Over the last several months, we've seen a variety of companies change their plans, and we've written a lot about how the work-from-home movement may change real estate investing, as well as the forecast for office REITs. Many companies are planning for a future that looks a lot different than it did a year ago. Here are three notable examples.
Ford plans for a more remote future
At Ford Motor Company (NYSE: F), many of the company's 30,000 employees who work at its headquarters in Dearborn, Michigan, have returned to completely clean out their desks because Ford is reconfiguring its offices. Before the COVID-19 pandemic, Ford had announced a massive redesign of its campus and moved some employees into co-working spaces inside the Fairlane Mall back in 2017.
Ford is also working on a renovation of the once-abandoned Michigan Central Station in Detroit's Corktown neighborhood, turning it into a new office that should be ready in 2022. When the pandemic first struck, there were concerns that this $350-million adaptive reuse project would be cancelled. In both cases, offices are being redesigned not just for safety in the current situation but also with the long-term expectation that employees will be working from home more often.
Pinterest opts out of new lease
Pinterest (NYSE: PINS) paid $89.5 million to terminate a lease on a to-be-constructed office complex in San Francisco. Pinterest will keep its existing offices and in a statement, Pinterest's CFO mentioned that the company is planning to create a more distributed workforce. Alexandria Real Estate Equities, Inc. (NYSE: ARE), an urban office REIT, announced the lease agreement in March 2019.
San Francisco has been one of the cities most impacted by the work-from-home changes, partly because rents and home prices are so expensive in the city and surrounding areas. Many San Francisco-based companies, including Twitter (NYSE: TWTR), have said some employees will be able to work from home indefinitely.
REI moves on before it moves in
For the last four years, outdoor outfitter REI had been planning to move into a new complex in Bellevue, Washington. Instead, it has announced it is selling the eight-acre campus before it moves in and is instead opting for a decentralized workforce in and around Seattle. It plans to use the money it earns from the sale to focus on nonprofit initiatives and growing the company.
The REI headquarters is located in the Spring District, where Facebook (NASDAQ: FB) has leased hundreds of thousands of square feet of office space. While there are rumors that Facebook may be interested in the REI headquarters, nothing has been made official yet. Amazon (NASDAQ: AMZN) is also said to be considering relocating some workers out of Seattle and into Bellevue to avoid a new payroll tax in Seattle.
But what do workers really want?
A survey of over 25,000 people conducted by IBM (NYSE: IBM) in April indicated that more than 75% of them said they'd like to work from home at least some of the time and 54% said they'd like it to be their main way of working. Contrast that with a study from the Gensler Research Institute in March that found that only 12% of office employees wanted to work from home full time. The truth may be that it is simply too early to tell what impact working from home will have on workers over time when it comes to key metrics like productivity and job satisfaction.
While some companies like Amazon are going against the tide and opening new offices, even it is leaning more toward smaller offices and deemphasizing massive centralized campuses. This movement away from clusters of workers in single locations contributes to what Zillow (NASDAQ: Z) (NASDAQ: ZG) CEO Rich Barton has called the "great reshuffling." This could unlock opportunities for real estate investors in secondary and tertiary markets, where real estate is not as expensive.