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Office, Sweet Office: Springfield businesses may be bucking a downsizing trend seen nationally

SBJ Economic Growth Survey: Inside the Vision

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At the very least, COVID-19 was instructive.

If no other good came out of the coronavirus pandemic, business owners could at least say it taught them to ad-lib. All over the world, workplaces found a way to operate in conditions that seemed antithetical to their purposes.

Workers learned to collaborate or even serve customers through online tools. The office itself was not the crucial element it once was believed to be.

For many, worker resiliency was an eye-opening discovery. Some started doing the math on the price per square foot of their offices, as workers began to point out that their efficacy was not impacted by their distance from the water cooler.

In some organizations, workers still have not yet made it all the way back to the office full time. And in some cities, like New York, it is possible they never will, at least not in the numbers they did pre-pandemic.

The City, a nonprofit digital news platform based in New York, notes subway ridership fell 90% at the start of the pandemic, but it has recovered only to half its 32.4 million average weekly users in 2019.

Likewise, the number of employees reporting to a New York City office on a weekday is also at half its pre-pandemic level.

But Ross Murray, president of R.B. Murray Co., a commercial and industrial real estate firm, says Springfield is not New York City.

“We’re at about a sub-5% vacancy rate here within our office market, and that’s extremely healthy, contrary to what the larger markets have seen,” Murray says.

Murray notes Springfield is considered a Tier 2 city, unlike New York, Chicago or Dallas.

He says COVID-19 taught some businesses in those cities that working from home brought certain efficiencies and financial savings.

He offers commuting as an example of pressures smaller cities don’t contend with. Someone who lives in New Jersey with a two-hour commute by public transit can save a lot of time by working at home, plus the expense of parking. Additionally, Springfield doesn’t have the real estate prices of a Tier 1 city, which has institutional high-rise buildings, so the savings realized from downsizing or abandoning offices isn’t as much a factor here.

“Most people here locally are excited to get back into the office,” Murray says. “A few are a little bit behind, and some may do some hybrid-type schedules, but for the most part, they’re glad to be there.”

Murray says he is continuing to see an increase in demand for certain office spaces.

Springfield seems to be bucking a trend. Digital.com, an online publication that evaluates e-commerce tools, reported earlier this year that 69% of U.S. businesses had permanently closed at least some of their office spaces since March 2020, and among those, 37% permanently closed all offices.

Some 41% of businesses downsized since the start of the pandemic, and 51% of businesses that planned to keep their office space would allow their employees to choose fully remote work indefinitely.

In the Digital.com survey of 1,250 U.S. businesses, respondents cited a desire by the majority of their employees to work from home.

What employers are saying
In the 2022 Springfield Business Journal Economic Growth Survey, 64% of respondents reported working out of one physical location. For 9%, everyone worked remotely with no office at all, and on the other end of the spectrum, 7% reported having more than five physical locations.

The majority of all respondents – 57% – owned their business office, while 26% had short- or medium-term leases and 8% had leases with terms of 10 or more years.

Unlike their NYC counterparts, 32% of local business leaders were looking to expand their physical operation, with 55% planning to stay the same size.

Working from home is a trend that continues in Springfield. Among survey respondents, 17% allow the WFH option always, with 58% offering it sometimes. The remaining 25% never allow it. While the survey is anonymous, it seems likely that this figure includes workers that cannot operate from home out of need for industrial equipment or similar factors.

Some 28% anticipated the next year would see less time spent working at home for employees, with 6% anticipating more WFH and 37% expecting things to remain roughly the same. The question was not applicable to 24% of respondents.

Architects’ take
Local architects agree: Springfield businesses are not looking to go lean with their physical operations.

Brad Erwin, president and principal architect with Paragon Architecture LLC, agrees with Murray that Springfieldians aren’t greatly inconvenienced by commutes.

“A 20-minute commute in Springfield gets you a pretty far radius,” he says. “That doesn’t exist in St. Louis or Kansas City. The time it takes to get back home each day is a significant toll on the quality of life.”

Erwin does not predict a radical change in offices in Springfield.

“An office environment needs to reflect the talent attraction and talent retention effort of that company,” he says. “It has to reflect values and brand and be a place somebody does want to come and work inside.”

Erwin notes today’s employer isn’t only competing with other companies for salary and benefits, but also for their office environment or even the ability to work from home.

Joel Thomas, principal at Buf Studio LLC, says after the pandemic, people thought workplaces would die off – but he was never convinced.

“It’s human nature to want to be around people,” Thomas says, noting he believes more people would say they prefer working in an office to working at home.

There are industries where interaction with others is not necessary to do a job, he notes. He knows of a 100-person office in a building on the Springfield square that sits empty now after the pandemic because the business discovered it could function without a physical office.

“They completely vacated that thing,” he says.

More than a post-COVID shift in worker mindsets, Thomas says high interest rates are keeping life from going entirely back to normal.

“We’re going to get back to a norm eventually,” he says. “The interest rate thing isn’t helping. If it wasn’t for the interest rate and inflation, we’d probably still be seeing booming construction going on.”

Where we want to be

Murray, too, believes workers prefer the company of others, but he knows they want to be together in an appealing space.

“They generally want new, modernized buildings,” he says. “They want to have media rooms, conference rooms, large break rooms, gathering rooms. They want a coffee-type bar within their own office areas, plus outdoor space and natural light. These are the things we recommend to the development community we’re working with.”

Murray adds that he still believes real estate is a good investment.

“Commercial real estate is a really good hedge in an inflationary period,” he says. “We’ve had a tremendous amount of success in the last 18 months, and there’s a lot of pent-up demand, especially for industrial, but really all facets.”

Erwin is making similar observations.

“We’re not seeing radical changes for the Springfield market,” he says. “We’re seeing a focus on the quality of the space – it could be daylight and views; it could be access to the outdoors. It could be a working environment that allows different types of tasks to be done in different areas of the building, so not every single thing has to be done at the desk.”

Thomas says businesses have grown cautious about wide-open spaces without the ability to close off individual offices.

With the pandemic, he says, one person in an open office environment would get sick, and the whole office would have to be shut down.

“That’s one of the things people are looking into – can you design it in a way that if a certain department had an outbreak, you can quarantine the area?”

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