Office Renovations Increase as Hybrid Work Becomes the Norm

A historic surge in office renovations is being fueled by the corporate return-to-work push, the rise in interest rates, and the need to remain competitive.

For the first time ever, architectural firms are seeing more income from renovations than new construction, said Chief Economist of the American Institute of Architects, Kermit Baker. Many clients who adopted the wait-and see-strategy during the pandemic are deciding to move forward with plans to redesign their offices to accommodate a hybrid workforce.

The upgrades of redesigned hybrid spaces can be defined into three elements of space: physical, digital, and human. Physical elements of space include features like more conference rooms and collaborative areas; digital space involves elements like apps to order coffee or book meeting rooms; and human elements of space have features including better air filters and health and wellness amenities. A key shift in redesign has been the end of the one-desk-per-worker tradition. More open and collaborative space are now in favor. Demands also show an extreme departure from the pre-pandemic focus on more frivolous features like office games and bars.

Sage Realty announced a $53 million upgrade of their Manhattan office tower which will include a new lobby space and a reworked amenities program for tenants, including a library, terrace garden, cafes, and communal spaces. The idea is to attract boutique companies and create optimal amenities for tenants at a competitive moment for office space in New York.

Landlords are looking to differentiate their properties for future tenants and are spending the money to do so before the interest rates rise further. This recent increase in rates led many to rush to finalize plans and designs to start locking down financing.

This urgency may have been for the best as buildings, especially older ones, fear obsolescence, only enhancing the need for renovation in this newly hybrid-driven corporate world.