It is no secret that commercial real estate is in trouble. Interest rate changes have impacted returns, and to compound this issue, in many places, vacancies are higher. Remote work has reduced the amount of square footage companies require, and while there are cultural differences between in office and remote work, for company bottom lines, lower space requirements can have a positive impact on profitability.

It is worth now considering the essential function of a high rise office building. Large organizations can use the vertical space of a building to reflect an organizational workflow. In a time before electronic networking, the potential for linear workflow was an efficiency enhancement. Each defined work unit could be contained to a specific space while retaining collaborative proximity to related departments.  This physical proximity was absolutely essential in a pre-networked world.

Today, the physical workflows of the past, can be replaced by virtual spaces which replicate the organizational advantages provided by high rise buildings. It is important to remember that downtown office buildings are not just monuments to corporate culture, they were once the best way to connect office workers.

This is no longer the case, electronic networking has permanently changed how organizations need to be physically connected.  To that end, there is a possibility that due to these changes, the market for high rise office space could be permanently affected.

In office work is no longer required for many roles. This is a function of technological development. The COVID pandemic accelerated the transition of a potential change by forcing companies to increase their dependence on technology.  

Like many technological revolutions, dynamic conditions have resulted in changes in the ways that we occupy physical spaces and organizational structures. While many await the return to the historic paradigms of office work, the reality is that the model may be permanently altered. What this ultimately means for the commercial real estate market will remain to be seen, but it is worth considering that if technology continues to shape our businesses organization, the utility of historic styles of office buildings may lose some value.