M4_ The Coming Corp-CoHab

In my last memo, Fusion & Floorplate - Why Office Conversions Really Identify as Demolitions, I addressed the difficulties of converting office buildings to residential buildings. Since then, the topic has grown in discussion, with NYC Mayor Adams announcing a proposal to convert office buildings to residential housing with his "city of yes" plan.

However, despite the growing interest in office-to-residential conversions, the reality is that very few conversions are actually happening. According to a recent opinion piece in the Washington Post by Heather Long, the US average for office space vacancy in top-tier cities is 18.2%, with only 1.4% of the vacancies undergoing conversion.

This low rate of conversions is a problem for two reasons. First, there is a desperate need for affordable housing in many cities. Second, the corporate world is amid a major restructuring, with many companies reducing their office space footprint.

This squeeze will compel non-competing corporations to consider cohabitation. This is an existing model in the case of an office building owned by a company that may only occupy a few floors and lease the remaining floors to other companies. Regus and then later WeWork joined in distilling this model down to the desk but could not maintain a corporate environment fit enough for S&P 500 companies in the backdrop of Neuman's nonsense. With Regus maintaining its business and composure during the pandemic they might be a natural partner in helping companies cohabitate. I would keep an eye on them.

It makes sense that corporations seeking office space consider corporate cohabitation because of increasing labor laws and HR constraints. If their employees are already roommates, alumni, and Pickleball partners what is the difference in being desk mates? Many major cities will soon adopt this method of desking their employees seeking a 4-day work week with an office full of perks when needed. And the people will love it because it will make being promoted or finding another job much easier because you will now share an office with representatives from at least half a dozen performing companies.

As the local government in each city slowly realizes that they will have to demolish most of these structures, cohabitation will naturally begin to occur.

Corporate cohabitation would be beneficial for both employees and cities. It would make it easier for employees to network with people from other companies, and help reduce vacant office space.

Local governments should encourage corporate cohabitation by offering tax breaks and other incentives to companies that are willing to share office space as will as developers ready to take on responsible demolitions and conversions.