The future of real estate office space is in for a change following the remote work trend sparked by the COVID-19 pandemic.

As agents continue conducting business and interacting with colleagues virtually, broker/owners across the United States face a new challenge as they look to the future of their firms: How much office space do they need?

“You don’t need to have [huge offices] because a lot of our sales professionals are not in the office, and most of the productive ones are out with customers and generating leads,” says Rei Mesa, president and CEO of Berkshire Hathaway HomeServices (BHHS) Florida Realty.

The increase in remote working and new technology during the pandemic led Mesa to reevaluate his office space needs. Since the pandemic started, BHHS Florida has cut the square footage of 14 offices—out of 36—by roughly 35%.

The reduction in office space appears indicative of embracing the hybrid work model for agents. Still, some broker/owners also see it as an opportunity to decrease some operating expenses.

“Your rent or occupancy expenses are 365 days a year, and it doesn’t change if the market goes up and down,” says Mesa, encouraging other firms to take stock of their office structure and company culture amid the increased use of technology.

“We’re just listening to what the business is dictating, and you abide by it,” Mesa says.

“I think each company has to ask the hard questions and then make a decision based on the answers coming back.”

For Long & Foster Real Estate’s chief executive, that’s been a question he’s been asking for more than a decade.

“I think it’s really important to differentiate between space and cost because those are not mutually inclusive,” says Gary Scott, president of General Brokerage at Long & Foster Real Estate.

According to Scott, Long & Foster has been reducing its office space occupancy costs since 2010. At the time, Scott says his firm created a “Space Tax” campaign to bring awareness to the amount of unused office space that firms were paying for in previous years.

“I’ve been in the business for 35 years, and we don’t list and sell houses at our desks,” Scott says. “We list and sell houses belly to belly, face to face with the consumer showing houses…I think that every real estate company learned after the financial crisis that we spend a ton of our resources on occupancy.”

While Mesa and Scott are proponents of reducing space in several offices, both agree that having a presence in their respective markets is still important.

In Long & Foster’s case, Scott says the firm has focused on increasing its footprint while cutting its space costs.

“Those two can be done simultaneously,” he says. “It’s all about better space and space that is more widely used by the agent of today, and it’s not about being on every street corner—which it was back in the day, which provided the billboard.”

Answering the Hard Questions

The writing has been on the wall for office space for quite some time, but the pandemic merely pushed along the inevitable shift in how companies—not just real estate firms—use their office space.

Recent data from the Urban Land Institute projected that office vacancy rates would peak this year before a slight recovery YoY in 2022 and 2023.

“Almost every tenant is asking the same questions: ‘How and when should I get my people back to the office?'” said Ben Breslau, chief research officer, Americas, JLL │Leadership during a recent ULI virtual panel.

According to Breslau, companies across different sectors struggle with how they will get workers back into offices safely while also worrying about scheduling.

“Although we are only, on average, at about 25% occupancy right now compared to pre-COVID levels…we think there is going to be a meaningful shift across the board to closer to 75% occupancy as compared to pre-COVID by the end of this year,” Breslau said.

He added that the increase in occupancy would likely start in late spring and summer of this year.

According to Breslau, up to 60% of the companies JLL│Leadership has surveyed will likely implement hybrid models, which may be the future norm for companies.

“I think the permanent work-from-home percentage of the population will double from its pre-COVID numbers [from 10% to 20%],” he said. “The purpose of the office in the future will be to bring people together, so you’re going to want enough space to bring people back, and there is quite a bit of activity on reconfiguring space in a bunch of ways.”

Office-space shifts may include moving to unassigned desks and additional space for collaboration, learning and other amenities.

The Office of the Future

Along with reducing square footage, brokers are pivoting in terms of how they set up their offices for agents.

“I think you’re still going to have people wanting to come in and collaborate,” says Scott MacDonald, president and CEO of RE/MAX Gateway in Northern Virginia, in a recent interview with RISMedia.

Since 2019, MacDonald says he has been cutting down space in his offices while shifting to offer agents a touchpoint to work with their colleagues.

The reception has been a positive one, according to MacDonald, who maintained that agents feel more comfortable in an updated office environment.

“I see us downsizing and staying in this smaller footprint, with more open offices and more collaborative areas where people can get together and share their ideas…[and] get their work done and then go on doing their business,” MacDonald said during a break-out session of RISMedia’s “Spring Into Action” virtual event on April 8.

During the “The Future of Brick & Mortar: The New Face of the Real Estate Firm” session, MacDonald and his fellow panelists discussed what the “office of tomorrow” would look like and how it would impact business for brokers and agents.

“I think, for us, it has improved our culture,” said Lacey Conway, president and CEO of Latter and Blum in New Orleans during the panel discussion.

While she acknowledged the benefits that remote work provided to her agents, Conway said that she was still a proponent of having people work in offices. During the virtual session, she said that her company had no plans of shrinking their office space in their Louisiana or Texas markets.

According to Conway, her company has polled top agents in its Louisiana markets on how productive they felt in and out of the office. According to Conway, about 90% of the surveyed agents said they worked better in the office.

“I also don’t know if we can put a figure on how many deals are saved or done with that interaction in the office,” she said. “As a company, we feel that personal interaction is key.”

With 1,800 agents in offices across New York, Massachusetts, Connecticut and Rhode Island, hybrid work schedules will likely become the norm, according to Candace Adams, CEO and president of Berkshire Hathaway HomeServices New England, Westchester & New York Properties.

According to Adams, she plans to set up office spaces to accommodate a more mobile environment, consolidating offices and opting for larger central offices with outposts in certain towns.

“In order to bring people together, we’ll continue to do [Zoom meetings]. We find that it is going to be a huge advantage to be able to take people and bring them together and network,” said Adams. “We will also continue to innovate digitally for both our agents and consumers. We realize that is not going away, and it will become more a part of how we do business.”

Jordan Grice is RISMedia’s associate content editor. Email him your real estate news to jgrice@rismedia.com.