has a view of the Front Range.
So far, a handful of law firms have signed on as tenants. Sherman & Howard, Denver’s oldest law firm, was the first to sign a lease. It vacated its home of more than 40 years a block away and moved into the new digs in December. New for the law firm: hoteling desks for drop-in employees, uniform office sizes for partners and office staff, and magnificent views.
“Our new space was designed to foster and maintain meaningful relationships. We focused on offering our teammates several areas where they can gather and work collaboratively outside the traditional office setup,” Stefan Stein, the firm’s CEO, said in an email.
The office may have been heading in this direction anyway. Even before the pandemic, there was talk of flexible hours to stagger commutes and cut down on traffic congestion, shedding corporate real estate and even working from home, at least part of the time.
The future River Mile project, a new 62-acre mixed-use community along the South Platte River that would replace Elitch Gardens, would incorporate all of those benefits. The plan includes about 12 million to 15 million square feet of buildings, with about half dedicated to offices. And that hasn’t changed because of pandemic trends, said Rhys Duggan, president and CEO of Revesco Properties, the River Mile developer.
“I tend to be an optimist by nature, and the conversations that I’m having with prospective tenants validate that optimism in that I think we are going to see a pretty full-fledged return to the office,” Duggan said. “People like to have their space. Just going off of discussions I’ve had with some folks who are in that (hoteling) arrangement, they just don’t like to pack up all their files and pens and pencils and computers at the end of the day just to have to go and lay it all out the next morning.”
He expects hybrid work will become the norm, with employees working remotely a few days a week or month but always having a dedicated spot at the office.
“The office has always been where collaboration happens and where personal interaction happens and where ideas happen,” he said. “And I expect we’re going to see that get back to some level of normal.”
The pandemic sped things up and came at a time when a move to a hybrid workforce was possible, at least here in the United States, said Haltom, with the Patrinely Group. Home broadband use is high, virtual meetings via Zoom are now common among grade schoolers and CEOs alike. Office workers aren’t “pushing paper” anymore, they’ve long been emailing, texting or communicating digitally.
“I know many people for whom this is a fact of daily working life and had never used any of those before March 2020,” Haltom said. “I truly have the opinion that the stay-at-home, work-from-home mandates implemented across every sophisticated country in the world in the spring of 2020 would not have been technologically an available option in any previous generation.”
We’re not going back to the old normal, Haltom said. Rather, he shared a phrase he heard recently that he feels is very applicable to the office market: “We’re going to go forward into normal.”