Though the peak of the COVID-19 pandemic is in the rearview, working from home is still a priority for workers — while cities are left with empty office spaces.
“Sixty-nine percent of Americans prefer working remotely and 68% of employers want people in the office,” said Kim Patton, president of Elevar Design Group, when discussing the affinity employees have for remote work.
The Covington Business Council’s monthly luncheon focused on discussing the trends shaping office vacancies, demand, design and usage in the post-pandemic world. Panelists included Corporex’s Chief Real Estate Officer Tom Banta, Catalytic Fund President Jeanne Schroer and Elevar Design Group President Kim Patton.
While the pandemic eventually waned, the work-from-home trend did not. In a report published by Colliers, the average commercial real estate vacancy rate in Cincinnati sat at 16.8% in 2022, up from 14.8% in 2020.
Cities like Covington rely on having their offices filled. Payroll taxes are the largest revenue generating mechanism for the city government. More than $30.8 million of the city’s $67.8 million total general fund revenue for the 2022-2023 Fiscal Year comes from payroll taxes. If employees are back working in the office and utilizing downtown Covington, it provides a companies who are considering the city for relocation with an example of a return to normalcy. More employers means more potential to grow the city’s payroll tax base.
More employees back in the office also means downtown businesses like restaurants and coffee shops, who rely on those customers frequenting throughout the workday, can potentially regain some of their lost pandemic business.
Despite this, 87% of people responding to a 2022 McKinsey survey said they would take the opportunity to work flexibly, if offered. Of course, remote work benefits different job types and industries. While healthcare workers can’t work from home, customer service representatives can transition from the office to home well with the proper equipment.
Although working remotely is popular, Banta believes employers will see the “pendulum gradually swing back the other way.”
“The work from home model, in the long term, doesn’t work,” Banta said.
When working fully remote, companies lose developmental tools such as person-to-person mentoring and routine collaboration between employees. Another loss is the effect remote working can have on company culture which can disconnect people from the day-to-day relationship building of the workplace.
“An employee working from the living room is going to work for whoever pays the highest dollar amount,” Banta said. “There is no more company loyalty if you’re just working in your living room.”
In Patton’s opinion, employees who are more experienced tend to do better while working remotely, while employees with less than five years experience lose out on formative developmental experiences in the office.
“We’ve found that people with 15 years experience to work from home, but people with five are just not developing at the same rate,” Patton said.
There are benefits and drawbacks to both working fully remotely and primarily working in the office. The answer, however, is most likely somewhere in the middle. This is called the “hybrid model.”
According to Patton, Northern Kentucky cities like Covington are uniquely positioned to benefit from utilizing the hybrid model.
“You’ve got to give people a reason to want to come to work,” Patton said.
Companies need less total office space if they have some employees working remotely and others coming into the office. Due to every employee not needing to be in the office, less space is needed. Companies can then look for spaces with greater amenities which in turn can enhance the working atmosphere of the office.
Amenities are an important draw factor for offices. Banta cited the example of Y’alls Café and Butler’s Pantry in the RiverCenter, which according to him, doesn’t break even every month. It does, however, keep workers in the building by offering proximity and convenience.
“Butler’s Pantry, which everyone absolutely loves, you know, we are delighted to see a month it breaks even,” Banta said. “That’s an investment we’re willing to make because it has helped us fill that building.”
In Schroer’s opinion, more residential rental options should be built so Covington workers can live closer to their place of work. If commute times among a portion of a company’s employee base are cut down, those employees might spend more time in the office.
“I think we’re seeing now that people will go to work if they don’t have a 50 minute commute,” Schroer said.
Mixed-use developments are also a solution. With the development of the Covington Central Riverfront project, the RiverCenter which is the heart of the city’s Central Business District, will be better connected with Mutter Gottes and MainStrasse. The former IRS site served as an island, cutting off the RiverCenter from West Covington.
“People tend to walk four to six blocks,” Patton said. “That’s been a big barrier in between RiverCenter and the rest of Covington, so you kind of feel like you have to get in the car. When that fills in, I think you’re going to see a tremendous asset.”
Patton contrasted the Covington Central Riverfront with The Banks, a mixed-use development along the Ohio River in Cincinnati between Paycor Stadium and Great American Ball Park, which is trapped between downtown and two stadiums with limited room for residential expansion.
“There’s not another residential community within six or eight blocks,” Patton said. “They’ve had a real hard time. They come to town, they take a job and then they’re gone.”
The pandemic was a major shock to the system for the commercial real estate market. Unprecedented problems require creative solutions. As the pandemic fades, Northern Kentucky employers are looking for better ways to fulfill their investment into workspaces, so their employees can have better work/life balance.
