The Platform


In an article last year, I warned: “Many major cities in the United States are facing a vortex of negative issues which will pull them down to a point of being the next Detroit, or worse. This will happen as federal funding from COVID relief funds run out and cities must go back to fending for themselves and believing things will get back to ‘business-as-usual’ when it comes to revenue streams. Business-as-usual includes having adequate revenues to run city government and that is not going to happen in most major metropolitan areas in 2022.”

Returning to ‘business-as-usual’ was also thought to be the case for commercial office space in all these metropolitan areas. All the people ‘working-from-home’ would be coming back soon and empty office buildings would be filled up again with their full complement of the workforce.

As I pointed out in April of 2020, I predicted that would not be the case. Not everyone would be returning to the office and more workers would opt to stay in a permanent ‘work-from-home’ position. “In coping with changes because of the pandemic, some of us have come to realize the need to re-evaluate many areas including education, transportation, commercial real estate, and emerging concepts like smart cities and intelligent infrastructure. Commercial real estate companies may also feel a residual effect from COVID-19. As more people telecommute for work, the need for as much office space drops in many metropolitan areas. Connections become more important in multi-tenant residential buildings where more of the tenants may need high-speed broadband connectivity to connect to their companies’ computer systems.”

In a very recent article in Axios, the author observed: “Loads of people who started [work-from-home] during the pandemic aren’t going back. That means less demand for office space now, and, conceivably, fewer potential office drones (er, workers) in the future.”

From the fourth quarter of 2020 to the fourth quarter of 2021, major cities saw a noticeable increase in vacancy rates. San Francisco was up 7.5%, Seattle up 3.9%, New York up 3.5%, Los Angeles up 3.3%, San Jose up 3.0%, Houston up 2.8%, Boston up 2.7%, Chicago up 2.6%, Washington, D.C. up 2.3%, and Miami up 2.0%. But remember, this is the beginning of the tsunami, not the end.

“Loads of people who started [work-from-home] during the pandemic aren’t going back,” I predicted in an article almost two years ago. Looks like many have been caught off-guard by this paradigm shift which I pointed out two years ago.

I observed in August of 2020: “Temporary alternative solutions are now becoming permanent, and the question becomes whether the three most important words in real estate shift again to location, location, and home? Working from home saves everyone money. It also impacts climate change because a lot less energy is expended from the reduced use of cars, mass transit, and other energy sources. There is real money saved if a corporation can go from leasing five floors of commercial office space down to one or two. That real money drops down to the bottom line and some companies are already coming to that conclusion.”

So, what is the significance of my earlier prediction? It tells me that real estate’s current set of tools and analytical models to assess and manage the commercial office space area is antiquated at best, and totally obsolete and useless at worst.

The analytical tools the ‘experts’ are using are not looking at the right variables or even having those variables be part of the formula looking at and identifying trends.

Identifying trends from a historical perspective has value, but not as much value as a forward-looking perspective on seeing the convergence of disparate variables collide and create a paradigm shift as it is happening, not just confirm it ‘after the fact.’

Seeing the approaching tsunami of vacant office space may provide some lead time to make some strategic changes and redirect resources. Realizing it after it hits will just verify that all the tools and experts were just all wet in their analysis.
You can’t apply 20th-century tools and solutions to solve 21st-century challenges. Sometimes you have to take your nose out of the charts and actually take a look at the churning seas around you.

James Carlini is a strategist for mission critical networks, technology, and intelligent infrastructure. Since 1986, he has been president of Carlini and Associates. Besides being an author, keynote speaker, and strategic consultant on large mission critical networks including the planning and design for the Chicago 911 center, the Chicago Mercantile Exchange trading floor networks, and the international network for GLOBEX, he has served as an adjunct faculty member at Northwestern University.