Continuing shifts in office space vacancies create more unknowns and opportunities
By Pia Hallenberg, Content by Pia
If overseeing property management for 2.5 million square feet of medical facilities during a global pandemic ever kept Gordon Hester, President and CEO of Kiemle Hagood, awake at night – he’s not saying.
“We certainly had many challenges, but we have also found significant success through this COVID pandemic,” Hester said. “Though I’m not sure if we did business that differently.”
After the initial shutdown period, Kiemle Hagood was considered a critical business and that meant 50 percent of the staff could come back into the office.
“Property management is hands-on – sometimes you just have to be there,” Hester said.
Protocols at the medical facilities managed by Kiemle Hagood changed quickly and maintenance staff had to stay on top of every detail.
“There were new safety and security steps put in place and we had to completely change the janitorial contract for one building,” Hester said. “COVID in some ways made us better at what we do. We had to react and adapt more quickly.”
Early on, Hester said it was decided to rotate staff in and out of the office, so 50 percent came in and 50 percent worked from home. That brought on new cybersecurity concerns that had to be addressed.
“We didn’t always know which type of computer systems employees had at home, or whether their internet connections were fast enough and secure,” Hester said. “We took some measures very quickly to get better VPN connections and make sure everything was working.”
Some local areas – including where his own home office is located – don’t have a strong broadband connection.
“That’s not necessarily something you worry about until you must work from home,” Hester said. “This was a reminder of how important broadband is.”
Kiemle Hagood of course also sells real estate, and the sales department went through 90 days of not being able to show any property to potential buyers in person.
“That was financially the biggest challenge for us early on,” Hester said. “There was a lot of Facetiming and Zooming going as our sales staff tried to do their jobs, and be creative.”
Yet amid challenges, Hester said Kiemle Hagood had the biggest year ever in its Coeur d’Alene and Moscow, Idaho, offices.
“That was driven by consumer demand for investment real estate and land sales, at the same time as our sales team actively worked the market,” Hester said.
In Spokane, where real estate prices were climbing by the minute, Kiemle Hagood saw similar success in the brokerage area.
Yet there are many real estate unknowns to be addressed as the COVID pandemic is beginning to lift. Housing is on everybody’s mind as it’s gotten increasingly challenging to find starter homes and rentals at the lower price point Spokane had gotten used to.
Large office spaces have yet to be repopulated by employees who now work remotely.
“You can see it in downtown. The office space vacancy is almost 25 percent, and the physical vacancy may be as high as 50 percent,” Hester said.
Long-term lease agreements keep commercial tenants locked in, making it difficult to assess just how much vacant commercial space may be available downtown. And no one knows how many downtown office buildings are going to fill up to pre-COVID levels.
“What I am hearing is that many businesses are thinking of coming back in September,” Hester said. “Office workers are already coming back. I’d say perhaps half of the workers who have not already returned to an office, will come back by fall.”
Which means there may be some empty office space downtown, just like in many other larger downtown- areas around the country. It’s certainly possible some of that space could be converted to residential units.
“Some of it could be converted to apartments. We have already seen some of that,” Hester said. “You are going to continue to see that happen as long as there is vacant office space available.”
Another real estate area in flux is retail. Hester said COVID just poured gas on the fire that was already burning under those retailers who were already struggling to adapt to new consumer habits.
“Before COVID, successful retailers were already changing how they were doing business,” Hester said. “They had a curbside pickup option, a great online option, and also a store option. COVID put even more pressure on retailers than we’d seen before.”
Kiemle Hagood is celebrating its 50th year in business and Hester said he is very proud of how the company’s employees have handled the COVID crisis.
“Real estate is a relationship business, and our employees are so important,” Hester said. “It is so important to have the right people on board during challenging times.”
View this article and more in the 2021 Annual GSI Connect Magazine, in partnership with the Spokane Journal of Business.