I attended a webinar this week with office specialists from JLL, C&W, Cresa and Newmark Knight Frank, representing San Francisco, the Peninsula, the East Bay and Silicon Valley. In San Francisco for the most part when March hit, the world just stopped. Nothing was happening, and tenants only did what they had to do. Along the Peninsula, there were still lab deals moving forward as it is hard to be a lab worker working from home. In the South Bay, R&D was still doing deals, although down 50% from the previous year, but not as bad as the office market which was down 64%. Much of he leasing activity everywhere was lease renewals, and there seemed to be many doing 1-2 year short-term extensions so companies could see when their employees would actually come back to the office, how long the pandemic would last, and what the long term impact might be. San Francisco reported an increase of 2 million square feet of office sublease just during the past few months.More direct space is anticipated to come back to market as leases expire. One broker commented that the invitation to come back to work will for the most part be up to the employee to decide as companies do not want to force a return to the office during the pandemic. There was also a great comment that having employees in a physical space is great for recruiting and getting new employees into the company work culture, which can be difficult to do working from home. With 10-20% annual turnover this could be a deciding factor in the future. Another comment related to installing UV lighting in stairwells that were going to be used to get up to your floor, so you don’t have to take the elevator. Tenants may be asking landlords about HVAC system specifications, how many times the air is turned over, what the landlord is doing regarding filters, UV, ionization, etc., basically issues that were not previously on the corporate radar screen. Lastly, the jury is still out if headquarters need to remain the same size, will some operations move to the suburbs, And will less space long-term be needed if more employees, again long-term, work 2-3 days a week from home?
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