More evidence that the office market has turned the corner as JLL reports a 34% increase in leasing revenues!

JLL doubles profit as leasing and property sales surge

By Randyl Drummer, CoStar News

Chicago-based firm joins US real estate brokerages reporting accelerated deal activity. Commercial real estate brokerage JLL more than doubled its profit and posted big gains in leasing and property sales as dealmaking picked up across the industry in the third quarter.

The Chicago-based company said revenue increased 15% to nearly $5.9 billion from the prior-year quarter, fueled by double-digit gains in leased space, capital markets and what it called its “resilient” businesses such as property and project management.

JLL reported a profit of $155.1 million in the quarter — up sharply from the $59.7 million a year earlier — as the company’s results were boosted by accelerating activity across all its main businesses.

“The results reflect our strength in transaction markets that are still in the early stages of recovery,” CEO Christian Ulbrich told investors during an earnings call on Wednesday.

JLL joined CBRE, Cushman & Wakefield, Colliers International and Newmark in reporting increases in leasing that helped drive higher revenue, activity that added to promising signs of recovery in property markets.

Law firms leased 3.2 million sf of office space in the first quarter, surpassing previous highs in 2019 and 2021. The evolving trend towards hybrid work, with 2 days remote and 3 days in the office, offers attorneys flexibility for collaboration and performance.

Law Firms Are a Bright Spot in a Dreary Office Leasing Market

By  Kelsi Maree Borland

Law firms have a history of supporting the office market. During the creative office revolution, law firms provided a lifeline to traditional office owners, and in the midst of today’s office market correction, law firms remain fervent users of office space.

From the adoption of hybrid work styles to retiring the corner-office mentality, they are emerging as an example of how the office market will evolve, say Raymond Trevisan, CRE, executive managing director with Cushman & Wakefield and a member of the Counselors of Real Estate, and Anthony DellaPelle, CRE, the global chair of the Counselors of Real Estate, two experts in law firm leasing.

Law firms are voraciously leasing office space, even as office demand in the US has fallen sharply. According to research from Cushman & Wakefield, law firms have accounted for 7.2% of office leasing activity in major markets, and firms have committed to 3.2 million square feet of space in the first quarter of the year alone. The activity exceeds leasing activity for the sector in1Q19 and 1Q21, and it puts law firms on track for another strong year of leasing activity

Didn’t see this one coming. The hottest new employee benefit is coverage of the new weight loss drugs that stem from the treatment of diabetes. This is desired more that PTO, remote work flexibility, and childcare assistance.

The hottest new benefit for employees is more coveted than remote work or unlimited vacation

By Andy Medici – Senior Reporter, The Playbook, The Business Journals

Employees would rather have coverage for a new class of weight-loss drugs than unlimited paid time off or child care assistance, according to results of a new survey commissioned by a health-care provider.

The survey of 1,300 Americans by diabetes-care firm 9amHealth found that when ranking their desired job benefits in order of importance, coverage for weight-loss drugs such as Ozempic and Wegovy ranked behind only employee-sponsored health care, flexible working hours, company equity and matching 401(k) contributions. It came in ahead of unlimited PTO, work-from-home or hybrid work, and child care assistance.

The class of drugs designed to treat diabetes known as Semaglutide (within the GLP-1 classification) — a class that includes Ozempic, Wegovy and Mounjaro — has shown the potential for weight loss and has since been approved by the U.S. Food and Drug Administration, sparking a rush for the medication that has so far outstripped supply. That demand for the drug class, however, has sent its value soaring, with the list price for the medication reaching more than $900 for a month’s supply.

About 30% of the survey respondents said they were employed somewhere that covered the weight-loss drugs, but for those who said they were not, about 21% said they would be very likely or likely to change jobs if they could access coverage to the drugs.

Among respondents who were taking the drugs, about 67% said coverage was either an extremely important or very important consideration for staying at their current job; another 23% said it was a somewhat important consideration.

“As more weight loss management medications receive FDA approval, our data shows that people are increasingly eager to get their hands on these drugs for weight loss, even if it means making extreme sacrifices like cutting back on entertainment and travel or changing jobs,” said Dr. Avantika Waring, chief medical officer at 9amHealth, in a statement outlining the survey results.

But while the drugs are extremely coveted, they aren’t without their drawbacks.

Finally, some good news for the office market as Law Firms leased more office space in 2023 than they did during any of the pandemic years, 2020-2022. In fact, per this article, they leased more in 2023 than in 2017, 2018, or 2019.

Law firm office-leasing activity hit a milestone in 2023. It could fuel a domino effect.

By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals

The legal industry leased more office space last year than it has since the Covid-19 pandemic.

In 2023, U.S. law firms leased a collective 16.9 million square feet, according to Cushman & Wakefield plc (NYSE: CWK). That’s not only more office space leased by the sector since the Covid-19 pandemic, but exceeds the amount leased nationally by law firms in 2017, 2018 and 2019, as tracked by Cushman.

The legal industry has bucked the broader trend of office-market leasing since the pandemic upended norms around office-space usage. While law firms, like other industries, have taken a hard look at their office real estate, they on the whole are using the office more regularly than other industries. Therefore, they’ve occupied a more robust segment of the leasing market while other industries have slowed their deal activity, put spaces on the sublease market or exited big chunks of space.

For those in commercial real estate who work with law firms on their office-space needs or otherwise track the industry, the legal sector’s recent leasing activity is indicative of its new normal.

Many law firms that saw their leases expire in 2020 or 2021 inked a short-term extension because of the uncertainty during the height of the pandemic. But in the past two years, law firms have gone back to the office more frequently and overall feel more confident making longer-term decisions about their space, said John McWilliams, senior research analyst at Cushman.

The biggest relocation signed by a law firm since the pandemic, according to Savills plc, was Paul, Weiss, Rifkind, Wharton & Garrison LLP’s deal inked late last year. The international law firm agreed to take 765,931 square feet at 1345 Avenue of the Americas in Manhattan. Not only was it the largest law office relocation since the pandemic, it was also the largest office lease signed across all industries and the U.S. last year.

Wow, according to this report AI firms are looking for 2.5 million sf of office space in the San Francisco area and another 1.7 million sf in New York. Hopefully they will start considering Denver where we have much cheaper rents, lots of inventory, and good base of tech workers.

AI Firms Are Hunting for A Lot of Office Space

By David M. Levitt

Artificial intelligence. Will it become the space user that boosts an office market hungering for tenants?

The jury is still out on that question. But the initial indicators look good.

“In a market as challenged as San Francisco is, it is the one bright spot that is showing growth,” said Derek Daniels, regional director of research for brokerage Colliers (CIGI). His remit includes the San Francisco Bay Area, which encompasses San Francisco proper and Silicon Valley, where many of the innovations in computer and information technology get their start. “Companies are saying we are going to commit to more space than we had previously.”

In a rare bit of good news, the largest lease in the fourth quarter of 2023 in the San Francisco office market was OpenAI’s commitment to 486,600 square feet at 1455 and 1515 Third Street in the Mission Bay submarket, Daniels said.

And the second-largest was the AI startup Anthropic taking 230,315 square feet at 500 Howard Street in the city’s South Financial District. Anthropic describes itself on its website as a company that produces “AI research and products that put safety at the frontier.” As for OpenAI, it famously introduced content generator ChatGPT in November 2022. 

The large deals were indicative, Daniels said, of an AI industry that needs the traditional advantages of an office — a place where workers can gather, learn company culture, pass along tips and collaborate — to keep growing.

“No one can predict the future, but if investment continues to grow in the AI space, there’s no reason to believe that Wall Street won’t help it expand its markets just like other tech users have,” Daniels said. “The industry grew from Silicon Valley and expanded into other markets. The Bay Area is currently the home of AI, but there’s no reason to believe it won’t expand outside.”

There’s no shortage of disappointment in commercial real estate, especially in the office market. In its national fourth-quarter office report, Colliers said the office market “limped” into 2023, and barely improved as the year played out. Nationally, the vacancy rate at the end of 2023 was 16.9 percent, higher than the 16.3 percent peak during the Global Financial Crisis of 2008 to 2010.

The drum beat of companies requiring employees to return to the office continues as Dell tells all its employees, even those more than an hour away, that they have to work at an office at least 39 days a quarter (approximately 3 days per week) saying that it is necessary to “drive innovation and value differentiation.”

After Championing Remote Work, Dell Calls Employees Back to the Office

By Katie Burke

After years of encouraging remote work, Dell Technologies is joining a chorus of global tech giants in their push to get employees to return to physical offices.

The Round Rock, Texas-based company told some of its employees that they must show up to a corporate hub at least 39 days a quarter, a mandate that shakes out to roughly three days a week, a Dell spokesperson confirmed to CoStar News. The new in-person requirement will apply to workers who have been operating on a hybrid policy, which the computer hardware company has gradually revised over the past couple of years.

“We believe in-person connections paired with a flexible approach are critical to drive innovation and value differentiation,” the Dell spokesperson said in a statement.

The revised policy marks a sharp turn for Dell, which had previously said about two-thirds of its workforce could continue working from home until the pandemic ended, and even then would only be required to show up to an office for one or two days per week. Starting last year, however, the company began walking that leniency back with a previous mandate requiring all employees living within an hour of a Dell office to come in at least three days per week.

Now, that has been widened to include all employees, regardless of where they live or how long it will take for them to commute to a physical workspace.

The move underscores employers’ growing confidence in their ability to enforce stricter rules surrounding in-person requirements, a shift widely expected to help boost daily attendance rates at office properties that have been sitting largely vacant since the early days of the pandemic. The tech giant joins other companies such as IBM, Kroger, Amazon and AT&T in stepping up in-person requirements that go as far as asking workers to relocate in order to live closer to an office.

Dell, which employs more than 125,000 workers, occupies about 9.5 million square feet of office space around the world, according to CoStar data.

We all knew it, but now Yale scientists have proven that Zoom Calls are not as good as meeting in person!

The Brutal Truth of What Zoom Calls Do to Your Brain, According to New Yale Research

EXPERT OPINION BY JESSICA STILLMAN, CONTRIBUTOR, INC.COM
@ENTRYLEVELREBEL

We’re years into the pandemic-driven explosion in remote work and, while most of us have gotten used to having many more remote meetings, they still seem a little awkward.

There’s the uncertainty about where to look, the hesitant wave goodbye at the end, the fiddling around with settings at the beginning, the unpleasantness of constantly watching yourself, and that one colleague who has really odd taste in backgrounds.

All of which creates a subjective feeling for many that spending time on Zoom — while possibly still preferable to a daily commute — can be exhausting and somehow unsatisfying. Are we all just still getting used to meeting by video? Is it just a quirk of the tech? Or is something more fundamental going on within our brains that makes Zoom feel so awkward?

Wow, there is a lot to digest in this EY Future Workplace Index 2023 study! Here are my key takeaways. Number 1, companies are pushing their employees to come back to the office at least 2-3 days a week or more. And the majority still have assigned workstations or offices as opposed to unassigned reservation systems. So along with this, most companies aren’t downsizing, but rather investing in their space to make it more attractive and productive for their employees. What is your company doing?

Future workplace trends: Are you putting your office to work?

By EY

Rocked by three years of shifting workplace trends, corporate real estate is still finding stable ground.

In the continuing reboot of the American workplace, millions of employees in the US and worldwide have been pulled in different directions by swerving trends. Hybrid, fully remote, flexible schedules, four-day workweeks, required days in the office each week and full time in the office are among the models vying for standardization, acceptance and talent in the corporate workforce.

Fluctuating expectations have created a low but constant drumbeat of anxiety for mid-career professionals with children, aging parents and long commutes. Meanwhile, Gen Z, the next wave of the corporate workforce, naturally assumes a whole new level of agency and flexibility when it comes to work-life balance and preferred practices, even in their first or second jobs.

The third annual EY Future Workplace Index, a national research survey of C-suite corporate leaders conducted by Ernst & Young LLP (EY US), offers an eye-opening window into the ongoing evolution of the workplace and real estate during the past year. Perhaps most remarkable, is that the number of EY US survey respondents reporting nearly full-time remote work has plummeted from 34% in 2022 to 1% in 2023.

The move away from full-time remote work is welcome news for the corporate real estate sector, which is aiming for growth in both the demand for office space and its utilization. It’s worth noting that based on survey respondent feedback, over the past 24 months, smaller companies increased their office space, while larger organizations maintained or reduced their footprint but enhanced the quality of their space, technology and amenities. Optimization of space and time leads company leadership priorities.

Are Law Firms redesigning their office space for hybrid work? Per this article from Gensler, maybe.

Certainly, they are planning more meeting/gathering spaces with smaller more uniform offices, but are attorneys willing to give up or share their private offices? I think the jury is still out on this one.

What do you think?

Rethinking Law Firm Workplaces in the Age of Hybrid Work

By Carlos Posada

Editor’s note: This article originally appeared on Law.com.

Although the debate on what the right balance and approach are continues, it is fair to say that hybrid working is here to stay. Embracing this transition in law firms has required a lot of thought, given the nature of their highly confidential and focused work. We also know how crucial mentorship and firm culture are to the business and ecosystem of today’s law firms, so creating places that people want to work in is more important than ever. As we increasingly look at design and the built environment through the lens of sustainability and social consciousness, it seems competing interests are emerging that are creating tensions in the design of law firm workplaces.

One of the universal issues we face is the climate crisis. As we collectively consider how to reduce our carbon footprints, the decision to rethink the purpose, and therefore layout, of our offices has become urgent. It is important we explore the challenges and opportunities law firms face in finding the right balance between their sustainability goals, employee well-being, and business opportunities where employees can thrive and do their best work.

Currently, data is showing that European office occupancy is averaging 50% with midweek peaks of 65%. The feedback we have received from lawyers is that they often feel isolated in their assigned offices and question the benefit of commuting in when there is a lack of buzz, energy, and even interaction with their colleagues.

Even employees believe they need to be in the office 3 days a week to maximize productivity. Key findings from a study by Gensler of 14,000 office workers from 9 countries are:

• 61% of workers say they need to spend more time in the office to maximize productivity.
• The ideal target for maximized productivity was 63% of the workweek at the office.

This comes direct from the employees.

Hybrid Is Here to Stay. So Is the Office.

By Janet Pogue McLaurin, Anita Grabowska

Office buildings in many cities are sitting empty, with some cities reporting the highest vacancies ever recorded. At the same time, Kastle is measuring average occupancy at just under 50% across 10 key U.S. cities. Does this paint a picture of doom and gloom for the office? In Gensler’s latest workplace research of 14,000 office workers across 10 industries in nine countries, we found an optimistic future emerging: while hybrid work is here to stay, the office is needed more than ever. And we found a few other surprises as well.

Gensler has been measuring how people work, space effectiveness, and what employees value in a workplace experience since 2005. With our data, we can see what is changing over time as well as identify global commonalities and unique differences by country, by industry, and by key performance indicators such as innovation, commitment, and engagement. As employees were returning to the office in late summer and fall of 2022, we researched how and where people were working, why people were going to the office, what’s working/not, and what’s missing. In the process, we uncovered some interesting shifts in how people are working and their expectations for the workplace moving forward. This is the first of a blog series delving into some of the key findings. Check out the published report here.