Exactly what shape the office sector's new normal will take following the pandemic has been the topic of much debate. Investors have been watching closely as several prominent companies have announced what their remote work policies will be going forward. A few have been so bold as to announce that their employees will be free to work from home -- or wherever they choose -- permanently, and many others will allow for at least part-time telecommuting.
Another major commercial real estate development over the past year has been the closing of thousands of retail stores. A shift to e-commerce wasn't doing most brick-and-mortar retailers any favors, and the pandemic was more than many could overcome.
And not to be outdone, residential real estate underwent its own pandemic-induced transformation as many fled cities for the surrounding suburbs.
As it turns out, the rather rapid developments in these three real estate sectors have come together to create an interesting opportunity.
A new day at the office
Former WeWork executives Joel Steinhaus and Doug Chambers took note of the rise in suburban remote workers and founded Daybase. According to The Wall Street Journal, their New York-based start-up aims to transform vacant retail establishments into roughly 5,000-square-foot furnished offices. A $50 monthly fee gets members access to a common work lounge, and private spaces and meeting rooms are available for additional fees. Venture investors Company Ventures and Good Friends are backing the new co-working company.
Chambers expects this arrangement will appeal to commercial landlords not only because it makes use of vacant space but also because the setup will draw more potential customers, in the form of office workers, to surrounding businesses. It'll be quite convenient for them to do some shopping or visit restaurants or cafes regularly before or after work or on breaks.
In another bet on remote work, residential REIT (real estate investment trust) AvalonBay Communities (NYSE: AVB) is experimenting with co-working space in its apartments, and fellow apartment owner Equity Residential (NYSE: EQR) may soon incorporate private office spaces into its buildings to complement its existing conference rooms.
The Millionacres bottom line
No one can say with any certainty what the future of the office looks like. Many companies have yet to commit to a particular working arrangement for their employees going forward, and it remains to be seen how willing a workforce that's had a taste of freedom (albeit under rather unusual circumstances) will be to return to a traditional 9-to-5.
Between that, the number of companies that have agreed to allow at least partial remote work, and the growing appeal of more living space, it's likely that remote work in suburbia is here to stay. It also seems reasonable to expect that many suburban telecommuters will seek a close, convenient solution to the problem of separating their work and home lives.
Going forward, residential landlords looking for new investment properties in suburbia may want to take into account proximity to a nice co-working office in the midst of shopping and restaurants. Meanwhile, suburban commercial landlords with vacant space may want to consider whether a co-working company like Daybreak could just be their ideal tenant.