An executive at Amazon says if employees don’t like the retail giant’s new return to office policy, they can leave their jobs. Amazon has been having its employees in the office three days a week, but recently announced it was upping that to five days a week. That’s led to speculation that other companies might follow suit, and require their workers to spend more time in the office.
All of this, of course, follows the trend since the pandemic of many employees either working from home or a hybrid setup of spending some time at home and some time in the office.
But, this could have implications for the commercial real estate market — as firms had fewer workers in the office, they needed less office space. But if those employees are coming back, how will those businesses respond?
Trevor Pratt, a managing director at the commercial real estate firm JLL here in Phoenix, joined The Show to talk about what he's seeing in terms of companies in the Valley trying to get workers back in the office.
Full conversation
TREVOR PRATT: It is. And I’m seeing more and more of that over, I’d say the last six months, especially with some of the big names, the Amazons and the Dell’s of the world coming out and doing that. It seems to be a bit of a domino effect here for Phoenix.
MARK BRODIE: How much of that do you attribute to a company, for example, like Amazon doing this? Other companies saying, “Well, if Amazon’s doing it, maybe we should too”?
PRATT: I think, frankly, a lot of it and a lot of it I think, it’s giving these companies the confidence to do it because, you know, somebody else is the first to break the trend. And as the job market gets tighter, I feel that organizations are getting more comfortable saying, “Hey, we want you back in some capacity.”
BRODIE: So what kinds of trends are you seeing in terms of workers maybe coming back full time a few days a week and maybe companies trying to figure out what kind of office space they need to accommodate that? Or maybe they’re having workers come back in a way that will make it so that the space they have works for the amount of folks that they would have in the office at any given time.
PRATT: I would say that the trend is anywhere from three to five days a week. And each organization is different, and they need to find that sweet spot for what works for not only their employees and their model but also their real estate. And we’re in a we’re in a pretty early process, I would say, of these organizations figuring out what the long-term real estate strategy is for, for this return to work. And the overarching trend, I would say, for nearly all organizations is how can we make our real estate attractive to employees so that they want to come back or don’t fight coming back?
BRODIE: So in terms of space, it’s maybe more quality over quantity?
PRATT: A hundred percent.
BRODIE: Especially as people started coming back to work after the worst of COVID, we heard so much about some number of companies anyway, downsizing and, as you say, maybe focusing on more collaborative spaces. They don’t need a couple of floors in a building, maybe just one and sort of reconfiguring their space.
Do you find that that is impacting how they are trying to go about getting workers back to the office?
PRATT: I do. I think we’re seeing that. I’m not hearing nearly as many of the “Oh, this company’s downsizing, this company’s downsizing.” It’s a lot of either companies are feeling comfortable with the reduced footprint that they took or they’re needing room for growth. And again, I think that goes back to hey, what is their occupancy strategy?
And in particular, do you go with what we call hot desking, which is you just come in and you hotel for a day at an office, or each employee have their own workstation? And it’s funny, employees start to feel like their workstation is their second home. So people tend to gravitate towards that. And I would say what I’m seeing right away is that companies — there’s more they’re looking to grow than reduce at this footprint, which is a really promising sign for our industry.

BRODIE: Is that a departure from what you’ve seen over the past number of years?
PRATT: Definitely.
BRODIE: So given, as you say, it’s been a little bit of a roller coaster over the last several years. What is all of this doing to the commercial real estate market in the Valley?
PRATT: A roller coaster is a polite way of putting it. It keeps you on your toes, that’s for sure. There is obviously the pandemic and how that affected everybody’s occupancy strategy. You’ve got the capital markets and interest rates that have played some games with all of us. And now, I would say over the last couple of years, we were trying to spin a positive message to the audience.
And now it feels like we’re really going on a positive trend of, more than anything, companies and individuals having confidence in their decision. And whether that’s we’re going to have people work fully from home or we’re going to have people in the office five days a week, there doesn’t seem to be this uncertainty at this point. It almost feels like the trial, they’ve had a long enough period to figure out what works for their organization.
And more organizations are finding that for the most productive employees and happiest employees for their organization, it’s being in the office in some form.
BRODIE: What is the state right now of available supply in Phoenix? Because as we’ve talked about for a while, companies were trying to downsize. And now all of a sudden it seems like they need more space. Are you finding that companies are looking to take space that is already available, that’s already up, or are you expecting more building in the near term?
PRATT: So I would say that I don’t foresee any new construction — we call it speculative construction — until, gosh, a couple of years at the earliest, in my opinion. And I think that’s a combination of interest rate driven.
But also when you look at our market, we’re at a total vacancy rate now of 25%, a really healthy market for us in my opinion, it’s closer to 15-17. We’ve also got to remember that Phoenix as a metropolitan city, we’re always going to have some level of vacancy because of the land and the ability to build. And what we need to focus on is what’s leasing right now is the highly amenitized, high-end, attractive space.
And we have parts of our market where it’s outdated space. And we have to figure out, what do we do with this space? Can we turn it into a different type of use, or do we need to invest money into it to make it attractive to organizations?
And so again, I think we’re always going to have a healthy amount of vacancy. We are a little ways off from new development, in my opinion. But we’re going to see more landlords investing money into their projects to bring them up to the quality of the space that’s leasing.
BRODIE: How does what you’re seeing in Phoenix compare to what maybe some of your colleagues are seeing in other parts of the country?
PRATT: The Sun Belt states, I think we’ve been a bigger benefit over the last couple of years of we have had companies that felt more comfortable being in the office and having employees return to the office.
When you look at some of the counterparts of ours — the San Franciscos, the New Yorks, the Seattles of the world — they have been slower to respond and be back in the office, in my opinion. And they are trending in the right direction. But we, again, I think have been in the benefit of a little bit of a quicker push back to the office.