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Todd Ogden points out the vacant buildings and office spaces standing on the corner of 13th and N streets in downtown Lincoln. With some companies in Nebraska’s most populous cities moving out of offices during and after the pandemic, some worry what will happen to the barren buildings now that life is returning to normal. Ogden, the president and CEO of the Downtown Lincoln Association, is not one of them.
"We can adapt to basically provide what's needed for this new landscape here moving forward," he said.
There are empty buildings scattered throughout the capital city’s downtown, with lease signs in windows nearby. The downtown is a changing area, Ogden said, but it’s not a change that worries him because what’s leaving is being replaced – just in a new and different way.
Real estate brokers and experts say this is a pivotal moment for the future of office and work life. A lot of companies are still to be determined on the future of their physical space. And that still leaves questions about what impacts that could have on cities – and, particularly, downtown areas – if the trend of ditching office space and an expensive lease continues.
“What we see now is tenants have backed off their commitment some," said Tim Kerrigan, principal and managing broker at Investors Realty in Omaha. "Tenants are considering whether they need as much space. Tenants are trying to make the work from home solution work on a more permanent basis and, so, that's resulted in higher vacancy.”
Those vacancies reflect the larger movement to reconsidering office space, Kerrigan said. In 2020, the amount of leased space in Omaha dropped 30%, while only 10% fewer transactions took place, according to Investors Realty's 2020 Year-End Office Market Report.
Banking, which has largely shifted to focus on the mobile portion of their business, has been one of the most visible industries to seriously consider the change in space. First National Bank of Omaha announced it would consolidate two downtown Lincoln locations into one new building. Others have considered the shift, too. Infogroup, a database marketing firm based in Papillion, is selling the Omaha metro area's largest single floor-office building, which housed 650 local employees.
Questions arise about the impacts if there are fewer employees that no longer leave the office over the lunch hour for a quick bite. But, in Lincoln, the downtown has become a haven for residential growth. In 2010, the capital city had just 3,000 residents living downtown. Now, that number stands closer to 10,000, according to Ogden.
"That's a huge jump in residents," he said. "And with more residents, you're going to see more neighborhood type of amenities.”
That means a need for new business – like more retail services, health care, pedestrian-friendly activities and maintaining downtown's grocery store, Ogden said. Those residents also equate to more business. In his eyes, one full-time resident may be worth four or five 8 a.m. to 5 p.m. workers who are just commuting in and out daily in terms of how much money they put back into the economy.
These are all trends Ogden and his team were observing before the pandemic and were just sped up by the temporary departure from office space during the first few months of the pandemic.
"It's all about having flexibility, and that's key," he said. "The new employee wants flexibility and when we give them the flexibility, they prove that they still want a downtown type workplace.”
That observation is being seen nearly everywhere in the working world and for a multitude of reasons. Working parents want more flexibility with daycare; some remote employees enjoy cooking their lunch over the noon hour, and others enjoy being able to throw a load of laundry in the dryer between meetings.
Visit Omaha, the city’s tourism bureau, is one company that’s embraced the flexibility to work from home. The group moved out of its downtown Omaha offices on May 1 and will use the savings, earned from leasing their old building, to support Omaha tourism and local businesses.
"When we started looking at how we could save money, we said, 'Do we need as much as we have right now?" Deborah Ward, Visit Omaha's interim executive director, said. "And we said, "You know what? We really don't. We've been working effectively and efficiently from home. Maybe that's a good way to save some money."
The tourism authority is mainly funded by the city's lodging tax, which was much lower than usual during the pandemic, Ward said. After the May move, the group utilizes its already-existent visitor center as a home base in downtown when needed for a company meeting or a place for packages to be delivered. For the most part, Visit Omaha staff will remain a largely remote workforce.
"It's actually provided a lot of nice life-work balance," Ward said. "But on the other side of it, I think we all miss the camaraderie of being in the office together."
On the other side of the spectrum in Omaha is Scoular, a grain company that buys, sells and stores grain to help feed customers around the world. The 129-year old company will be moving out of downtown and into a newer and slightly bigger office space in west Omaha come October or November. The new facility will consolidate Scoular staff from five floors to three and will provide a 5,000 square foot increase from the old facilities.
“The square footage doesn't sound that different, but the functionality is so different," said Paul Maass, Scoular's CEO, adding the old building, located just south of Omaha Central High School in downtown, has more square footage than actually being used by the headquarters' 100 employees.
Scoular made the decision to invest in an office that’s a better use of space during the start of the pandemic, Maass said. If you ask Kerrigan, who helped broker the deal – or other office space purveyors – that was almost unheard of during the last year, as few companies made decisions because the pandemic halted or made them completely rethink space altogether.
“While [Scoular employees] have been incredibly effective working from home, they want to connect to something with a bigger purpose," Maass said. "They want to connect to what the company is doing, and that is much harder to do 100% remote. And, so, being together, the energy that comes with that the connectivity is – without any question – the best path forward for Scoular.”
Maass understands why some would make the move to less space and more remote work. It wasn’t in Scoular’s best interest, he said, but managers will let employees decide where they work from on Fridays when everyone is back in the office starting on June 1, which appears to be a model that will be used by many.
"You're gonna see some hybrid scenarios, where maybe employees are commuting to the office two days a week, instead of five days a week," said Brett Harris, a real estate broker at Greenleaf Commercial Real Estate in Lincoln. “On the other days, they're working remotely, or people are coming in and just sharing desks rather than having their own private offices or cubicles. But the net effect of all this, I think, is that there's going to be softer demand for office space going forward.”
This looming decision, as he and others say, will be debated in many office spaces for years to come. Kerrigan, the other real estate broker, heard one such story:
A CFO wanted employees back in the office because enough people had been vaccinated. There was a little pushback. The employees argued they liked the flexibility, not commuting to work, not buying as many suits and eating from home. To which the CFO asked if it's fair to pay those remote employees less because they pay in-office staff more to cover the costs of working in the office.
"Gosh, that's an interesting thought," Kerrigan said. "I hadn't thought of that. At the end of the day, it oftentimes does come down to dollars and cents."
Regardless of whether some companies in Lincoln and Omaha’s downtown leave, or just become more flexible with their workforce, Ogden said, expect to see a new take on the same old cities.