Commercial Real Estate and the Changing Shape of the Workplace

From WGN Radio interview with Dan Barrins

There’s no question that the way we work has undergone noticeable changes in recent decades. The days of men and women in serious suits working in a 9-5 office are waning. The clothes have gotten more casual and the offices have flexed to keep pace with today’s expectations and technology.

Because some work can be performed from nearly anyplace with a Wi-Fi connection, there’s less of a need for the traditional office space. Some workers may even report to and interact with supervisors hundreds of miles away. Other companies, particularly startups, are now doing business out of the next generation of offices: the shared space.

Perhaps no other company in the U.S. has taken up the flag of shared space like WeWork. Based out of New York, the commercial real estate giant leases millions of square feet of space across the nation, including in Chicago.

But the bubble may be about to burst. Dan Barrins, a senior vice president for commercial real estate at Associated Bank, spoke on WGN’s podcast recently about WeWork’s faltered attempt at an initial public offering. “The issues with WeWork, in my opinion personally, is that it’s somewhat of a phantom landlord,” he says. “They’re a sub-landlord, in effect. I think their leases are usually 15 years, and they’re signing leases for a month at a time. They have a 15-year commitment to these landlords that own these buildings, and one-month sublease space is not a good business model.

“They’re leasing one desk at a time, two desks, a conference space, a conference room … that’s a lot of space to fill. There’s nothing wrong—plenty of good quality businesses have started in people’s basements, people’s garages. But I think in the midst of a recession, startups will retrench to the cheapest space available—which would be in mom and dad’s basement or potentially their garage—and not have to pay significant money for rent for a startup.”

Technology is impacting and challenging the industrial side of commercial real estate as well. Warehousing and supply-chain operations are turning to sophisticated automation to track and move materials, and companies are going to need the facilities—and the workforce—to keep current.

According to Barrins, companies that want to locate in an area with a highly skilled workforce, particularly in an economy with low unemployment rates, may have a hard time filling those jobs. These workers will need to be adept at learning and understanding new technologies and be willing to continue learning as they progress throughout their careers. “Some people may be hesitant or resistant to that change, but it’s really the future that all workers, even what some would consider blue-collar workers, are going to have to adapt and learn to adopt new abilities in their career.”