Virginia Beach is named a top city for the “new normal” corporate administrative office among 40 current and emerging cities in the country’s suburban office markets.
That’s according to a 2024 report by The Boyd Co., a New Jersey–based location consultant specializing in corporate site selection.
Based on a hypothetical 150-worker office, annual operating costs for corporate administrative offices in Virginia Beach total $15 million — ranking among the lowest in the national survey. Palo Alto, California, ranked highest with a total operating cost of $19.5 million and Wilmington, North Carolina, was the lowest at $14.2 million.
The study factors in “new normal” remote working trends, the growing popularity of suburban office markets, state income tax structures and operating costs including labor, real estate, construction, utilities, taxes and travel.
These are the drivers that are influencing where companies locate their offices in the post-pandemic market, said John Boyd, principal of The Boyd Co.
“This is a model consistent with hybrid working, so projects are getting smaller with respect to real estate commitments,” Boyd said. “The office today is more like the space station where you have a workforce rotating in periodically.”
Boyd believes the hybrid model is here to stay, but there is a push — primarily among Generation Z — to be back in a brick-and-mortar office. Moving forward, he stressed office spaces would need amenities to attract workers.
While nobody has a crystal ball, John Profilet, senior vice president of commercial real estate firm S.L. Nusbaum Realty Co., sees the future of remote work a bit differently.
He projects that remote work will continue only for certain business sectors, such as call centers where a thousand employees previously worked in open cubicles in large floor plans.
“As the job market swings, you will see remote working much less often,” Profilet said.
He said there is a great deal of speculation about what the future of office space looks like. While some tenants are downsizing, many are reconfiguring space to make them more collaborative and others are remodeling.
“There’s always going to be a need for office space,” he said. “It might be used differently, but there will always be a need.”
Perry Frazer, executive vice president and managing director for Colliers in Norfolk, said he has seen class A office space in Hampton Roads remain extremely strong with high rates and low vacancies. He pointed to the construction of very little new office space in the past decade and a “flight to quality” as employers seek to create amenity-rich environments to entice employees back into the office.
“The last component is that we’re dealing with local and regional groups that want to be back in the office,” Frazer said. “They want to be around their co-workers … so the effects of COVID and remote working just did not hit us as hard.”
The study also mentions the growing quality-of-life challenges facing employers and employees in major urban hubs with a concentration of corporate offices such as New York, Chicago and San Francisco.
The one large multi-function downtown corporate headquarters office is becoming more rare, the report says.
Instead, many companies are converting to a hub-and-spoke model — a smaller headquarters with additional satellite central administrative offices for support operations such as finance, accounting, information technology, human resources, legal, sales and training.
Nicole Campbell, vice president of office leasing and sales for Divaris Real Estate, said while she has yet to see the hub-and-spoke model here, she stays busy helping companies reevaluate their current office needs.
“As companies shrink their commercial real estate footprint, they’re seeing who within the firm can work remotely or more on a hybrid schedule,” she said.
Campbell also said many clients, still in the midst of a long-term lease, are eager to maintain functionality in their office spaces the best way possible in light of the “new normal.”
A big proponent of the “great office glow up,” Campbell said she feels it’s vital to create spaces that accommodate and change employees’ perception of the workplace.
“Happy employees are really what leads to great businesses,” she said.
Sandra J. Pennecke, 757-652-5836, sandra.pennecke@pilotonline.com