DETROIT, Mich. — It might be time to consider buying your own watercooler.
Many Detroit-area businesses have surpassed five months of empty office space as workers moved off-site to do their jobs remotely amid the coronavirus pandemic.
For most, the arrangement has been working out well – maybe a little too well. Now some employers are considering downsizing their office space or giving workers more flexibility to work off-site permanently. That would change the real estate landscape of Detroit, could erode the city’s tax base and put some stores that rely on foot traffic out of business.
In fact, one of Detroit’s biggest employers, General Motors, is rethinking how it uses office space. GM owns the Renaissance Center, its global headquarters, in Detroit where about 5,000 employees work. Because it owns the building, GM can’t downsize or eliminate offices. But GM leaders are discussing how the automaker can offer workers more flexibility in how they work in the post-pandemic world.
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“It’s very difficult to project how it will play out going forward. The objective is to work on getting the best of both worlds, so that employees have flexibility, but at the same time get the team building and collaboration that you get at the workplace,” said David Caldwell, GM spokesman. “That’s the team’s goal. That’s what we’re working on right now. There are a lot of ways to get there.”
The changing dynamic
There will likely be pressure from city officials on many downtown office tenants to bring their workforce back because these workers pay a Detroit income tax – which some don’t have to pay if hey work from a home in the suburbs.
Frank Monaghan, a commercial real estate broker whose company, Monaghan & Company, specializes in commercial real estate, said employers are looking at downsizing their office space as the pandemic stretches on in Michigan and their employees continue to work remotely.
“There’s a whole new changing dynamic in the way offices operate. We’ll see more people working remotely and we’ll see more people not going into the office on a regular basis,” Monaghan said.
He predicted the office floor plate will also shrink, with workers eventually coming into their offices a couple of days a week and trading off use of a cubicle with other employees.
“We’ll see more consolidation into these work environments,” Monaghan said, adding that the days of heading into the office five days a week will be consigned to the past.
He said retailers are also affected by the working-from-home trend, and may have to downsize. Their landlords also feel the pinch.
“There have been concessions to retail tenants in these office buildings due to the stay-at-home orders,” Monaghan said.
But given the ongoing pandemic, it is still too soon to have any data that measures the permanent impact on office space going forward.
A ghost town
Jim Bieri, a principal with Stokas Bieri Real Estate, said it will take two years for the office market in Detroit to recover from the pandemic.
Bieri, who has been working from his offices in the First National Building on Woodward near Campus Martius in Detroit, said downtown Detroit is a “ghost town” at the moment.
But he sees many workers eventually returning. Many of their employers will want them back because it’s easier to collaborate; there’s a synergy from being with colleagues.
“It works too well for too many people,” Bieri said. “There are things that you miss from not being in an office environment.
“You can maintain a business remotely, but it’s hard to move the business forward and allow it to grow unless you have the ability for your people to collaborate on new ideas,” said Bieri, who specializes in commercial real estate.
“There’s a reason for staff meetings,” Bieri said. “You can’t do everything by telephone. You can’t read their (employees’) faces, you don’t know if you have their attention, you miss the spontaneous remark that could be just the idea you’re looking for. It’s difficult to stay engaged when you’re looking at a screen.”
Transforming office space
For many of those reasons GM leadership is discussing what to do with its workforce. Last month, GM surveyed its white-collar workers about their work experiences during the pandemic. Their feedback indicated that remote working is highly effective, Caldwell said.
“We’re compiling lessons learned, and looking at ways we might use work spaces differently going forward,” Caldwell said. “The ongoing transformation of the Global Technical Center is a good example.”
GM has spent about $1 billion over the past three years to redesign its southeast Michigan facilities at the RenCen, Global Technical Center in Warren and its proving grounds in Milford.
“The recent investments and upgrades to our campuses – including improved common areas, upgraded technology and increased flexibility – put us in a good position for the future,” Caldwell said.
GM has about 40,000 nonunion salaried workers across the United States. Here is how it breaks out in Michigan:
- Renaissance Center in Detroit: 5,000 workers
- Global Technical Center in Warren: 22,000 workers
- Customer Care and Aftersales headquarters in Grand Blanc: 1,000.
- GM Proving Grounds in Milford: 4,000.
The new intolerance
On Friday, GM told U.S. salaried workers who are working remotely to plan on continuing to do so until at least June 30, according to an internal document provided to the Free Press. That memo said GM is working to create “a more flexible work culture” after the pandemic.
In a recent interview, GM CEO Mary Barra told the Wall Street Journal that one of the lasting effects of the pandemic may be how GM’s salaried employees do their jobs going forward, with an eye on remote work.
“I’ve been so impressed with the team being able to continue to develop vehicles and services in a remote fashion,” Barra told the Journal. “Everybody demonstrated this commitment of ‘We’re not slowing down. We’re going to find a way.’ And so many of the things that they’ve done, I believe we can now permanently put in place.”
As an example, Barra said there was an area where GM was making some changes and, “normally this would be about a two-week process with the reviews and everyone who thought they needed to have input. We got it done in a day. What I love is there is now this new intolerance to going back to the old way.”
Ford and FCA ponder
Crosstown rivals Ford Motor Co. and Fiat Chrysler Automobiles continue to ponder a return to the office date for their white-collar workforce too.
Ford’s world headquarters sits on Michigan Avenue in a 12-story glass-clad boxy building dubbed the “Glass House.” The automaker has several other offices, design and engineering facilities sprinkled throughout Dearborn.
Ford has told salaried workers who typically would fill those buildings, to continue to work remotely until at least January if their jobs allow off-site work. Ford conducted a North American survey in June and found three-fourths of its 30,000 remote workers prefer to continue to work off-site.
More than 100,000 Ford global employees who hold jobs that require working on-site have returned to those facilities.
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At FCA, the 18,000 salaried workers in North America have adjusted to remote work and the automaker continues to “actively monitor the situation related to work arrangements in the long term,” said Shawn Morgan, FCA spokeswoman.
FCA’s corporate campus sits off I-75 in Auburn Hills. A 15-story building employs mostly white-collar corporate executives and others such as legal, human resources, finance and marketing, to name a few. The complex is 5.4 million square feet, making it the second-largest building in the U.S. in floor space under one roof, according to the company. The Pentagon is larger.
The nearby Tech Center houses a 170,000-square-foot Pilot Plant. There are also scientific laboratories at the complex.
FCA has taken steps to keep its employees safe and keep business going while most people work remotely. It monitors and makes adjustments to working conditions as needed, Morgan said.
“Our team that has the ability to work remotely will continue to do so, until they hear directly from their manager,” Morgan said. “All employees who must be physically present to perform their jobs are continuing to report to their work sites where we have implemented robust multi-layered processes to ensure their health and safety.”
‘The new movement’
Often California trends tend to creep across the nation, making it inevitable that the industrial coffeemakers in many office break rooms will become relics of a bygone era.
Silicon Valley has spoken: Twitter has said its workforce can work remote permanently. Facebook has joined Google in saying it will allow employees to work from home until the middle of next year, similar to GM.
“They really are the trendsetters of the workforce,” said Adam Robinson, CEO of Hireology Inc., a Chicago-based HR technology provider. “When you start to see large corporations like GM considering that new reality, then you know that’s the new movement.”
Robinson has told his 200 employees who work at the Hireology offices in downtown Chicago to work remotely for the rest of the year. His employees have asked to have permanent flexibility in how they work post-pandemic and Robinson said he will grant it.
“If you have a people-first culture and your people are asking for something that is really important to them, then there’s really no reason to not do it,” Robinson said. “It represents the new reality. If you can take care of your customers and the business can operate, there’s no reason to not do it.”
After all, he said, technology has enabled people to meet in real time from any location in the world.
Remote management course
But there is the fallout for the businesses that rely on workers being downtown, such as lunch spots, dry cleaners and other supporting businesses.
“They’re really hurting right now. So it changes what it means to own real estate in a central business district,” Robinson said. “Rents are coming down, hurting landlords. It’s shifted the landscape.”
In Chicago, the number of subleases have exploded as businesses try to get out of their space, Robinson said. It typically costs $50-to-$80 a square foot for high-end office space in many large metro markets, he said.
That means for a business with 1,000 employees, assuming a modern open-office design, at least 125,000 square feet is needed, pegging the price for that space at a minimum of $6.3 million annually.
“That’s a lot of money; it’s most companies’ No. 2 expense behind salary and compensation – No. 2 is typically real estate or health care,” Robinson said.
Many companies are covering a portion of employees’ home internet
costs and closing up the offices to eliminate that No. 2 cost, Robinson said, noting, “It’s a lot cheaper to pay for an internet connection than it is for office space.”
Employers aren’t the only ones to see cost savings from remote working. The employees who have had to live near their offices in, say, Silicon Valley where the cost of living is astronomical, can now relocate to a more affordable area and still keep their jobs.
If companies segue to a permanent remote style of work, it doesn’t have to spell the end of teamwork and collaboration.
“Sure you lose the around watercooler talk,” Robinson said, admitting he likes to walk the office floor and converse with people.
“But managers are going to have to change their style to meet their times,” he said. “To be a highly effective manager, to meet the skills of their team remotely, is a skill that they’ll have to acquire.”
Robinson’s prediction: “I wouldn’t be surprised to see remote management courses taught in future MBA programs.”
Detroit Free Press staff writers Eric D. Lawrence and Phoebe Wall Howard contributed to this report.
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