Just when employers thought they had figured out the ‘secret sauce’ to optimize office environments that attract and retain talent, another Black Swan landed and the pandemic turned all business planning upside down. Last year all of the pundits were talking about collaborative design, co-working, experiential environments, all to improve attraction and retention.

Today, employers are speculating that a significant number of employees may permanently work from home. Due to the pandemic and resulting governmental restrictions, the current office demand throughout the United States has fallen to its lowest level in nearly 20 years as tenants shed space and occupancy losses have now surpassed the declines during the Great Recession.

Source: CoStar News

In the Fort Collins/Loveland office market, there was approximately 38,000 SF of negative absorption in the first quarter of 2020 prior to the onset of the pandemic. Over the last 12 months, negative absorption is reportedly 345,088 SF; 2020 is the first time in a decade that the market has experienced three consecutive quarters of negative absorption. Prior to the pandemic, Fort Collins/Loveland was a very healthy office market, with a 3.91% vacancy rate reported in Q4 2019. With the recent negative absorption, direct vacancy rates have risen to 7.1%.

Additional negative absorption is forecasted for the fourth quarter of 2020 with a modest recovery beginning in 2021. The Fort Collins/Loveland market experienced a surge in unemployment to over 11% earlier this year and is rebounding well from the downturn, with Larimer County posting a current unemployment rate of 5.2%. Job growth is expected to accelerate in 2021.

Source: CoStar News, BizWest

The Greeley population has increased by approximately 15% since 2014, one of the fastest growth rates along the Front Range. In Q2 2020, the unemployment rate in Greeley peaked at 9.6% and currently stands at 7%. Prior to March 2020, the unemployment rate was 3.2%; it's difficult to predict the unemployment rate recovery due to the uncertain environment for the oil and gas industry which employs a significant percentage of non-farm jobs.

Although the current preference among many employees is to work remotely, after the pandemic subsides, employers will reevaluate their remote options based upon costs, productivity, ability to attract and retain talent, and the effect on strategic growth plans. It's anticipated the number of businesses that want to return to an in-person office environment will outweigh the preference to work remotely. In 2021, landlords can expect tenants to seek shorter-term leases, occupy less square footage and decrease shared work spaces.

Northern Colorado’s diverse economy is highlighted by higher education, medical services, agriculture, technology, oil/gas and business services, all of which have proven resilient and are positioned well to recover faster than other areas of Colorado and the nation.

Source: CoStar News, The Reporter Herald, Facility Executive