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The big question for all those Salt Lake City office towers: Will workers return after COVID-19?

3 out of 4 employees continue to work from home due to the pandemic

(Illustration by Christopher Cherrington | The Salt Lake Tribune)

Few worlds blew apart with the pandemic like our lives at the office.

COVID-19 upended countless everyday workflows, habits and human interactions built around a culture shared daily and face to face at the workplace. Downtown Salt Lake City streets, its office towers, lunchtime eateries and mass transit lines remain ghosted of most of their usual inhabitants, though foot traffic has returned with business reopenings.

The latest numbers show that three of every four downtown employees are still regularly working from home. For state government’s estimated workforce of 22,000, some 40% were working remotely, as of late October.

All those empty cubicles, hallways, parking lots and so many wilted plants echo a key question for commerce in Salt Lake City’s urban core:

Will the workers return? Long term, post-vaccine, will our need for interaction bring back those office settings?

“I would refer you to the history of the human race,” said an upbeat Dee Brewer, executive director of the Salt Lake Chamber’s Downtown Alliance. “We started gathering around the campfire, and then we built huts and towns and cities, and we kept gathering and gathering and gathering.

“We are social animals, and there is creativity and opportunities that are created in those gatherings and with density,” Brewer said. “People want to do that, and they will do that.”

The past months have disrupted so much of how we view workplaces and routines — from safety, hygiene, co-workers, shared spaces, touched surfaces and so much else on the job. But the attractive and self-sticking side of human nature is something else again, experts say, and is combining with some longer-term market fundamentals in Utah’s capital to give key players an optimistic view.

Even now, rents for office properties in the Salt Lake City market continue to inch upward, even with no end in sight on the coronavirus crisis. Developers are building nearly 1.3 million additional square feet of new office spaces, too, with about a quarter of that set to open by year’s end.

Several so-called flexible workspaces have also opened in the city since the pandemic began — a sign that employers and entrepreneurs still want adjustable, low-cost work settings to test their business models.

“History and pandemics in the past have shown us that, yes, these kind of things are significant and will impact the way we do business and live our lives to some extent,” said Gary Ellis, president of Utah-based Jacobsen Construction, a major downtown builder. “But I don’t think this is going to destroy our normal way of life."

Home has limits

(Francisco Kjolseth | Tribune file photo) Michelle Brown works from home amid the pandemic as the coordinator of resource stewardship for the Department of Administrative Services.

Initial indications during the onset of the pandemic, after the abrupt shift to telecommuting, showed that productivity jumped by working from home in many cases. Some employees have treasured the new flexibility, reduced distractions from office life and the lack of a daily commute.

But there are signs some of those trends are giving way to others, with only about 11% in a June survey saying they “felt more productive and more engaged with remote work than work from the office.”

Market researchers at The Martec Group, a global firm based in Chicago, recently found that mental health had declined for those working from home across all industries, seniority levels and demographics — even among those who were in “excellent” mental health before this began.

Many have reported unforeseen demands on their time at home in similar surveys, such as having to care for family members or help school-age children with remote learning while balancing workloads. Others miss the daily casual exchanges with colleagues.

Yet, in Salt Lake City’s case, the specter of the virus remains a palpable factor.

After dropping to 13% by mid-May, the share of downtown Salt Lake City employees working in their offices jumped to 22% in June and inched up to 25% through October, according to data from the Downtown Alliance.

That means thousands are telecommuting even after an official easing of restrictions and widespread reopening of businesses, although that has reversed to some extent now with rising COVID-19 case rates since August. And amid the cascading side effects, the months-long shift away from full office occupancy has combined with other pandemic impacts to hit downtown Salt Lake City hard.

Hotel stays, partly a function of business travel, are now at 43% of what they were last year. About 140 of the urban core’s bars and restaurants are open for limited service, according to late October numbers. That’s up from 75 in May but well below full-blown capacity. Roughly 90% of downtown’s retailers are now open in some fashion, data shows. That’s much improved from June, when it was as low as 30%.

The virtual evacuation from downtown offices also came after years of heavy office construction in Salt Lake City and along the Wasatch Front, raising questions about a potential oversupply. The pre-COVID building trend had brought millions of square feet on line in the heart of the city and the suburbs alike as Utah’s economy led the nation with job creation and a growing tech sector.

(Al Hartmann | Tribune file photo) Guests take in the breathtaking view of Main Street from the top floor north windows of Salt Lake City’s 111 Main office tower in 2016.

The pre-pandemic boom included several substantial office tower projects downtown with lots of glass and top-flight building amenities, such as 111 Main and the soon-to-be-completed 95 State at City Creek, both built by The Church of Jesus Christ of Latter-day Saints.

Now, a major share of those office floor plans across the city are uninhabited or populated by much slimmer staffing.

Safe spaces

Office vacancy rates — a sign of longer-term slackening in demand for space — have edged up to 14.3% in July, August and September, according to one report. That’s up after leasing activity in the city center and surrounding pockets in the Salt Lake Valley dropped in spring and summer as some business owners gave back the spaces they were renting.

Salt Lake City employers who are bringing back workers to the office gradually face a complex set of choices, according to another study, and that is going to make the entire picture cloudier in coming months.

Real estate analysts at Newmark Knight Frank found that employers are often dealing with reduced numbers of workers overall during the pandemic while having to figure out how to socially distance everyone and take other steps to keep their workplaces safe. That has blown up previous thinking on what office floor plans look like.

Some large employers are clamoring for more office space to spread out their workers, brokers said. Others need less room because fewer will be there in person over the long haul. Some aren’t even entertaining the question of bringing back their workers to the office en masse until sometime next year.

Where all that ends up short term on total office square footage across the Wasatch Front, according to Salt Lake City real estate analyst Kip Paul, “we don’t know the answer yet.”

“You’re going to have some that will shrink back over time and some that have to expand right away,” said Paul, vice chairman of investment sales for Cushman & Wakefield. “My best guess is that part will be a net wash.”

But there are bigger signs that demand for office spaces in Salt Lake City will continue on an upward slope, thanks to Utah being seen as a potential refuge amid a coastal exodus.

This is the place — again

(Rick Egan | Tribune file photo) A house on Aspen Drive, in the Aspen Springs neighborhood in Park City, Tuesday, Sept. 29, 2020. Employees are increasingly relocating from the U.S. coasts to places like Summit County, where they can work remotely from home.

As the pandemic wears on and new waves of infections seem to be taking hold in a number of states, strong signals are emerging of an outmigration from crowded cities on U.S. coasts to more suburban and rural locales, accelerated by the trend of working from wherever you call home.

After a brief slowdown in April and May, homes sales have surged in Utah, particularly at the luxury end, with historic buying in Park City and other high-end communities but also in areas across the state with median-priced homes.

It’s not just out-of-staters relocating to Utah, either.

With interest rates at historic lows, agents are reporting rising demand from domestic buyers for homes in the suburbs with larger backyards — as well as immense appetite for additional rooms to be used as home offices.

An Oct. 24 report from Zillow, the online real estate listing service, showed home inventories in the Salt Lake City metropolitan area down 50.1% year over year and down 10.6% compared to last month — the largest single drop among the 50 largest U.S. metros.

That’s a stark number after nearly a decade of rising prices on the Wasatch Front had already pushed the average home out of reach for most first-time buyers, sparking what officials were calling an affordability crisis before COVID-19.

There are ramifications for offices in all that as well.

Just as out-of-state executives and skilled workers newly uncoupled from their physical workplaces are fleeing to places like Utah, more and more employers and institutional investors in coastal cities are thinking along similar lines.

The Beehive State’s economy has been buzzing for years as investors try to push their cash into secondary city markets in the U.S. as a way of hedging their portfolios. The Wasatch Front is generally less costly than bigger cities when it comes to commercial real estate, and its proximity to mountain recreation also gives employers an inside track on recruiting and retaining talented workers.

And while its economy has suffered along with the rest of the world since March, Utah’s unemployment rate, at 5%, is well below the national average. Companies continue to relocate to the state, drawn in part by its skilled workers and relatively lower wages.

All those features look even better now, many observers say, as more companies decouple from a physical workplace and seek to migrate out of more heavily populated areas.

“Out of state, there is still a lot of capital on the sidelines,” said Ellis, with Jacobsen Construction, which is responsible for several large developments now underway in Salt Lake City, including The West Quarter near The Gateway.

“We’re getting calls all the time from people saying their research points to Utah as a one of their top three or four markets,” Ellis said. “People are seeing what a great place this is to live and that it is outside of the major metropolitan areas. And so I think we have a lot of things going for us.”

Paul, with Cushman & Wakefield, recounted an August conversation with the manager of a “sizable” New York-based investment fund.

“He asked me, 'If you don’t have to live in New York or San Francisco and ride public transportation and go up a 60-story-building elevator every day, why would you?” he recalled. " ‘If I could move my family to Salt Lake, I’d do it tomorrow!’

“We hear that theme,” Paul said, “over and over.”

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