Moved forward by the Bay Area’s Metropolitan Transportation Commission, a new measure would require many businesses to keep employees working remotely even after the coronavirus pandemic passes in a move that would limit gas emissions but could dramatically hamper the region’s office sector.
The idea of a regional remote work mandate does not favor the Bay Area’s office sector or its overall economy, said JLL International Director Chris Roeder, who is based in San Francisco. That level of remote work would lead to much larger tech company departures from the San Francisco Bay Area, he told Bisnow in an interview.
“It’s totally unrealistic that a city or a region could dictate how a company allows their employees to come in and work within their office, and I think it’s going to scare [companies, investors and lenders] away,” Roeder said.
Plan Bay Area 2050 includes a mandate that office-based Bay Area businesses with 25 or more employees keep 60% of their workers home each workday in an effort to meet state-outlined greenhouse gas reduction standards. It is one of 35 strategies in the plan but has garnered the most attention.
Meeting those standards requires an increased degree of remote work by 2035, including the crafting of state legislation, according to MTC Assistant Director of Communications John Goodwin.
Goodwin disputed that the move could affect CRE in the region.
“This is going to have certainly no immediate impact, and perhaps never an impact, on commercial real estate,” Goodwin said of MTC commissioners moving the blueprint forward this month. “This is a planning action rather than a policy action.”
Plan or policy, remote work has divided companies, employees and commercial real estate over its long-term appeal and feasibility for most companies and workers.
From early in the pandemic to now, the office sector has remained resolute in its belief that properties will once again attract workers beyond the downturn. But remote work has appealed to many businesses, including companies like Facebook, which may be 50% remote by 2025, as well as employees hoping to trade the office environment for more flexibility.
Since March, San Francisco’s previously high-flying office sector has faltered. Last quarter, it had its largest drop in space absorption in almost 20 years, seeing a jump of 2.1M SF of open space from Q1, according to Newmark Knight Frank (not including Uber‘s newly delivered 1M SF Mission Bay offices).
Similarly, sublease space and vacancy rate have both skyrocketed. Sublease space in S.F. grew by 1.7M SF, or almost 50%, while the vacancy rate climbed 3.6% to 7.6%, according to NKF’s report.
Goodwin said momentum for the mandate formed over the summer, as many companies were forced into adopting remote work by the coronavirus pandemic. MTC polling of Bay Area residents showed remote work is a popular way to reach a 19% reduction in greenhouse gas emissions from cars and light trucks.
“It was among the most popular of the proposed climate-related strategies that we were asking people about,” Goodwin said.
Under the plan, 20% to 25% of workers in the Bay Area would be remote, up from the 6% baseline seen in 2015 and the 14% forecast for 2050 without legislation, according to Goodwin.
Proponents say the level called for in the mandate isn’t necessarily inconsistent with how much companies and their employees will favor remote work post-pandemic, mandate or no mandate.
“Everybody wins except the commercial real estate market in a remote workforce model,” Moe Vela, chief transparency officer of remote work consulting company TransparentBusiness, said in an interview.
Vela said he expects many companies to adopt a hybrid model like the one called for by the MTC strategy, saving money on rent, operational infrastructure and other office-related expenses.
Even so, neither remote work advocates’ dreams nor office landlords’ fears will be realized overnight. Goodwin stressed that neither the MTC nor the Association of Bay Area Governments, its partner agency in crafting the regional plan, have that kind of authority. In addition, the MTC will soon put out an implementation plan looking at the legislative feasibility of all 35 strategies, including mandatory telecommuting, with any final adoption of Plan Bay Area 2050 due next summer.
After that, it will be up to state elected officials to legislate what are likely to be sweeping changes by 2035 if they are to meet the state’s 19% reduction goals in time, according to Goodwin. As dramatic as mandatory telecommuting may seem, agencies estimate that strategy alone only moves the state about a couple of percentage points closer to 19%, he said.
“This is a great illustration of how hard it is to cut greenhouse gas emissions meaningfully,” Goodwin said. “If it’s not a work-from-home mandate, then it’s got to be something else as dramatic or an awfully big collection of small behavior changes.”
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