Hybrid work has become the preferred work model for most Americans. This trend has ripple effects throughout the commercial real estate industry.
A recent survey shows that 52% of U.S. workers now describe themselves as hybrid workers Gallup poll and real estate transactions slowed downExperts say the industry is facing a shift in demand that landlords cannot ignore. Chase Garbarino is the CEO of HqO, a software company that operates more than 1 billion square feet of office space worldwide and tracks the effectiveness of office facilities. he told wealth The first rule in real estate is still location, location, location, but there are new rules for offices.
“The reality is that the hybrid genie is out of the bottle, which means there will be a lot of structural changes in how landlords need to run their business models. ” wealth. “The entire industry is based on 10-year-plus leases because they want a product. They have to think and act like a hotel.”
The 10-year lease provides owners with the security of long-term financial stability, providing them with predictable cash flow and minimizing turnover costs. However, Garbarino said this model has been upended by the rise of hybrid working, as employers no longer commit to ten-year leases as they once did. Landlords must win back tenants, guaranteeing luxuries and services that will keep them around for the long term, he said.
K-shaped office economy
one 2025 Analysis Brokerage JLL and business observers found differences in lease terms across industries. The average lease term for financial services companies is 7.6 years, the average lease term for technology companies has shortened to 5.3 years, and the average lease term for artificial intelligence startups is only 3.5 years. Even for Class A space or the most prestigious properties, lease terms are getting shorter.
“They have to win people back over and over again,” Garbarino said.
Manhattan’s luxury real estate market is on the rise among financial services, legal and technology companies amid demands to return to work. A record number of leases were signed based on $100 per square foot office space in Manhattan by 2025. financial times. There were 313 leases signed last year for at least $100 per square foot, up from 212 in 2024 and a nearly 50% year-over-year increase, according to brokerage JLL and CBRE.
company likes JPMorgan Chase Made a fortune from luxury goods. In October, J.P. Morgan announce action Go to 270 Park Avenue, a $3 billion, 60-story office space that the company owns that has all the trappings of a luxury resort spa, from hot and cold pools and meditation rooms to 19 restaurants and a variety of coffee shops.
But this shift isn’t limited to New York. Companies across America are going all out to provide their employees with luxurious amenities. Larry Ellison’s Oracle – This Is Scheduled to take over TikTok’s U.S. operations are building a 70-acre tech campus in Nashville that will serve as a town and include a high-end Nobu restaurant and a hotel.
While Garbarino noted that nap pods are currently the most booked facility in a building near J.P. Morgan’s headquarters, he insisted that they alone won’t be enough to prompt employees to return to the office. “What we’re really seeing in commercial real estate is that, frankly, space is a commodity,” he said. “Location still matters. It’s not enough to be a differentiator.”
Instead, he argued, their effectiveness often depends on office policies, and amenities help create a healthy environment for those who need to be in the office full-time, rather than serving as the main attraction. “Those things are going to be the balancing factor,” Garbarino said. “If you’re going to be working day and night and staying here all the time, we want to balance that with a healthy work environment.”