CULVER CITY, Calif. (NewsNation Now) — The U.S. is now leading in new cases and new deaths related to COVID-19. Those rising cases have more people working from home.
WarnerMedia’s Human Resources Chief James Cummings announced the company is extending its work from home policy through next June. Google and other companies have made similar announcements.
With so many people working from home, what will happen to the empty buildings?
The signs are everywhere in downtown Los Angeles.
Inside the slew of buildings available for rent, tens of thousands of abandoned offices and cubicles sit as much of America works from home.
“I think that this has been a big eye-opener for businesses to realize they don’t have to spend so much money to have these huge spaces,” said Gabrielle D’Addario, who works from home.
It’s unknown how long these huge spaces will remain unoccupied.
Richard Green is the director of the Lusk Center for Real Estate at USC.
“I do think there’s gonna be a return to people working in offices, I don’t think office space is dead,” Green said.
He believes a hybrid work standard will become the new norm and the downtown market may not recover fully. At least in LA, where many buildings went up in the 80s.
“So there are floor plates, technology, etc. are not what office users are looking for right now. The strongest office space in downtown LA is actually not those buildings that you see is not those famous buildings that you see at the beginning of TV shows,” Green said.
Office occupancy in greater LA is down by 2.7 million sq. ft. in the third quarter, according to the CBRE Group.
It follows a drop of nearly two million square feet in the second quarter.
While the figures are a small fraction of the market, it has led to a boom in subleasing.
“It reflects weakness in the market,” Green said. “It means that current tenants when their leases expire are not planning on reletting the amount of space that they currently have. In the meantime just try and recover as much as they can.”
Empty office space is also an issue in other major cities such as New York, Chicago and San Francisco.
“Office space is expensive, one of the expensive costs of the company,” said Codeillusion CEO Satoshi Miyagawa.
This company CEO has about 10 employees working from home for his tech startup, Codeillusion. There is no timeline for a return.
“Unless they really need to gather, kind of an offline service. Otherwise, I feel like this is how … even for the next year, 2022,” Miyagawa said.
As for downtown, Green predicts a lot of space will be repurposed for residential use or rebuilt.
“Downtown sort of hit a critical mass 10-15 years ago where it won’t go back, as an office center, I don’t think that’s going to be its function,” he said.
The ripple effect is a pandemic of empty office space all over America. Another ripple effect of office abandonment, employee pay cuts.
Many companies that compensate for higher costs of living are asking for pay cuts in return.
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