Hybrid work has emerged as the preferred mode of work among the majority of Americans. That trend has sent a ripple effect across the commercial real estate industry.
With 52% of U.S. workers now saying they are hybrid workers, according to a recent Gallup poll and real- estate dealmaking having slowed, experts say that the industry is facing a demand shift that landlords can’t afford to ignore. Chase Garbarino is CEO of HqO, a software company that works across more than one billion square feet of office space globally and tracks the effectiveness of office amenities. He told Fortune that the number one rule of real estate remains location, location, location, but there are new rules for offices.
“The fact that the genie is out of the bottle on hybrid means there’s going to be a lot of structural changes in how landlords need to operate their business models,” Garbarino told Fortune. “The whole industry is kind of predicated upon the 10-year-plus lease as the one product skew that they want. They’re going to have to think and act a lot more like hotels.”
The 10-year lease provides guaranteed long-term financial stability for landlords, handing them a predictable cash flow and minimized turnover costs. Yet that model, Garbarino says, has been upended by the rise of hybrid work because employers aren’t committing to 10-year leases as much as they used to. He says landlords must win tenants back, guaranteeing luxuries and services that can keep them long-term.
