The new normal at Nashville businesses: More flexibility, fewer cubes and uncertain real estate

Decode Health had been subleasing office space in Cummins Station in Nashville when Covid-19 forced the team home in March. The company, which provides predictive disease insights to national laboratories, moved its more sophisticated equipment to its employees’ homes, and increasingly relied on Slack to discuss operations. December was the last month they paid rent there. 

“We are not going back,” said Decode Health founder Julia Polk. “Our team has adapted really well to work from home.”

Businesses across Middle Tennessee, from large corporations to small startups, are rethinking their day-to-day workplace policies and office design and are making long-term adjustments that, for many, will last beyond the pandemic. The changes being considered and implemented have broad implications for recruiting, daily operations and the region’s commercial real estate. 

“Working from home and having flexible work hours and work place is a new way of life. It is definitely here to stay,” Stephen Kulinski, managing director for CBRE’s Nashville office, said. “I don’t think things are ever going to go back to normal.” 

Office vacancy rates in Nashville climbed to more than 10 percent in the third quarter of 2020, up from 7.3 percent in 2019, according to a report from Colliers International. Downtown, the vacancy rate nearly doubled to 10.4%. 

Bridgestone Americas has ended its lease at its Antioch office, where 400 people worked, to consolidate operations at its headquarters downtown. Change Healthcare is closing its headquarters office in Donelson with as many as 700 workers working remotely, according to the Nashville Business Journal. 

“We have continued to look for ways to better support our employees and ensure we’re shaping a culture that promotes flexibility, work-life harmony, and is sustainable for the future,” Bridgestone spokeswoman Emily Weaver said in an emailed statement. “We are adopting a more efficient model that will result in less office space needed.”

Tractor Supply will offer hybrid models for its store support center in Brentwood, with employees allowed to work some from home and some from the office, officials said. The Brentwood-based company also will support those who wish to be entirely on-site or entirely at home. 

“Prior to the pandemic, we were already seeing flexibility as a key driver of a strong, productive work culture and anticipate that this will continue going forward,” spokeswoman Mackenzie Goldman said in an emailed statement. 

For seven years, Courtney Jones, founder of Knoxville-based recruitment firm Momsource Network, has been helping companies in Nashville and across the Southeast to consider more flexible arrangements that could help attract and retain employees, especially working mothers. While some businesses have been open to flexible hours and working from home, many have resisted changes, saying remote work options would hurt productivity or damage culture. Now that Covid has forced companies to adapt to remote operations, those executives see the downsides are not as significant as they thought, she said. 

“We were trying to tell people, ‘if you just try it, try it with a single department,’” Jones said “Some of our biggest successes have come from that, when we have been able to encourage people to take a really low-risk, pilot option.”

Nashville employers have become more comfortable with the concept, because they were forced to try it, but employees also have experienced the benefits. Many will expect it in some form in the future, Jones said. 

“You will see a swell of men and women, parents and non-parents saying, this is going to be the new normal,” Jones said. “You are going to see people flock to the organizations that do operationalize it, instead of saying, ‘this is an exception.’”

Real estate impact 

Remote options have long been in place for tech positions and tech companies in Nashville. More than 72 percent of Nashville companies surveyed by the Nashville Technology Council in May said some kind of remote work will be common for them going forward. Nashville Technology Council CEO Brian Moyer said that could lead to greater interest in less expensive spaces outside the city’s core.

“These companies sending people home to be remote, they need people in for whiteboarding,” Moyer said. “If all you need is an event space with a white board and videoconferencing, I think that bodes well for those kinds of spaces.”

Kulinski said he expects companies with downtown offices to hold onto their space as a cultural hub, even if they decide to reduce their overall footprint. They may also reconfigure their office space, to support meetings, instead of more cubicles. 

“It’s just looking at space in a different way,” Kulinski said. “Workstations got smaller and smaller. Square foot per person got smaller and smaller. You are going to see less of that.”

Colliers reported in its third quarter report that office leasing dropped by nearly 30% in the third quarter and more than 50% in the second quarter. Still, the asking rental market rate increased nearly 6% to $29.78 per square foot. 

“Nashville is in a really good position,” Kulinski said. “Nashville is still a hotspot for companies relocating from these denser, urban areas.”

While some tech companies are completely abandoning offices, Moyer said he is hearing from others who maintain the regular, in-person interaction is critical for long-term success and a strong company culture. 

“Managers and owners have been surprised as to how well this has all worked out,” Moyer said. “That’s great for a team who has worked together for years and knows each other well and you are working on projects that are well defined. What happens when you start onboarding people who don’t understand your culture?  I wonder if it will be the same.”

Beyond training new hires, the move to remote also poses questions on how it shapes an individual’s career trajectory. 

“If you are 22 years old  starting a career, how do you get the exposure that you need to advance your career if everyone is working from home?” Kulinski said, adding that younger generations may not see a career hurdle from less face-to-face interaction. 

Finding the right model

Polk said instead of a more traditional office space, she and her team of seven people are looking for a setup that allows for a handful of people to work and provides access to meeting rooms. They still want to have in-person interaction but plan on making remote work an option for those who want it, even beyond the pandemic. She can more easily imagine four day weeks at the office than she might have a year ago.

“Our team benefits from some in-person time,” Polk said. “For those who want to be in the office every day, because they want to get away from the noise or need more space for their stuff, we won’t tell people they can’t have that. But, we are also not going to say you have to be in the office five days a week.”

Polk said before Covid, she had already begun to recognize some benefits from being away from the office, such as having more time to think about larger strategy with fewer daily distractions. Making that option available is also important for a smaller company competing for talent with larger businesses with bigger pay packages.

“We are going to struggle to beat them out on salary, so we have to be able to show this is a great place to work and we are doing important work,” Polk said. 

Meg Chamblee, who leads a local team for Richmond, Va.-based tech solutions firm UDig, said she returned to her office in Cool Springs just two or three times since March and had begun to consider it as more of a storage unit. She is not renewing UDig’s lease. 

“It wasn’t a very hard decision,” Chamblee said. “We haven’t used the space.”

Chamblee said her team is waiting to see how the market plays out before they sign another contract, and she hopes to find a more permanent space by the end of 2021. UDig has established a “work from anywhere” approach after conducting a survey in September. On average, respondents said they would like to work remotely about half of the time in more normal times. Some clients might still want their UDig consultants onsite, but knowing a remote arrangement is a possibility could help with recruitment.  

“It will probably be a good selling point,” Chamblee said. 

Chamblee said being able to work from home has helped her find more balance in her own life and she is hoping to retain that beyond Covid. She also expects employers to have a greater tolerance for other priorities that arise outside of work. 

“It’s always been a race to get to daycare before they close and taking turns with my husband on who is going to do drop off, who is going to do pick up, what do we have going on in the evenings this week, how are we going to make everything work,” she said. “Now, we just don’t have to have those conversations as often. It’s so much more flexible.”