Lately, I’ve been thinking a lot about innovation and change. In 2022 I passed my fifth decade in the industry that I’ve always referred to as the “contract furniture industry,” probably because I’ve mostly worked for furniture manufacturers.
More inclusive names, like “workplace design and furnishings,” take into account the professions of architecture and Interior design that have such influences on our workplaces, as well as the manufacturers of furnishings like textiles, flooring and lighting that are clearly in the industry, but also clearly not furniture.
I bring all this up because in the industry (whatever you call it) we talk a lot about innovation, but the innovations that have had the most dramatic effect on the workplace and consequently on our industry, have not come from within; instead, they’ve come from the tech industries.
Starting quietly with the development of the personal computer, workplace tools from the tech industry have transformed not only the way we work in offices but have made the need to be in those offices less essential. Consider digital tools such as e-mail, Google Docs, Microsoft Teams or Zoom meetings, virtual whiteboarding, and chat channels like Slack and their impact on where we work.
On the workplace design front the way offices are designed and used has evolved, incorporating tech innovations and erasing the old hierarchies of private offices with doors and everybody else in cubicles. In fact, some of the more radical workplace methodologies that have impacted the design of offices, such as team-based work in open-plan layouts, and amenities-loaded layouts that feel more residential have spread from the technology industry to broad acceptance elsewhere.
Then in March of 2020, the pandemic suddenly collapsed trends that had been evolving slowly and in a day we were all working remotely. But continue to work we did and the results were very uneven, depending on the industry one was working in. Some companies found that productivity actually increased, raising a more fundamental and vexing question: Do we need offices at all?
What’s the purpose of the office? Is it a place for bosses to see us and make sure we’re working? A source of friends and social life? A reason to leave the house? It turns out that work, which is what the office was supposed to be for, can now be done from pretty much anyplace.
The impact of these changes on our industry has been negative and since we are inextricably linked to the commercial real estate business, I have to say it has been perhaps even more negative on it.
Since the pandemic office vacancy rates have risen to unprecedented highs in major cities. In San Francisco where there was virtually no Class A commercial vacancy before March of 2020, the combination of remote work and tech company layoffs have contributed to an unprecedented rate, by some current estimates, of vacancy as high as 30% in the City by the Bay.
Perhaps it’s Karma that the city most identified with tech companies is suffering most from the fallout from their innovations. And of course, San Francisco isn’t the only tech hub, nor is it the only city with high vacancy rates in the post pandemic era.
Which brings me to the point: Chicago. Home of our favorite trade show. You may be aware (unless you’ve been sleeping under a rock) that several major companies have departed their long-term bases in Chicago, THE MART, for apparently greener pastures in the Fulton Market neighborhood. Earlier in my career I ran the Knoll sales operation out of the Merchandise Mart, as it was known then. I found it to be a great tool for selling office furnishings. It was easy to organize social gatherings with our design clients as it was a short walk or cab ride from their offices. I personally rode the ‘L’ to work, as did many of our salespeople. The A&D community reported that it was convenient for them to bring clients to THE MART to kick the tires of the products they were spec’ing. And I could go on, but my point is that it has been hard for me to understand why these companies were investing the time, energy and money to move to a neighborhood of primarily Class B office space that’s not conveniently located near much of anything.
THE MART has been owned by Vornado, a REIT, (Real Estate Investment Trust) for more than 25 years. While most of us see THE MART as the center of our annual trade show, and as the location of the Chicago showrooms of many of our contract furniture manufacturers, the contract furniture industry is but a small, although important, part of THE MART’s business. According to a May 22nd article in Facilitiesnet, “Vacancy Rate Hits New Record High in Chicago” written by Greg Zimmerman, “The long-term changes to how we live and work brought by the pandemic continue to wreak havoc on the commercial real estate market. In Chicago, in April, the city’s central business district hit an all-time high vacancy rate of 22.4 percent in the first quarter.
“A metric called net absorption, which measures the delta between space occupied and the space tenants have gotten rid of, fell below zero for the first time since fall 2021. CBRE says the net absorption in the first quarter in Chicago was negative 323,000 square feet.
“Chicago’s central business district currently has 7.5 million square feet of space available for rent, more than double from the 3.3 million it had available at the beginning of the pandemic.“
And apparently Class B space has suffered even more. So maybe what we’ve seen from some key companies in our industry is strictly a real estate play. Whatever the reason(s), they have moved and their departure is an obvious threat to the importance of NeoCon.
The name “NeoCon” and related assets are trade-marked and copyright property of Vornado, i.e. THE MART. As would be expected, over the years management of THE MART have jealously restricted the use of its property exclusively to its tenants. So, companies now in the Fulton Market may not use the name NeoCon. Instead, they have collaborated to organize “Fulton Market Design Days” to be held concurrently with NeoCon. And why wouldn’t they, since NeoCon attracts tens of thousands of people with various interests in our industry to Chicago during that time.
I can understand how, during leasing negotiations, feelings get hurt, egos bruised, sides taken, positions hardened. But the industry is besieged by external forces of societal change, so I hope that any walls that have been built and any hard feelings that have developed, the parties can come together to cooperate to make the second week in June the unparalleled, most important furniture design event in the world.
We truly are, “Better Together.”
