Adaptability, survivability and the persistence of human nature

AACI | Vice President, The Regional Group of Companies Inc.
  • Jul. 6, 2020

We’re in a hurry-up-to-wait sort of situation right now from a commercial real estate perspective. Employers and landlords are preparing for a return to the office . . . with no firm plans to abandon remote working just yet.

The news came late last month that one of the largest single occupiers of commercial space in the country, the federal government, is in this very mode.

On the one hand, it has issued an extensive guidebook for a return to the regular 9-to-5 for its 250,000 public servants. On the other, the directive from the top is that a re-opening of offices will be a gradual, as-needed process that will vary between departments. Many public servants can expect to continue working from home through the winter.

It’s this kind of wait-and-see attitude that understandably has people worried. Commercial tenants, if their cash-flow position was already on a short fuse prior to March of this year, have legitimate concerns about their ability to weather even a small decline in revenue for six months, never mind any longer. Their landlords rightfully fear what will happen at lease renewal time – or sooner.

A recent news headline here in Ottawa focused on how some of the larger tenants in the tech hub of Kanata North are already looking to sublet – tens of thousands of square feet, in some cases.

“Is it just the tip of the iceberg?” brokers in the article ponder. The number of such requests over just a few weeks, one broker noted, are about as many as he would normally see in a whole year.

Tip of the iceberg for the office?

That’s a fair question.

But again, I think a lot of people are in a state of panic right now. Which, again, is understandable, when we have no real idea when this threat will fade, either because it runs its course or we have a vaccine.

We’ve been through a lot of change and upset in the past few months. It’s a combination of prudence and knee-jerk fear.

As I have said in recent posts, we must be cautious about regarding how our lives have changed since March as a reliable indicator of what our “new normal” will look like.

In Kanata North, for example, some large tenants are looking to sublet, but that doesn’t mean they all are. Nor do we know what factors were already in play for these businesses before the pandemic. In some cases, I expect, the pandemic has only accelerated plans that were already in the making.

I also tend to side with that group which doesn’t see a mass exit from the traditional office as a likely outcome of the pandemic once restrictions have eased.

The digital means to be able to work at home online have been in place for more than a decade. Remember this whole world of connecting through the ether really stems from the introduction of Windows 95, which has its 25th birthday in a month, so any changes we may see speeding up right now have been incubating for over two decades.

The vast majority of business owners have the sense to always be considering how they can make things more efficient and productive. If having most of the team working from home was the most productive approach, a majority of employers would have started doing it long before now.

Our social habits are hard to break

Ottawa-based commercial real estate sales rep David Glick-Stal, commenting on a CBRE report, said he just doesn’t see the end of the office, his bias in favour of office space notwithstanding.

It’s not about real estate or technology, but human nature. Most of us are social animals. For many, the workplace is a primary social environment.

Zoom et al. are simply not a substitute for face-to-face interaction and the energy and privacy that comes of it. Consider the difficulty in training new staff without in-person contact.

Office design and usage patterns may change, but the office itself isn’t likely to become extinct.

As always, adaptability is the most important gauge of survivability.

Landlords with grocery store tenants must be rubbing their hands together right now in anticipation of lease renewals. Grocery stores are a great example of adaptation, given how they have switched to online ordering and curbside pickup.

Even the local tea store I like now has an easy-to-use app with home delivery.

Species that don’t adapt become extinct.

Be online, or be left behind

Never has the importance of a small business being online been proven so decisively. CIRA, steward of Canada’s .CA domain registry, reported recently May was the single busiest month in its 20-year history for new registrations. The majority of these were e-commerce and business related.

Some companies in some sectors have every reason to be fearful. Cruise lines and airlines, for example, face an uphill battle to convince people being stuffed into close quarters, whether at sea or in the air, is any longer a good idea.

But we must always remember that humans are creatures of habit.

We crave convenience, social interaction and freedom of choice. These things will play a huge role in what form our new normal takes.

The world may be an unpredictable place right now, but human nature is not. Business owners of all types must adapt to survive and if they keep human nature in mind, those that can ride the wave of change are bound to do so with success.

To discuss this or any valuation topic in the context of your property, please contact me at [email protected]. I am always interested in your feedback and suggestions for future articles.

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

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