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Badger Mutual Insurance Co.announced last fall it would relocate its headquarters from Milwaukee’s south side to downtown. About eight months later, the company had officially moved into its new digs – 16,500 square feet at The 42 building southeast of West Juneau Avenue and North Ninth Street – in the middle of a global pandemic.
The company was still designing its future office space in March when the COVID-19 outbreak began spreading in Wisconsin. Many businesses were forced to close due to state and local mandates. And many businesses deemed essential, including Badger Mutual, had its employees work from home in an attempt to avoid infection and spread of the virus.
On a late June weekday, the new Badger Mutual offices, meant to hold 85 employees, looked to be less than half full. At that point, departments were required to ensure fewer than 50% of their employees were on-site any given day, said Badger Mutual president and chief executive officer Dan Nigro.
“We’re just going to take a look at this in two-week or weekly periods as we meet as executives, and what we feel is safe, what’s happening in the area, what’s happening in the building, and make decisions based on that,” Nigro said. “The employees … are awesome through all this. They all have safely moved into their space and got it organized, but it’s not like they’re knocking on the door saying, ‘We want in.’”
While their situation differs from many office users, Badger Mutual’s approach is similar to what other companies have taken and will likely take for the remaining half of the year, according to Milwaukee-area office market experts.
What the coming months have in store for the market is largely dependent on the progression of the COVID-19 outbreak.
Office real estate brokers say office users will slowly bring back workers, barring major setbacks. Office space deals will still get done, though some users are opting to stay put or make no major changes until conditions stabilize. And though brokers predict significant long-term changes to the way people work, the need for a physical office space will remain, they say.
Back to the office
A majority of companies have begun calling employees back to the office, but the policies related to their return vary, said Andrew Jensen, principal with Cushman & Wakefield | Boerke.
“Almost unanimously, yes, employees are coming back to the office in 2020,” he said. “It’s just a matter of what percentage and how they do it.”
Alyssa Geisler, senior associate of CBRE Wisconsin, said none of her clients have required all employees to come back, and the majority are having workers return only if they’re comfortable.
Office tenants in large downtown towers seem to be taking longer to call workers back, likely because of the challenge of workers facing bottleneck points in getting to the office.
Elevators, for example, present a problem. Geisler noted that only one or two people can use elevators at a time if they are adhering to social distancing practices. But that creates long wait times for those in line.
“Elevators, I think, is the biggest thing companies are trying to figure out how to solve,” Geisler said.
Geisler predicted the slow return to normal will extend into next year.
“The majority aren’t going to be back to normal in 2020,” she said. “If anything, we’re talking more like a year out, so mid-2021.”
As workers return, they will likely encounter new safety practices and protocols, including dividers in office walkways, sanitization and mask requirements, markers or signs to aid with social distancing, and glass dividers.
But so far office space users aren’t spending big money to overhaul their spaces because of the outbreak, Geisler and Jensen said.
“Nobody is making big changes right now and spending money on existing space or designing new,” Jensen said. “They’re still trying to figure out what are the best practices. There are conversations of going from cubicles that were low to raising them, putting plexiglass shields between desks, people doing more private offices. Conversations are happening, but for the most part, people aren’t spending money yet.”
While some companies have announced major office relocations in the area, many are deciding to hold off on making major changes until they have more certainty.
Geisler noted a lot of her clients have opted for short-term lease renewals while they wait for the health crisis to subside.
“I think a lot of people are trying to buy time until we get there,” she said.
Even so, it appears that activity is picking up again, she said.
Several new leases and relocations have been announced in recent months. Brookfield-based Hydrite Chemical Co. plans to move its headquarters and Seattle-based Milliman Inc. plans to move its Brookfield office to new buildings planned in The Corridor mixed-use development in Brookfield in 2022. EXACTA Corp. has relocated from Brookfield to the Technology Innovation Research Center in Wauwatosa. Milwaukee-based Northern Ground will move into a historic former church in Walker’s Point this fall. Boston-based Gordon Bros. and Elm Grove-based Annex Wealth Management are relocating their Mequon offices to The Pointe at East Mequon Corporate Center.
And Rexnord Corp. appears to be moving forward with relocating its offices to downtown Milwaukee. According to city records, the company this month began slowly moving 120 employees into its new space at 111 W. Michigan St.
But it isn’t clear how many workers, if any, will be in the office during the pandemic. Rexnord did not respond to a request for comment.
Milwaukee-based Irgens Partners LLC, is among the busiest office developers and landlords in the market. It is the developer of The Corridor and the new 25-story BMO Tower in downtown Milwaukee, which opened to tenants this spring.
Tom Irgens, executive vice president of Irgens, said the firm’s new office buildings offer a chance for companies to rethink their office environments in the context of a world altered by the pandemic.
“I think moving into a fresh space with brand-new HVAC systems, and they’re able to realize efficiencies, it really brings value to their organizations and team members,” he said. “It’s really an opportunity for them to continue to invest in their people.”
Future of offices
Office real estate brokers also predict some potential long-term changes as a result of COVID-19.
Geisler said companies could turn to a “hub and spoke” model for physical offices, which would involve a large central office presence along with several small satellite locations that are more convenient and offer a safer environment during a pandemic. It would give employees more control over where they work, and they could choose based on their comfortability.
“It might make people more comfortable to have more options like that,” she said.
The work-from-home movement will likely come out of this stronger than ever. Geisler said companies that were reluctant to implement work-from-home policies have been forced to do so because of the pandemic.
“I think just that whole span of control with employees, (from) work-from-home to hub office, is the future,” she said.
But with those changes, brokers said the need for physical space will remain, citing the importance of collaboration and culture.
Jensen said some firms, including his own, already had a policy allowing people to work from home for certain situations. That will only be more widespread, but it won’t be full-time for the vast majority of workers, he said.
“With COVID, I think that everybody is realizing you can work from home,” he said. “The caveat to that is culture. I think that what we believe very firmly is if there’s too much work from home, you lose the company culture.”
Being in the office also allows employees to strengthen relationships and learn from one another. This is especially important for younger workers or those learning new roles, said Katie Brueske, real estate advisor with Cushman & Wakefield | Boerke.
“Just being younger in my career, learning and development is a lot harder to do from home,” Brueske said. “Just being in the office, whether it’s a recent college grad or people changing positions … it’s difficult to try to learn when you’re not face-to-face with someone because you can’t ask all those questions all the time. A lot of learning is done by overhearing people talk in the office and learning the language, sitting in on meetings, and you can’t do all those things when you’re at home.”