News & Analysis

driven by the PitchBook Platform
Weekend Analysis

Landlords are betting workers will choose the office over the metaverse

As the work-from-home trend continues, many landlords are reimagining how buildings will be used in the future. And a growing class of startups catering to flexible work needs have emerged.

Chances are good that you work on a team whose offices have been pretty quiet or even empty for most of the past couple years.

And, thanks to the one-two punch of the delta and omicron variants, a new recognition has emerged: Many, if not most of us, plan to use offices very differently, if at all, over the months and even years to come. It’s a scary thought for office-building owners, who worry how they’ll survive in a world where tenants are shifting to remote or hybrid work in ever greater numbers. No need to schlep to the office when you have Zoom, Slack and other work-metaverse tools, right? Maybe so, but owners of big downtown offices aren’t ready to surrender just yet.

So what to do with all that pricy real estate? For many landlords, the answer is to reimagine how buildings will be used in the future, and to find innovative (read digital) ways to make spaces as valuable as possible to office tenants whose employees have never been more untethered from the traditional workplace. Like many old-line industries—except perhaps with greater urgency—the real estate sector is plunging into tech for help adapting to the new normal. Indeed, landlords are earmarking billions of dollars to place bets on flexible workspaces, desk reservation apps, co-working and other potential hallmarks of the new workplace.

This article appeared as part of The Weekend Pitch newsletter. Subscribe to the newsletter here.

Countless companies’ return-to-office timetables have been upended. A growing number of building landlords are hunkering down for the long haul, expecting offices won’t fill back up for the foreseeable future. In their view, a giant swath of a formerly high-occupancy office market will consist of businesses running hybrid or mostly remote workforces for years to come.

“This is the most seismic change in working since the industrial revolution,” said Roelof Opperman, whose venture firm Fifth Wall is backed by real estate powerhouses including CBRE, Hines and Cushman & Wakefield.

At a time when many companies are embracing long-term work-from-home policies, you might assume that office real estate professionals are dusting off their fallback plans for second careers or retirement. Threats posed by digital platforms such as video conferencing, says Opperman, seem comparable to ecommerce’s devastation of traditional retail. But venture capitalists are an optimistic lot, and Opperman is banking on the idea that most employers will want to use offices at least part of the time to allow teams to gather for projects that need the unique benefits of in-person collaboration.

Companies have accepted employees working remotely for long stretches. Most businesses have done fine working either totally remote or totally in the office, according to Opperman. But they’ve struggled with the gray areas in between those two states. “Everyone’s feeling their way through it,” he said.

Images in the news present differing accounts of the shifting landscape. On the one hand, we see public transit stations and sidewalks in financial districts looking deserted during business hours. On the other hand, tech giants are still committed to office spaces and in many cases are even expanding their footprints.

Take Google‘s $1 billion purchase of a London office building, announced just days ago. Most of the company’s UK employees want to work on-site at least some of the time, with the flexibility for WFH time as well, according to Google.

Venture investors are pouring more capital than ever into the global proptech market, totaling $20.5 billion across 974 deals last year, PitchBook data shows. Some $7.5 billion of that amount came via rounds backed by real estate investors.


A growing class of startups catering to flexible work needs have grabbed much of that funding. WeWork, the shared-office company, was a trendsetter in a group that also includes New York-based Industrious, which raised $200 million from CBRE last February. Berlin-based Lendis, which just closed an €80 million (about $91 million) Series A on Friday, and London-based Hofy are among the newer startups that specialize in leasing tech and other office equipment for distributed work teams.

“I think the idea we’re all going to stay remote forever is well oversold, and the idea we’re going to be staying the same is kind of like putting your head in the sand,” said Josh Raffaelli, managing partner of global real estate giant Brookfield’s venture investment arm.

The firm’s parent company, which manages assets of more than $650 billion, created Brookfield Growth a couple years ago. Today the unit runs two funds with over $500 million in commitments from Brookfield and outside LPs investing directly in VC-backed startups related to property management or development. Raffaelli is on the hunt for proptech partnerships that can add value to the tenant experience in the some 230 million square feet of floor space owned by Brookfield as well as the broader real estate market.

His firm’s portfolio now spans 14 companies, the most recent addition coming earlier in January when Brookfield Growth led a $111 million Series C for San Francisco-based Envoy, a mobile app that companies use to track workers’ health status and manage the comings and goings of employees, visitors and deliveries. Brookfield has also invested in Convene, a meeting-booking and flexible workspace platform that has raised over $276 million in total financing, according to PitchBook data. Similar startups include Fifth Wall-backed Eden Workplace, and OfficeSpace Software, which just got a $150 million investment from Vista Equity Partners.

Apps like Envoy also gather data that can help companies rethink their changing office needs and adjust accordingly, Raffaelli said. “They’re all asking the question, ‘Do I need the same space, how much space do I need? Less space? More space? Or different kinds, like more conference rooms?’”

For companies like Envoy, which was just valued at $1.4 billion in its Series C, an investor like Brookfield can be a pivotal partner in exposing their technology to their tenants.

“We are invested aggressively into going into every building in the world and operating every office in the world, and we’re going to get there,” said Envoy founder and CEO Larry Gadea. “Right now the market is empty and we’re going after literally every single office in the world.”

Most employees want to go into the office in some capacity, according to a survey of 1,000 workers last year by Envoy and Wakefield Research. Gadea said the complexity of this hybrid staffing formula is creating both opportunities and logistical hurdles for companies.

“People will see so much more value out of their workplace,” Gadea said. “These workplaces will have to prove themselves again if they’re going to want people to come back.”

Featured image by Aleutie/Getty Images

Join the more than 1.5 million industry professionals who get our daily newsletter!