🔒Office space redux: How it’s changed in Maine during the pandemic

Hybrid work, which wasn’t even a phrase two years ago, will be the future of office life going forward.

Just as the pandemic changed the world’s behavior, it changed the office, perhaps forever.

“Going to the workplace has to be a ‘want to’ — you need a reason to go to work in person. The old workplaces — that’s not going to do it. Telling people to go back to sitting in the same cubicle? What’s the draw? There needs to be a draw,” says Jeanna Stewart, director of workplace practice at SMRT Architects & Engineers in Portland.

“Flexibility needs to go beyond a buzzword. What employers will look like will have to change so they can meet employees where they’re at. For some, that means reducing their square footage and having fewer designated spaces for each employee. There will be a high value on shared space, collaborative space, social gathering spaces and fitness spaces,” Stewart says.

“Employees really are in the driver seat,” Stewart says. “There’s an incredible number of job changes and job openings. If you’re not being flexible with workplace options, you will miss out on people.”

The office of the future means walking into the office and not going to assigned cubicles, but whatever work space fits your task, Stewart says.

Before the pandemic, just 7% of workers nationwide had access to a “flexible workplace” benefit or remote work, according to a report from Pew Research.

“Hybrid work is here to stay forever. In general, employees like it. They want the benefits of both the office and remote,” says Catherine Lamson, senior vice president and chief administrative officer at the Portland workers’ comp insurer MEMIC Group.

When the pandemic hit, all of MEMIC’s employees became remote except for about a dozen people who were deemed essential to on-site operations.

“Our company is very nimble. We had the technology we needed. People’s work stations became their dining room or home office. We never expected we would be doing this 100 weeks later. It is stunning. We’re remote in 22 states,” Lamson says.

“We had planned to come back. But now there’s a lot of interest in remote work and hybrid work,” Lamson says. “We always had a full house here. But things have changed.”

MEMIC plans to begin the return to the office on or about April 4, but even that will look different than the past, Lamson says.

“I don’t ever think we’re coming back the way we were,” Lamson says. “We will be very flexible when we return.”

Lamson expects there to be a varied schedule for some employees, while others, such as maintenance, will be in the office five days a week.

“People will come in when there’s a purpose. Not just to occupy a vacant seat,” Lamson says. “If employees come in and there’s two people in a 9,000-square-foot space, why come in? People will need to be here for staff meetings, trainings, team building. But that doesn’t happen very often.”

Nationally, about 60% of human resource executives surveyed by the Gartner Group says they are planning for a hybrid work future, and only 1% say they expect all of their workers to return to work full-time in the office.

‘Return to work’ has different meanings

In Portland, Fidelity Investments recently expanded, taking advantage of office space that was freed up in the pandemic. Fidelity leased 5,600 square feet of additional space on the sixth floor of 3 Canal Plaza in Portland, and renewed its lease of 5,217 square feet on the ground floor.

Meanwhile, Tilson, a Portland-based information technology company with more than 600 workers and 18 branches nationwide, says it will allow eligible staff to work from home for as long as they want. Still, Tilson has no plans to give up its headquarters in Portland’s East End.

“Office space is needed. Folks are not abandoning the office. It’s needed for collaborative work. Sure, heads-down work can be done at home. But for younger employees to have a mentor and mix with peers, offices are needed,” says Nate Stevens, a partner with real estate firm the Boulos Co.

Nationally, insurer Prudential Financial, professional services firm PwC, banking company Citigroup, as well as Google have said they would have a hybrid plan for at least a transition period.

“I think you’ll see more meeting space,” Stevens says. “Hybrid is here to stay. It’s becoming an employee satisfaction tool. It’s a talent attraction and retention piece, rather than a safety measure now.”

“Some companies are ready to start changing it up. They’re listening to what people need,” SMRT’s Stewart says. “Work can be a collaborative hub. We need to be mindful of people who want to work at the office and those who don’t. It’s about personal preferences.”

In a recent Boulos survey, fewer than 10% of companies were willing to reduce office square footage or abandon office space. In the survey, 140 respondents from across the state and in various sized companies participated.

In response to the question about what the “return to the office” looks like, 59% of respondents indicated that they’ll be using a hybrid model incorporating remote work moving forward.

Only 36% of respondents answered “all or most employees will work in the office full time” and only 5% indicated that the majority of their employees would work remotely full time.

The changes in work environments have had an effect on the real estate market. Just as employees have a stronger hand in negotiations with employers, tenants now have an edge over landlords, Stevens says.

Since COVID-19, companies can hire more employees without needing more space due to hybrid work plans.

“Tenants have more power now,” Stevens says. “Rents haven’t increased in two years.”

That’s a change from the recent past.

Between the Great Recession and the pandemic, it was a landlords’ market.

“Landlords called the shots,” Stevens says. “The vacancy rate was unhealthy. It was a stagnant market.”

The Class A vacancy rate in 2019 was only 0.2% but it jumped to 6.5% in 2020, Stevens says. It has settled somewhat to about 5% vacancy currently. The Class B office space vacancy rate was 8% in 2019, and hit 13% in 2020. Now it hovers around 12.5%, Stevens says.

“Tenants did not have options. If they had three options before, now they have eight or nine or 10,” Stevens says.

Portland currently has a glut of office space, with about 837,000 available square feet, with another 336,000 in available sublease space, according to Stevens.

Portland’s absorption rate last year was 330,000 square feet. At that rate it could take three years to fill the available space. To get to pre-pandemic levels, it could take a year or two to fill, Stevens says.

“We don’t generally get these big outside companies coming into Maine,” Stevens says. “What we’re relying on is organic growth in companies.”

“The dip in the market isn’t a long-term issue. In 2008 through 2010 there was more panic. Landlords are not panicking now,” Stevens says.

To lure tenants, landlords are offering fairly significant free rent as many as six or nine months.

Office of the future

“There’s both anxiety and excitement about the return to the office. Some people were really isolated for 100 weeks, with very little socializing and visiting. The few people who have already come in are very rejuvenated and happy to see people,” MEMIC’s Lamson says.

MEMIC occupies two buildings in the Old Port, with one featuring a new collaborative space that was built just as the pandemic hit, Lamson says. It features open space, meeting space, balconies, respite space, five meeting rooms and a pool table.

When asked whether MEMIC would change its office square footage, Lamson says “I don’t think this is the time to make that decision. We still need workstations. Over time, we will look at whether we keep all the space.”

MEMIC has offices in eight states and it will evaluate whether it will keep all of them open, Lamson says. Hybrid work and working from home gives MEMIC the opportunity to recruit talent nationally.

“Offices of the future may involve some square footage reduction or at the very least some reconfiguring of that square footage,” Stewart says. “A lot of these models involve activities-based spaces rather than a space for a role.”

Not every company will embrace hybrid work or change their offices to suit current trends. Eventua

lly, however, they may be forced to. “Some organizations are able to go to a new model and change. Some organizations can’t manage it, at least not yet,” SMRT’s Stewart says. “The changes are not happening yet [or] as quickly as I expected. The onslaught of people feeling left behind is coming, though.

“Maine is more traditionally minded,” she adds. “But it’s starting to be more of an evolution here and there’s change underfoot.”