Boston Properties CEO Owen Thomas told CNBC on Thursday that working from home is not a long-term replacement for physical offices, arguing many of the coronavirus-related shifts in business will be temporary.
“The ability to mentor younger employees, the spontaneous collaboration and creativity that occurs, and also the culture that companies develop, it’s very difficult to do it when we’re all on Zoom” or Cisco’s Webex videoconferencing platforms, Thomas said on “Squawk Box.”
A massive shift to a work-from-home culture post-coronavirus would stand to hurt Boston Properties, whose office building business depends on company leases.
Thomas said the return to the office will be gradual as the presence of the pandemic remains. But he said there is already evidence that companies value having an office, pointing to efforts by some businesses to set up smaller, satellite offices in suburban locations instead of requiring large portions of their workforce to commute to a downtown location.
“Think through what that’s saying. Companies are saying, ‘Look, we don’t want to work from home. We want to have our people in a physical office, and so we’re going to go to the cost and the expense of leasing something in the suburbs on a short-term basis so we can put them all together,'” he said.
Thomas, whose company has a portfolio of 193 properties with large presences in New York City, Los Angeles, San Francisco, Boston and Washington, said he believes many of the suburban offices set up in response to the Covid-19 outbreak will be temporary. He said that, over time, the value of urban workplaces will return.
“When the risks of the virus disappear, for whatever reason, I think the companies will come back to the city,” he said. “Knowledge workers, talent workers want to congregate in cities. They want to be together. They want to experience the culture and the excitement of big cities. They will come back, and that’s why the employers are there, because they want to attract the talent.”
Thomas said Boston Properties in April collected 96% to 97% of its rents from office tenants. When including its small number of retail tenants, the company overall collected a percentage of rent in “low 90s,” he said. The company has not announced May collections yet, he said, but those also are “very favorable.”
According to its 2019 annual report, Boston Properties’ top tenants as of the end of December included the federal government, Salesforce, WeWork, Bank of America, Alphabet’s Google and Snap. The real estate investment trust, or REIT, has a stock market valuation of $12.5 billion. Shares of Boston Properties were lower Thursday and are down more than 40% in 2020.
The coronavirus pandemic has put pressure on all sectors of the economy, from retail to hospitality to travel and leisure. The real estate industry has hardly been immune as commercial and residential tenants alike struggle to meet rent obligations. The industry’s present difficulties come alongside significant questions over its future.
Twitter and Square, both led by Jack Dorsey, have already announced they will let most employees work from home permanently. Google has said it will allow employees to work from home until the end of the year. Insurance company Nationwide, by contrast, has said it will be accelerating its transition to a “hybrid operating model,” with employees at only four main campuses continuing to work from the office. In most other locations, employees will work remotely.