EastAlliance Sector Watch: Return To Work And Its Implications On Our Office Market Strategy

Typically, our Sector Watch reports are designed to share our observations about investment news, real estate markets, and the global economy. However, for this installment, we want to unpack the latest on how some firms are addressing the return of employees to the office. This topic is particularly important to us as office investments will remain a meaningful part of our investment strategy (and perhaps expand in the near term).

While some were focused on fleeing the short-term uncertainty caused by the pandemic in 2020, we found opportunity by partnering with a trusted office investment manager who shared our hypothesis that (as we stated in the August 2020 Sector Watch), “Office is not dead.” We encourage you to read that previous post if you have not already, but here we quote a key excerpt that summarizes our view on office demand:

“While the pandemic has altered our collective use and perception of the importance of office space, it has not ended our need for it – on the contrary, it has sparked (or accelerated) an entirely new way to use, value, and design it…. When one thinks about onboarding new employees and integrating them into the corporate culture, it is difficult to imagine it will be done exclusively through Zoom.”

So, as we continue to identify and assess opportunities in institutional-quality office assets in major markets throughout the US, we thought it would be a good idea to share with you what some firms and leaders have to say about their plans to return to the office. This is by no means an all-inclusive summary, but we want to share some of the highlights from a handful of articles we found informative (links to each provided below).

Things to Watch 

Let’s start with some encouraging news that hits close to home (some of us work out of our NYC HQ). In a sign that underscores the sentiment and growing confidence in the direction of our beloved Big Apple, the New York Daily News reported that the mayor recently announced remote work for 80,000 city employees will end in May.   

At the national level, Microsoft announced it is giving its 57,000 Seattle area workers the option of returning to the office beginning March 29th. While it has been allowing a limited number of employees to work from the office, this new initiative indicates the importance it places reigniting its in-person collaborative culture. As some have pointed out in the attached article, steps taken by giants like Microsoft may signal to other smaller firms that the time to safely ease into office mode is upon us. Of course, a lot of this depends on companies’ abilities to design policies and use data/technology to ensure guidelines are met and safe practices are followed.

In the same article describing Microsoft’s planned re-opening, is an excerpt regarding a study on employee sentiment we found particularly interesting. “Microsoft paired the announcement of its return to the workplace with the release of a report showing that for many, an end to full-bore remote work cannot come soon enough…

The report, which surveyed more than 30,000 office workers in 31 countries and analyzed ‘trillions of productivity and labor signals across Microsoft 365 and LinkedIn,’ found that 65% are craving in-person face time with their teams. Remote employees also reported being overworked and exhausted — though managers said their teams were more productive than ever. Still, Microsoft’s report indicated that 70% of workers want to have the option to work remotely, a future Microsoft is not alone in dubbing a ‘hybrid workplace.’” We encourage you to read Microsoft’s post on the matter. It’s quite interesting.

Which brings us to an interesting (and similar) take on the future of remote working from Goldman Sach, CEO David Solomon, via the BBC (link below) who is quoted rencently as saying, ““It’s not a new normal…it’s an aberration that we are going to correct as quickly as possible.” Mr. Solomon goes onto to highlight a point about culture we feel highlights why the office market is not entirely obsolete. Firms, at a minimum, will need some collaborative space to integrate new associates into a company’s culture and to establish the personal relationships that are a key ingredient in professional development.

Source: pexels.com

In EastAlliance’s opinion, working entirely from home can hinder the development of these relationships and collaborations. Or as Mr. Solomon put it when referring to the 3,000 new employees at Goldman Sachs, “I do think for a business like ours, which is an innovative, collaborative apprenticeship culture, this is not ideal for us,” Jes Staley, CEO of global bank Barclay’s echoed a similar sentiment about remote work and its impact on the entire finance industry when he stated, “It will increasingly be a challenge to maintain the culture and collaboration that these large financial institutions seek to have and should have.”.

The article goes onto to convey a few other key perspectives on why a hybrid model appears to be the more likely outcome compared to an entirely remote or distributed workforce. “Although all recognise there are positives, such as more flexibility for workers and potentially lower overhead for employers, concerns also abound about the impact remote work could have on trust, company culture, how young people’s careers progress and how employees collaborate.” While this article focuses on the implications of remote work on the finance industry, EastAlliance believes this perspective can extend to the law, pharmaceutical, research & development, design, human resources, and several others. Between the importance of collaboration and security (will clients like sensitive information residing in someone’s living room?) and strong demand for mentorship and professional development from associates (spontaneous interaction or informal idea exchanges can be a bit more difficult when entirely virtual) providing a workspace seems to have its benefits. And this says nothing of the potential digital fatigue of employees that stems from never quite “leaving the office” if constantly working remotely. But when it comes to a simple way to frame where things are headed, perhaps Daniel Pinto, COO of JP Morgan Chase put it best, “Going back to the office with 100% of the people 100% of the time, I think there is zero chance of that. As for everyone working from home all the time, there is also zero chance of that.” We agree. Things will settle somewhere in the middle in the near-term.

Even tech peers of Microsoft like Facebook and insurance industry leaders like Aviva, implemented remote work programs over the past year, but anticipate moving forward with a hybrid model. Lastly, there are indications that Alphabet (Google) is fully committed to the hybrid approach vs shedding its office space. As noted in the BBC article (as reported by the New York Times), Alphabet CEO Sundar Pichai said that Google plans to invest more than $7bn (£5.07bn) in offices and data centers in the US this year and stated “Coming together in person to collaborate and build community is core to Google’s culture, and it will be an important part of our future,” And it expects employees to work in-person for at least three days a week after the planned return to offices on September 1, 2021.

Impact on EastAlliance Office Investment Strategy 

In short, not too much has changed as it relates to our focus on higher quality assets in major metro and suburban markets. As we pointed out previously, our position is simple: Work from home was inevitable, even before the pandemic hit. The pandemic simply accelerated its wider implementation. But we believe that as vaccines make their way throughout the population (thank you, smart scientists!), people will return to the office, albeit gradually. Perhaps they will return in more measured numbers and maybe not daily, but they will return. Regardless of how long it takes for this to occur, we do know that collaboration and innovation will always require in-person candor and exchanges. Furthermore, specific functions like research and development, legal, human resources, accounting, and other more information-sensitive industries will always need places in which to conduct operations safely and discreetly. Lastly, we believe a collaborative corporate culture is such an important component to remaining healthy, relevant, creative, and competitive in an industry. So, onboarding, training, exposure, and mentorship will continue to require some element of in-person interaction, especially for new hires.

But we recognize it will not be quite business as usual for the entire office market. The supply of functionally obsolete or low-quality office space in low growth submarkets will suffer through extended periods of downtime, and some space may even be repositioned for different uses. When it comes to demand, users of space maybe have smaller requirements as it relates to full time use, but this may be offset slightly by social distancing guidelines that may mean fewer people may need more space (e.g. a higher per person per square foot requirement). So, the imbalance of supply and demand may require some patience from investors and creativity from operators as we collectively navigate the new realities ahead.


As we continue to invest alongside some of our experienced operators and expand our investment allocation in the office sector, we continue to learn about preferences, challenges, and opportunities from all stakeholders, and use these valuable data points to forge ahead. As we shape our fund strategies, we fully anticipate a continued commitment to the post-pandemic office economy. In fact, we are in the process of assessing and designing an exciting potential collaboration/program with a substantial office investment partner with a national presence (we intend on inviting select institutional and family office investors in the coming months, so stay tuned!).

As always, thank you for your time and we hope this post finds you and your loved ones happy and well. If you are interested in staying connected or learning about our platform, please be sure to follow us on social media or visit our website at eastalliance.us

The EastAlliance Family 

[1] https://www.nydailynews.com/news/politics/new-york-elections-government/ny-nyc-municipal-workers-return-to-office-20210323-drlmlkvmnvghhnbv2lj44t5wti-story.html
[2] https://www.seattletimes.com/business/microsoft/microsoft-will-allow-seattle-area-workers-to-return-to-the-office/
[3] https://www.bbc.com/worklife/article/20210323-the-bosses-who-want-us-back-in-the-office