The pandemic has affected and/or altered every aspect of life and society: education, communication, transportation and recreation; medicine, media, politics, relationships — and real estate.
Multinational corporations and their thousands of employees are adapting to the new business environment while global real estate giants work creatively to fill cavernous corporate campuses left vacant by the virus. Zoom conferences have replaced morning sales calls in most sectors and business air travel has plummeted in the past five months.
“Since March 2020, the majority of office-occupying industries have been working from home, while sheltering in place. This abrupt shift in workplace operations has resulted in significant behavioral changes that will have a lasting impact on workspace design and use, while simultaneously altering the demand for commercial office space for years to come,” say experts from Jones Lang LaSalle, or JLL, the world’s second-largest real estate services company. “Many tenants are hopeful for a return to their workplaces, but the level of uncertainty and anxiety is very high regarding the timing and detail of that reentry. Significant collaboration will be needed among building owners, tenants, employees and governments to address the challenges that lie ahead.”
But as usual, the landscape looks a little different in the Florida Keys, where geography limits the number of corporate offices and the tourism economy reduces the need for cubicle-lined compounds.
“Office space leases have always been the least active sector of the commercial real estate market in Key West,” said Will Langley, principal broker at Berkshire Hathaway Keys Real Estate and Knight & Gardner Realty in Key West. “We just don’t have many large, corporate, office-based employers, like the Microsoft or Google campus with space for thousands of workers, so I think we’ll be less exposed to that national issue of empty office space.”
Langley said Key West is seeing an increasing demand for small office spaces for one or two people.
“People who have been working from home for the past five months are now looking for a small, private workspace,” Langley said, adding that such spaces are available for $700 to $1,000 per month in locations such as the Professional Building and the Offices on Northside Drive.
The same is true elsewhere in the island chain, said Brian Schmitt, principal broker at Coldwell Banker Schmitt Real Estate.
“Office users are finding that they can often get along with less space as remote workers can utilize web apps like Zoom to handle office and client meetings. We do our sales meetings via Zoom weekly with typically 100 CB Schmitt agents, many of whom now prefer to work from home,” Schmitt said. “But all of our retail shopping centers are virtually 100% occupied, all paying rent with continued requests from local, regional and national tenants.”
But vacant retail space remains a glaring concern on Key West’s Duval Street, where rents are among the highest in the country and where potential business owners are concerned about the unknowns of the city’s cruise ship industry, Langley said.
“People who want to reduce cruise ships say the cruise ship industry only brings a million visitors a year to Key West, but that’s a million people coming through a six-block area, which makes quite an impact. So that issue is certainly going to be a factor for lower Duval Street, which hasn’t had any cruise ship traffic since March.
“Things aren’t pretty on Duval Street these days, unless you’re in the business of printing my ‘For Lease’ signs that are in the windows,” Langley said wryly, adding that the increased supply of available space and the uncertainty of the cruise ship situation will likely lead to increased flexibility from landlords.
“Landlords are realizing they have to be more flexible to get good tenants in those storefronts,” Langley said. “But for now, that uncertainty will continue to be a factor down there.”