Loren Keim on the ‘Never-Ending Tug-of-War’ Over Remote Work

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In this episode of Lehigh University’s College of Business ilLUminate podcast, we are speaking with Loren Keim about return to office mandates by governments and companies, whether hybrid work is “the new normal,” and other issues related to the future of office work. 

Keim is a Professor of Practice of Real Estate and the Program Manager for the Goodman Center for Real Estate in the Perella Department of Finance at Lehigh University. He teaches real estate development, real estate finance, and the program's capstone practicum program.

He spoke with Jack Croft, host of the ilLUminate podcast. Listen to the podcast here and subscribe and download Lehigh Business on Apple Podcasts or wherever you get your podcasts.

Below is an edited excerpt from that conversation. Read the complete podcast transcript [PDF]. 

Jack Croft: We talked about the future of office space two-and-a-half years ago. And one of the developing trends at the time was the tension between employers who wanted to require workers to return to the office full-time and employees who wanted to either continue working remotely or have a hybrid schedule working from home some days each week while going into the office on other days. … How is that tension between employers who want workers back in the office and employees who want more flexibility to work remotely currently playing out?

Loren Keim: The tension between employers and employees of remote work is like that never-ending tug-of-war, except now I think everyone's wearing suits and sneakers at the same time. 

Some employers are digging in and pulling harder for a full return to office, often citing collaboration, company culture, and productivity. But on the other hand, workers, especially highly skilled and experienced ones, are holding the rope just as tightly, valuing that flexibility, that work-life balance, and frankly, the realization that commuting two hours a day wasn't part of their life goals. And these workers are voting with their resumes. 

I think the result we're seeing is a new realpolitik emerge. Companies with the most bargaining power, like big tech, major banks, government agencies, are mandating those returns. But in sectors where talent is tight or skills are highly transferable, employers are being forced to compromise or risk bleeding out their best people. It's kind of that delicate dance of push too hard and you lose good talent, but if you give too much, you're losing good cohesion.

Moving forward, I think we're going to continue to see a sorting effect. Some firms will succeed by embracing hybrid and flexible models. Others will double down on traditional office setups, but will have to offer richer incentives to keep that top talent. And even then, they're going to face longer hiring cycles and higher turnover risk like we're seeing now. 

The battle isn't over. It's just shifting from being about where work happens to who gets to decide where it happens. And that's a story that's still being written. And for better or worse, for some of these companies, if they think they can dictate people back into 2019, they might be very lonely in some of those new shiny conference rooms. 

The companies that survive aren't the ones forcing people into cubicles. They're the ones building work culture strong enough that people really want to show up whenever and wherever that showing up happens.

Croft: So gazing into the crystal ball, how do you see this all eventually shaking down? Is hybrid work “the new normal?" is a phrase I keep coming across doing research for this. And if so, what impact will that have on office vacancy rates long term?

Keim: Well, I think only time will tell if I'm correct. But I believe the traditional model of offices as places where you clock in, sit at a desk, and then clock out is slowly evaporating. Maybe not in every field, but in many fields. 

And future offices will be less about where you work every day and more about where you gather when it matters. I'm thinking high-end clubhouses, like Google has done, flexible spaces focused on collaboration, innovation, and culture building, but not cubicle farms. I also believe that companies will lease less space overall, but they'll be far pickier about it. No one wants to pay for half empty floors anymore. 

Firms will favor higher quality, amenity-rich buildings and great locations over those outdated towers with bad layouts. So the winners are going to be top-tier Class A offices, and the losers are going to be old, tired B and C buildings without a major refresh. So tomorrow's office market isn't about having more square footage. It's about having better square footage. 

I also believe that hybrid work is going to demand what I call a third place. People don't want to work from home or from a traditional office in many cases. And I think that next frontier is going to be a continued rise in third places like coworking hubs, flexible satellite offices, suburban collaboration spaces, even mixed-use lifestyle centers that combine coffee shops, parks, and professional meeting areas. 

Real estate is already shifting to meet some of that new reality. And I think in the future, the best office amenity won't be that free latte. It'll be the freedom to choose when and why you show up.

Croft: It seems clear, from all I've seen and the discussion we've had here, that not all of the office space that we had before the pandemic is going to ever come back as office space. And in fact, some has already been converted. So a lot of it's been empty for, in some cases, five years now. What are some of the more promising trends you've seen in terms of how this former office space is being converted into other uses that are positive for the areas they're in?

Keim: Actually, I've got students this semester working on analyzing several large office buildings in Manhattan that are being repurposed into residential apartments, high-end residential apartments, to meet a more pressing need for housing. They're trying to determine what the return on investing in these conversion projects might be. 

One of the buildings is the former headquarters of Pfizer. I'm sure you're familiar with Pfizer. That building, which I believe is now owned by the Durst Corporation that has some ties back to Lehigh is planned for 1,600 residential apartments. Another building that we're tracking is 7 53rd Avenue. That's being converted into 639 residential apartments by SL Green, another company tied back to Lehigh. And they'll be adding a winter garden project and some high-end amenities, but they're also dedicating 25% of those units to affordable housing. 

The adaptive reuse of large office buildings into residential apartments in Manhattan and other major central business districts is signaling a broader rebalancing, prioritizing housing needs over that oversupply of outdated office space. And housing is a more critical use of space in today's environment. 

We are also seeing repurposing in suburban markets. More often in suburban markets, the buildings might be actually demolished rather than converted. But we are seeing conversions to apartments, the storage facilities, self-storage facilities. And in many cases, if those buildings are going away, those buildings are being torn down and warehousing or distribution is being put up or housing, either way.

Croft: I would like to give you the opportunity, as we come to a close, to talk about anything that you think our listeners should know about the future of office work that we have not talked about yet.

Keim: I do think we'll continue to see a large percentage of the workforce trade commuting for connectivity. And in this war over companies acquiring the best talent, I think the real enemy is traffic. I think you're going to continue to see remote workers want to stay remote. And it's going to be a challenge for companies to get them back and retain that top talent.

I believe, by 2035, many top companies won't care what city you live in. They're only going to care what time zone you're going to work in and whether your dog can stay quiet during Zoom calls.