At this week’s Realtor Roundtable meeting, we had a fantastic discussion with Vladimir Bosanac, Founder, Publisher and CEO of The Registry, one the Bay Area’s premier real estate publications. Vladimir joined us to share his insights into real estate market trends during the pandemic, and more specifically, the outlook on commercial real estate with the emergence of the remote workforce.
If you’re not familiar, The Registry is an excellent resource Bay Area real estate news and updates. At their core, they are a trade publication, but their appeal extends to anyone with an interest in keeping up to date with local housing and development projects. You can subscribe here.
We were very excited about the opportunity to pick Vladimir’s brain about the outlook of the commercial market in a post-COVID world. We hear a lot of talk, both within the industry and outside of it, about what will happen to all of this new office space in the Bay Area if a large part of the workforce remains remote, even after it is deemed safe to return to the workforce. Will there be mass vacancies? And why are developers still applying to build more office space with such an uncertain outlook? Of course, there are no definitive answers to any of these questions, but as someone who covers the industry so closely, we were curious to hear Vladimir’s thoughts.
“Culture eats strategy for lunch”
When speculating as to whether we will see offices return to full capacity again post-COVID, Vladimir invoked this famous saying. Meaning, once a culture has become established within a company, it can become very hard for leadership to change it. Now that so many companies have afforded their employees the flexibility of working from home, it may be very difficult to get them to return, even if leadership demands it. A recent Robert Half study seems to support this notion, with 1 in 3 professionals working from home saying they would look for another job if asked to return to the office. This could leave tech giants like Facebook and Google, who control so much office space across the Bay Area, in a bit of a catch-22. Do they fight their employees and twist their arms to come back? Like Marissa Mayer famously tried to do at Yahoo! back in 2013. Or do they embrace the shifting workplace dynamics and downsize accordingly?
Vladimir emphasized that we won’t be able to fully grasp the effects that working from home will have on the commercial market for another couple years, once many of the large leases on office space have expired and companies have had time to assess how much of their workforce will remain remote.
When asked why developers still continue to apply for new office projects despite the uncertainty, Vladimir’s answer was simple. They are developers, it’s in their DNA to have have a rosy outlook on the market. Still, he says it is entirely possible that the commercial market stays the course and office buildings return to a healthy capacity. Industries like biotech and other laboratory sciences require a large in-person workforce to function properly, and solutions like shared workspaces may help companies with larger office spaces lease out what they aren’t using.
With regards to what this all means for the residential market – Vladimir thinks we could start to see the further expansion of the “Bay Area” into regions like Monterey/Salinas, Santa Rosa, and Sacramento. The reality is that, regardless of how this pandemic resolves itself, we will likely be left with a hybrid workforce moving forward, with some portion of people who used to work in-person now coming into the office only 2-3 times a week, or as needed. This will allow some people to settle farther outside of Silicon Valley proper, into cities where you can get more house for less money. Where the 1-2 hour commute becomes tolerable if it only has to be done a couple times a week. Still, he is confident that the commanding presence that big tech has in Silicon Valley will keep the peninsula residential market healthy, despite an emerging hybrid workforce.
Our conversation with Vladimir covered so much more, but for the sake of keeping this blog post from turning into a short story, we’ll cut it off here. If this sort of discussion interests you, please do check out The Registry, and follow along with their excellent coverage of Bay Area real estate. And as always, don’t hesitate to reach out with any questions.
Thank you for taking the time to chat with us, Vladimir!