Not long ago, Lea Hong thought she might need more office space. The Hawaii director of the Trust for Public Land, Hong was planning to add to her staff, and knew she wouldn’t have enough room for everyone at her small suite of offices downtown at Bishop Square’s Pauahi Tower.

Fast forward to November, and Hong figures she’ll have enough space after all. Her six-person team has been working from home since February, and the staff like it – enough to say they’d like to keep working remotely at least some days, even when it’s safe to congregate again.

“I’ve polled every employee,” she says, “and only one wants to come in every day.”

And that attitude seems common among U.S. workers. Much has been written about the “new normal” workplace and the idea that the great COVID-19 work-from-home experiment has gone better than expected. According to the management consulting company McKinsey, as of April, an estimated 62% of employed U.S. workers were working from home.

McKinsey found that 80% of people questioned said they enjoy working from home; 41% said that they’re more productive than before, and 28% said they’re as productive.

“Many employees liberated from long commutes and travel have found more productive ways to spend that time, enjoyed greater flexibility in balancing their personal and professional lives, and decided that they prefer to work from home rather than the office,” McKinsey reported.

Pauahi Tower and views of downtown Honolulu.
Oahu’s office real estate market has remained remarkably strong, even as thousands of workers have been working from home for months. Cory Lum/Civil Beat/2020

Of course, there’s a down side. Kids, pets and noisy neighbors can pose distractions for telecommuters. A lack of in-person contact with colleagues can hinder collaboration and communication. And the lack of a boundary between the home and office can mean longer hours on the job. Finally, there’s the ever-present urge to do chores.

“There’s always that pile of laundry saying, ‘Wash me. Wash me,’” Hong says, “I have to resist the urge until after work hours.”

Hong doesn’t plan to abandon the office altogether; there’s simply no need to get more space. And from the looks of things, the Trust for Public Land isn’t alone.

Mike Hamasu studies commercial real estate trends as director of consulting and research for Collier’s International in Hawaii. According to Hamasu, the office market remains fairly stable.

His most recent quarterly analysis, for the third quarter of 2020, said the vast majority of Oahu’s approximately 14.1 million square feet of office space was full at quarter’s end.

There was a loss of 53,871 square feet of occupancy during the third quarter, Hamasu said. That contributed to a year-to-date loss of 144,255 square feet, Hamasu reported. Oahu’s office vacancy rate rose to 11.6%, its highest level since the end of 2018.

“It’s too early to throw in the towel on the office market,” Hamasu said. “It looks like the office market is treading water.”

Real estate experts chalk this up to multiple factors. For one thing, the economics for businesses that use offices, like financial and professional services, are simply better than others that rent commercial space, like restaurants and retailers.

Kim Lord analyzes the Honolulu market as senior managing director of CBRE’s Hawaii region.

She acknowledged that office tenants tend to be locked into longer-term leases that could make it hard to give up space quickly. But the trends CBRE sees, she said, are more a function of real estate costs relative to operating expenses, plus the bottom-line impact of COVID-19 on each particular industry.

Oahu’s office real estate market has been affected by COVID-19, as occupancy rates have risen. But several factors have kept the market fairly resilient for now. Colliers International

For example, she said, if an office space is 10,000 square feet for a 50- to 75-employee business, the average cost per square foot of $3 per month is relatively low compared with a company’s cost of labor.

But, she said, retailers or restaurants face a different equation. Such businesses in the same size space might only have 10 to 20 employees, with a cost per square foot closer to $4.75 per month, plus they typically have to cover utilities and other building operating expenses. That means a much greater share of costs are going toward real estate.

Plus, some retailers had little or no revenue while stay-at-home orders were in place, while white-collar businesses that use offices could still make money to cover expenses with people working from home.

“For retailers, the real estate costs become too high to justify or cover,” she said.

Fewer People, Same Space

Another factor boosting demand for office space is the need for social distancing, which means less densely populated workspaces, potentially for the long term.

With approximately 2,000 employees, Bank of Hawaii is one of the state’s largest employers. Altogether, about two thirds of employees could work from home, and of those about 80% are choosing to do so, said Peter Ho, the bank’s chairman, president and chief executive.

Still, the need for social distancing means the demand for space will remain, even if fewer people are filling the space. And Ho doesn’t see social distancing going away any time soon.

“Those elements might net each other out,” he said.

Bank of Hawaii isn’t the only big employer with large numbers of employees working from home. Hawaiian Telcom was entertaining the idea of giving more employees the option to work from home before COVID-19, said Kira Higa, the company’s human resources director.

Hawaiian Telcom building located on Bishop Street.
About 60% of Hawaiian Telcom’s 1,100 employees are now working from home instead of at the company’s headquarters on Bishop Street. Cory Lum/Civil Beat/2020

“But COVID-19 just forced us to move a little quicker,” she said.

The result has been better than expected, she said. About 60% of the company’s 1,100 employee are now working from home, she said.

That includes the company’s 100 call center employees. Initial concerns about background noises from calls proved not to be an issue, Higa said. But the company is constantly assessing operations to see what’s working well and what isn’t.

“I don’t think it’s a universal thing,” Higa said. “Everyone is different. Every department is different. And that’s the challenge.”

To Bank of Hawaii’s Ho, there’s another broad concern. While employers and workers have proven remarkably able to adapt to living with COVID-19, the changes, he said, were born out of necessity, during a crisis. At some point, he said, it will be time to step back again and ask whether the changes brought by COVID-19 are really the best for companies and workers.

“The Shazaam element to all of this is that we’ve proven we can do it if we have to,” he said. “The question is, ‘To what extent do we want to?’”

Hawaii’s Changing Economy”  series is supported by a grant from the Hawaii Community Foundation as part of its CHANGE Framework project.

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