How commercial real estate distress is reshaping work, talent and hr innovation today

Why commercial real estate distress matters for hr and people strategy

Why distressed commercial real estate is suddenly an HR issue

Commercial real estate distress is usually framed as a balance sheet problem for landlords, lenders and capital markets. Yet the consequences are now landing directly on HR leaders and people teams. When office buildings sit half empty, when cap rates move by hundreds of basis points, and when refinancing risk forces companies to exit long term leases, the result is not just a property story. It is a work, talent and culture story.

Across major markets like New York City and San Francisco, vacancy in class office towers and older commercial assets has surged since the post covid shift to hybrid work. Research from CBRE and JLL shows that US office vacancy reached record highs in 2023 and 2024, with some central business districts facing more than 20 percent vacancy. At the same time, interest rates have risen by hundreds of bps compared with the ultra low rate environment of the late 2010s, pushing cap rates higher and compressing asset values across the office asset class. Distressed assets are no longer a niche phenomenon ; they are a structural feature of today’s commercial real estate market.

For HR, this matters because the office is still one of the most visible symbols of an employer’s promise. When companies shrink their footprint, sublease space, or move from prime class office locations to cheaper buildings or even to fully remote models, employees experience it as a signal about stability, ambition and care. HR leaders are being asked to explain why the company is leaving a landmark office in downtown San Francisco, or why a regional hub in a secondary market is closing, and what that means for jobs, flexibility and career paths.

How real estate distress reshapes work, not just buildings

The distress in commercial real estate is driven by a mix of structural and cyclical forces. Hybrid work has reduced demand for traditional office space. Higher interest rates and tighter cre financing conditions have made it harder to refinance loans on office buildings at previous valuations. Rising insurance costs, construction tariffs and operating expenses are squeezing net operating income. In some markets, especially older office stock, the economics simply do not work at current cap rates.

But for HR, the key question is not only what happens to the buildings. It is how these shifts change the way work is organized and how talent is attracted, developed and retained. When a company exits a long held headquarters because the landlord cannot secure new financing, HR must redesign workforce models, rethink where teams sit, and renegotiate expectations around presence in the office. This is not a facilities issue ; it is a people strategy issue.

At the same time, capital is flowing into other asset classes such as multifamily, industrial logistics and data centers. According to reports from major real estate investment managers, billions of dollars have rotated away from traditional office into industrial warehouses, data center campuses and build to rent multifamily projects. This reallocation of capital has labor implications. Talent demand is rising in logistics, data center operations, property technology and asset management, while traditional corporate office roles in some locations are stagnating or being relocated.

HR leaders in sectors tied to commercial real estate, from financial services to technology and professional services, now need to understand how cap rate movements, cre financing conditions and market specific distress in places like New York or San Francisco will influence where jobs are created, where they disappear, and how hybrid work policies evolve.

Why HR needs a view into capital markets and CRE data

Historically, HR and real estate teams operated in parallel. Real estate focused on leases, cap rates, financing and the physical portfolio. HR focused on headcount, skills and engagement. In a world of commercial real estate distress, that separation is no longer sustainable.

When a company’s office portfolio is under pressure, decisions about renewing or exiting leases, consolidating locations, or converting office space to other uses can reshape the workforce. A decision to close a york office and consolidate into a single hub can trigger relocations, voluntary exits and changes in team structures. A shift from traditional office to flexible space or coworking can alter how teams collaborate and how often they meet in person. HR needs early visibility into these moves to manage workforce planning, communication and change management.

To do this credibly, HR leaders need at least a working understanding of key real estate and capital markets concepts :

• How interest rates and basis points changes affect cre financing costs and refinancing risk
• How cap rates and asset values move across different asset classes, from office to industrial and multifamily
• How local market dynamics in cities like New York City or San Francisco influence vacancy, rents and landlord behavior
• How distressed assets and loan maturities can force rapid decisions on office locations

With this knowledge, HR can participate in strategic conversations about which offices to keep, which to exit, and how to design hybrid work policies that align with both people needs and real estate constraints. This is also where data driven HR practices, including the use of occupancy analytics and collaboration data, will become essential for evidence based decisions about space and staffing.

From distressed offices to new talent risks and opportunities

Commercial real estate distress is not only a risk ; it also opens new possibilities for HR innovation. As companies reduce their office footprint, they can redirect part of the savings into better digital tools, learning programs, wellbeing initiatives and more flexible benefits. However, this requires deliberate choices. Without a clear people strategy, cost cutting in office space can easily translate into a fragmented employee experience and weaker culture.

There are also new talent pools emerging. As capital shifts into industrial logistics, data centers and multifamily development, new roles are created in operations, maintenance, cybersecurity, ESG reporting and tenant experience. HR teams that understand these trends can help their organizations reskill existing employees, design new career paths and compete for talent in these growing segments of the real estate ecosystem.

At the same time, the rise of AI, automation and conversational technologies is changing how employees interact with HR and with the workplace itself. For example, conversational AI is increasingly used to support employees navigating hybrid work policies, booking office space, or accessing HR services. For readers interested in how these technologies are reshaping people operations in fast changing markets, this analysis of the rise of conversational AI in HR offers useful context.

In the coming sections, we will look at how organizations are moving from an office first mindset to a people first approach, how new workforce models are emerging from distressed office portfolios, and how HR can use space and occupancy data to make better decisions about culture, wellbeing and psychological safety in a shrinking office world.

From office first to people first: rethinking the role of the workplace

The office is no longer the default center of gravity

Commercial real estate distress is forcing a simple but uncomfortable question for HR leaders : what is the office actually for now ? When office buildings in major markets like New York City or San Francisco sit half empty, the old assumption that work naturally orbits around a physical headquarters breaks down.

Across commercial real estate (CRE), cap rates have moved up by dozens to hundreds of basis points in some office submarkets, while financing conditions have tightened. According to CBRE and JLL market reports, global office vacancy reached record highs in 2023 and early 2024, with some US gateway markets seeing vacancy rates above 20 percent. At the same time, multifamily, industrial and data centers have attracted more capital as investors rebalance their portfolios away from traditional class A office assets.

For HR, this is not just a facilities or balance sheet issue. It is a people strategy issue. When the office is no longer the unquestioned center of gravity, organizations must redefine how employees connect, learn, innovate and grow. The physical workplace becomes one tool among many, not the default answer.

From fixed location to intentional experience

In a post covid environment, the most forward looking HR teams are shifting from an “office first” mindset to a “people first” mindset. That means treating the workplace as a designed experience rather than a fixed location.

Instead of assuming that employees will commute to a central commercial real estate asset five days a week, HR and business leaders are asking :

• Which activities truly benefit from being in person, and which do not ?
• How often do teams need to be physically together to maintain performance and trust ?
• What kind of space layout supports those moments best ?
• How do we balance real estate costs with talent attraction and retention ?

This shift is visible in how companies renegotiate leases, sublease distressed assets, or move from large headquarters to smaller, more flexible hubs. Some are reallocating capital from long term office commitments into technology, learning and wellbeing programs. Others are experimenting with flexible space providers, shorter lease terms and shared data center or collaboration hubs in key markets.

Research from McKinsey and Deloitte shows that hybrid models, when designed intentionally, can improve both productivity and employee satisfaction. But the key word is “designed”. Without clear norms and support, hybrid work can increase inequality, reduce inclusion and damage culture. HR has to lead the design of these new norms, not simply react to real estate decisions.

Workplace strategy is now a core HR capability

Historically, workplace strategy sat mostly with corporate real estate and finance. In a world of distressed commercial real estate, rising insurance costs and higher interest rates, that is no longer sustainable. HR must sit at the same table as capital markets, finance and CRE teams when decisions about office portfolios are made.

Why ? Because every real estate decision is now a people decision :

• Downsizing office space affects how teams collaborate, how often they meet and how new hires experience the culture.
• Shifting to smaller hubs in markets like New York or San Francisco changes the talent pools you can access and the commuting patterns employees face.
• Reallocating capital from office to other asset classes such as industrial, multifamily or data centers can reshape where and how work happens.
• CRE financing constraints and higher cap rates can push organizations to accelerate remote or hybrid models, which then require new policies, tools and leadership skills.

In many organizations, HR is now co leading cross functional “future of work” task forces that bring together real estate, IT, finance and business units. These groups look at the full picture : distressed office assets, cap rate movements, refinancing risk, tariffs and regulatory changes, as well as employee engagement, turnover and wellbeing data.

Events focused on HR innovation and capital markets are starting to reflect this convergence. For example, forums that bring together HR leaders, investors and CRE professionals increasingly discuss how commercial real estate distress, interest rates and capital flows are reshaping workforce models and leadership expectations. A recent overview of an innovation focused event in Texas highlighted how HR is now expected to understand not only talent trends but also how real estate and financing constraints influence work design and location strategy. You can find a detailed breakdown of these themes in this analysis of what to expect at a major venture and HR innovation forum : human resources innovation spotlight.

Reimagining the office as a portfolio of experiences

As commercial real estate markets adjust, the office is evolving from a monolithic asset to a portfolio of experiences. HR leaders are working with CRE teams to segment space by purpose rather than by hierarchy or department.

Typical shifts include :

• From individual desks to collaboration zones : More square footage is dedicated to project rooms, innovation labs and cross functional spaces, while individual focus work moves to home or quiet zones.
• From permanent offices to flexible neighborhoods : Teams use shared “neighborhoods” that can expand or contract based on project needs, reducing the risk of stranded or distressed assets on the balance sheet.
• From one flagship HQ to a network of hubs : Organizations diversify across markets, sometimes combining smaller class office spaces in core cities with flexible options in secondary markets where cap rates and rents are more favorable.
• From static layouts to data informed design : Occupancy sensors, booking systems and collaboration tools generate real time data on how space is used, which feeds into both CRE financing decisions and HR policies.

Reports from global brokerage firms show that companies are increasingly willing to pay a premium for high quality, energy efficient class office space in prime locations, while older, less flexible buildings face higher vacancy and refinancing risk. This “flight to quality” means HR must think carefully about which locations truly matter for talent and culture, and where a smaller but better office might deliver more value than a larger, cheaper one.

Balancing cost, flexibility and human connection

Underlying all these changes is a tension between cost optimization and human connection. Rising interest rates, wider cap rates and tighter CRE financing conditions push organizations to reduce their office footprint. At the same time, employees still need meaningful in person interaction to build trust, learn informally and feel part of something bigger.

HR leaders are navigating this tension by :

• Using scenario planning that links real estate costs, cap rate assumptions and headcount forecasts with engagement and retention data.
• Designing “anchor days” or “ritual days” when teams come together in the office for specific purposes, rather than mandating arbitrary attendance rates.
• Partnering with finance to quantify the trade offs between office savings and potential increases in turnover, burnout or lower innovation.
• Exploring alternative spaces, such as co working, flexible industrial converted spaces or shared data center campuses, when they better match how teams actually work.

In this environment, the office is no longer a sunk cost that HR must simply fill. It is a strategic lever that can either support or undermine the broader people strategy. The organizations that will navigate commercial real estate distress most effectively are those where HR, finance and CRE teams jointly define what “people first” really means in practice, and then align capital, assets and policies around that vision.

New workforce models born from distressed office portfolios

From distressed portfolios to flexible workforce ecosystems

When commercial real estate distress hits office buildings, it does not only sit on the balance sheet. It reshapes how work is organized, who is employed, and where talent sits. As cap rates move up by dozens or even hundreds of basis points in key commercial markets, owners and occupiers are forced to rethink their workforce models as much as their capital structure.

In large office markets like New York City or San Francisco, rising interest rates, tighter capital markets and higher insurance costs are pushing many office assets into the “distressed assets” category. According to McKinsey research on commercial real estate, the value of office buildings in some global cities could fall by hundreds of billions of dollars by 2030. This is not just a real estate story. It is a people story.

HR leaders are now expected to design workforce models that can flex with the volatility of the commercial real estate market. That means aligning headcount, skills, and work patterns with a portfolio that may be shrinking, converting, or diversifying into other asset classes such as multifamily, industrial or data centers.

Hybrid by design, not by accident

Post Covid, many organizations adopted hybrid work as a quick response to health and safety needs. In a period of commercial real estate distress, hybrid becomes a structural lever to protect both people and capital.

• Core hybrid workforce : A stable core of employees anchored to a smaller class office footprint in key hubs like New York or San Francisco, with clear in office days tied to collaboration, client work and culture building.
• Distributed remote talent : Roles that can be fully remote are shifted out of high cost commercial real estate markets into lower cost regions, sometimes even across borders, to reduce occupancy costs and salary pressure.
• On demand and project based talent : Contractors and gig workers are used to flex capacity without committing to long term office space or permanent headcount.

For HR, this means workforce planning is now inseparable from portfolio planning. When a lease expires on a large office building, the question is no longer only “what is the new rent or cap rate ?” but also “which roles really need to be in this location, and which can move to remote or to another asset class environment, such as a data center or industrial facility ?”

Evidence from Brookings research on remote work and urban geography shows that remote and hybrid models are structurally changing where people live and work. HR teams that treat hybrid as a permanent design choice, not a temporary fix, are better positioned to navigate ongoing CRE financing pressures and shifting cap rates.

Workforce models aligned with asset class shifts

As commercial real estate portfolios rebalance away from traditional office towards multifamily, industrial and data centers, workforce models must follow. Each asset class has its own talent profile, work rhythms and risk exposure.

For HR, this shift means building new talent pipelines, reskilling existing employees and rethinking reward structures. A professional who used to manage a floor in a class office tower in New York may now manage a multifamily asset in a secondary market, or move into a role supporting an industrial portfolio. Skills mapping and internal mobility become critical to avoid large scale layoffs every time capital is reallocated between asset classes.

This is where a structured view of skills, often called a skills ontology for HR innovation, becomes a strategic tool. By understanding which skills are transferable between office, multifamily, industrial and data center operations, HR can design workforce models that move with the portfolio instead of being broken by it.

Variable capacity models tied to capital and financing cycles

Commercial real estate distress is closely linked to capital markets dynamics. When interest rates rise by hundreds of bps and cap rates adjust, refinancing becomes harder. CRE financing terms tighten, and some loans move into special servicing. This volatility in financing and cap rates often leads to rapid decisions about which assets to hold, sell, convert or write down.

HR cannot control interest rates or tariffs, but it can design workforce models that flex with these cycles :

• Scenario based headcount planning : Building workforce scenarios that match different cap rate and financing outcomes, so that HR and finance can act quickly when a deal closes or a loan defaults.
• Tiered employment structures : Combining permanent staff for core operations with flexible layers of contractors, vendors and partners that can scale up or down as assets move on or off the balance sheet.
• Shared services across markets : Centralizing some functions (for example, lease administration, analytics, marketing) to support multiple commercial markets, rather than duplicating teams in each city.

Research from PwC on the future of real estate highlights how investors are increasingly focused on operational efficiency and flexible cost structures. Workforce models that can adjust as quickly as cap rates and financing terms become a competitive advantage, not just a cost control tactic.

Data informed deployment of talent across locations

As discussed in the broader article, data is now central to HR decision making. In the context of distressed commercial real estate, data on occupancy, utilization and performance can directly inform where and how people work.

Organizations are starting to combine :

• Space utilization data from office and commercial real estate assets
• Productivity and engagement metrics from hybrid and remote teams
• Market data on rent levels, cap rates and labor costs across cities

By integrating these data sets, HR can answer questions such as :

• Which teams perform better in office versus remote settings, and in which markets ?
• Where can we relocate roles to reduce occupancy costs without harming performance or culture ?
• How do changes in commercial real estate values in a given city affect our long term talent strategy there ?

Evidence from Gartner surveys on hybrid and remote work shows that most business leaders plan to expand remote options, but many still lack robust data to guide these decisions. In a distressed CRE environment, guessing is too risky. HR needs reliable data to decide where to grow, where to shrink, and how to deploy talent across a changing portfolio of commercial real estate assets.

HR as a strategic partner in real estate decisions

Finally, distressed commercial real estate is pushing HR into conversations that used to be reserved for finance and asset management. When a company considers exiting a major office lease in New York City, or converting a downtown office building into a mixed use asset, HR must be at the table.

Strategic questions now include :

• How will this decision affect our ability to attract and retain talent in this market over the next 3 to 5 years ?
• What workforce model will support this asset strategy : more remote, more on site, or a mix tied to specific roles and functions ?
• How do we communicate these changes to employees to maintain trust, psychological safety and performance ?

Reports from Deloitte on commercial real estate outlook emphasize that organizations which align people strategy with real estate strategy are more resilient in downturns and better positioned for recovery. New workforce models born from distressed office portfolios are not a temporary fix. They are becoming the operating system for how work, capital and real estate interact in the post Covid era.

Data driven hr: using space and occupancy insights to shape people decisions

Turning space data into people decisions

When commercial real estate distress hits, the conversation in the boardroom often starts with lease terms, cap rates and balance sheet exposure. For HR, the real opportunity is different. Every square meter of office space, every underused floor in a class office building, every sublease in a central business district is a live data point about how people actually work, collaborate and stay engaged.

In distressed office markets like san francisco or york city, organizations are renegotiating leases, exiting locations and shifting capital across asset classes, from traditional office buildings to industrial facilities, multifamily projects or data centers. Each of these moves generates data that HR can use to redesign workforce models, talent strategies and employee experience, instead of simply reacting to real estate decisions made elsewhere.

What to measure when office portfolios are under pressure

Most companies already track basic occupancy, but in a post covid environment and a volatile commercial real estate market, HR needs a more granular, people centric view. The goal is not surveillance. It is to understand how different teams use space, what patterns support performance and wellbeing, and where the organization is silently wasting both capital and human energy.

• Occupancy and utilization : Not just badge swipes, but hourly and daily patterns by team, role and location. In many commercial real estate portfolios, peak utilization of office assets is now well below 60 percent, even in prime markets.
• Space type effectiveness : How often are focus rooms, collaboration zones, meeting rooms and social areas used ? Which layouts correlate with higher engagement scores or better project outcomes ?
• Commute and location friction : Time and cost to reach the office, especially in high cost markets like york city or san francisco, where insurance costs, transport costs and housing pressures are rising alongside interest rates.
• Cross functional collaboration : Meeting and communication patterns across teams and geographies, including how often people connect across business units when they are in the office versus remote.
• Wellbeing signals : Absence data, burnout risk indicators, and pulse survey results mapped against office attendance and specific locations or buildings.

When HR links these people metrics with real estate data such as lease terms, cap rates, operating expenses and insurance costs, the organization can see where distressed assets are not only a financial issue but also a drag on talent attraction, retention and performance.

Connecting HR analytics with commercial real estate metrics

In many companies, real estate and HR still operate on separate dashboards. The finance team looks at cap rates, basis points, cre financing conditions and the impact of interest rates on the balance sheet. HR looks at engagement, attrition and headcount. The real value emerges when these views are integrated.

By treating commercial real estate data as a strategic input to workforce planning, HR can anticipate where the organization will need new skills, new locations or new employment models, instead of reacting after a lease is signed or a building is sold.

Using space data to redesign workforce models

As cap rates move, financing conditions tighten and tariffs or regulatory changes hit specific asset classes, many organizations are reallocating capital away from traditional office and into industrial, logistics or data center projects. This shift is not only a portfolio story. It is a workforce story.

For HR, the question is : how do we use the data from distressed office portfolios to design better workforce models ? Some practical moves are already visible in the market.

• Hybrid by design, not by policy : Instead of a generic three days in the office rule, HR can use occupancy and performance data to define team specific patterns. For example, product teams might cluster in person days around key milestones, while support teams stay mostly remote with occasional on site training.
• Location strategy informed by talent, not only rent : When commercial real estate markets in core cities become too expensive or distressed, companies are going start exploring secondary markets. HR can combine labor market data, salary benchmarks and real estate costs to identify locations where both people and capital can thrive.
• Flexible use of distressed assets : Some organizations are repurposing underused office floors into training hubs, innovation labs or shared spaces with partners. HR can lead these experiments, using data to test which configurations support learning, collaboration and psychological safety.
• Cross asset class collaboration : As companies invest more in industrial sites, multifamily projects or data centers, HR can use space and occupancy insights to design rotation programs, cross functional teams and new career paths that span different asset classes.

Scenario planning with real estate and people data

In an environment where interest rates can move by hundreds of basis points in a year and cre financing conditions change quickly, HR cannot rely on static headcount plans. Scenario planning becomes essential, and real estate data is a powerful input.

HR analytics teams can work with finance and real estate to model scenarios such as :

• A 100 bps increase in financing costs for a portfolio of commercial real estate assets
• A drop in occupancy in key office markets due to new remote work policies
• A decision to exit a large office lease in york or san francisco and redirect capital to a new data center or industrial facility

For each scenario, HR can estimate impacts on hiring, internal mobility, learning needs and culture. This allows the organization to move from reactive cost cutting to proactive workforce design, aligned with how the commercial real estate portfolio is evolving.

Governance and ethics around workplace data

Using space and occupancy data to shape people decisions raises legitimate concerns about privacy, trust and fairness. If employees feel that badge data or sensor information is used to monitor individuals, psychological safety will erode quickly, especially in a shrinking office world where people already feel under pressure.

To avoid this, HR should establish clear governance principles :

• Aggregate, not individual : Use data at team or function level, not to track single employees.
• Transparency : Explain what is measured, why it matters and how it will influence decisions about office design, hybrid policies and investments.
• Employee voice : Combine quantitative occupancy data with qualitative feedback from surveys, focus groups and listening sessions.
• Cross functional oversight : Create a joint committee with HR, real estate, finance and legal to review how space data is used and to ensure compliance with regulations and internal ethics standards.

Handled with care, data from distressed commercial real estate portfolios can become a powerful tool for more human centric, evidence based HR. It helps organizations move beyond simple cost cutting and towards a more deliberate redesign of how, where and why people come together to work.

Culture, wellbeing and psychological safety in a shrinking office world

Why a smaller office footprint amplifies culture risk

When commercial real estate distress forces companies to shrink their office footprint, the immediate focus often goes to leases, cap rates and balance sheet exposure. Yet the deeper risk sits in culture, wellbeing and psychological safety. A portfolio of distressed assets is also a portfolio of stressed people.

In major markets like New York City or San Francisco, rising insurance costs, higher interest rates and tighter CRE financing are pushing organizations to exit class A office buildings, convert space to multifamily or industrial, or sublease entire floors. These moves may be financially necessary, especially when cap rates move by dozens of basis points in a single year, but they also disrupt how people experience work.

HR leaders are now asked to protect culture while the physical environment is in flux. That means treating the office, and every commercial real estate decision around it, as a human system rather than just an asset class on a spreadsheet.

Psychological safety when desks disappear

Psychological safety is fragile when people feel the ground is literally shifting under their feet. Office closures, consolidations and moves from prime commercial real estate to cheaper locations can trigger a sense of loss and status anxiety. Employees read every change in square footage, every move from a flagship office to a secondary site, as a signal about their value and the company’s future.

Several patterns show up repeatedly in organizations that are rightsizing their office portfolios across markets :

• Uncertainty about the future – Rumors about distressed assets, potential sales of office buildings or conversions to data centers or multifamily units create a constant background noise of fear.
• Space as a proxy for worth – Moving from a high profile commercial real estate location in a central business district to a lower cost site can feel like a downgrade, even if the new space is more functional.
• Loss of informal support – Fewer days in the office and fewer shared spaces reduce the micro interactions that help people process stress and change.

Psychological safety in this context is less about slogans and more about how transparently leaders explain the real estate strategy, the capital markets pressures behind it, and what it will mean for people in practical terms. HR can insist that every major CRE decision includes a people impact assessment, not just a financing or cap rate analysis.

Designing the office as a wellbeing asset, not a sunk cost

As organizations exit underused space and renegotiate leases, the remaining office footprint becomes more precious. Instead of treating it as a cost center, leading HR teams are reframing the office as a wellbeing asset that must earn its place on the balance sheet.

That shift is especially visible in cities where commercial real estate distress is acute. In New York and San Francisco, for example, vacancy rates in some submarkets are pushing landlords to reimagine class A office space with amenities that support mental health and collaboration. HR can use this moment to push for environments that genuinely support people, not just aesthetics for capital markets presentations.

Practical moves include :

• Purpose built collaboration zones – If employees are going to start commuting again, the office must offer something they cannot get at home. That means fewer rows of desks and more spaces designed for deep project work, mentoring and cross functional problem solving.
• Quiet and recovery spaces – In a post Covid world, stress levels remain high. Small, well designed quiet rooms, wellness areas and outdoor terraces can have outsized impact on wellbeing.
• Inclusive layouts – Distressed portfolios often lead to rapid moves into smaller spaces. HR should be at the table to ensure accessibility, neurodiversity needs and hybrid participation are built into the new layout.

When HR can show that a thoughtfully designed office reduces burnout, improves retention and supports high value collaboration, it becomes easier to justify investments even when commercial real estate markets are volatile and financing conditions are tight.

Hybrid rituals that protect connection across locations

As companies rebalance between office, remote and flexible arrangements, culture risks fragmenting along geography and asset type. Some teams sit in flagship commercial real estate locations, others in lower cost suburban offices, others fully remote. In parallel, the organization may be shifting capital from traditional office to industrial facilities, data centers or multifamily projects. Without intentional rituals, people in different sites experience entirely different versions of the company.

HR can counter this by designing simple, repeatable practices that work regardless of where people sit :

• Shared cadence – Company wide rhythms for town halls, team retrospectives and learning sessions that include both in office and remote employees.
• Location neutral recognition – Recognition programs that do not favor those who are physically close to leadership in a central office.
• Transparent updates on real estate moves – Regular briefings on how the organization is managing its commercial real estate exposure, including office, industrial and data center assets, and what that means for teams.

These rituals help maintain psychological safety by reducing the sense that decisions are happening in a black box driven only by cap rates, basis points and CRE financing constraints.

Wellbeing in the shadow of financial stress

Commercial real estate distress rarely exists in isolation. It is usually tied to broader financial pressures : higher interest rates, refinancing risk, tighter capital markets, rising tariffs and operating costs. Employees may not follow every detail of cap rate movements or bps changes, but they feel the consequences in hiring freezes, budget cuts and slower promotion cycles.

HR teams can respond by making wellbeing support more visible and more practical during these periods :

• Clear communication about trade offs – Explaining how decisions about office space, industrial facilities or data centers are helping protect jobs or avoid deeper cuts.
• Targeted support for affected teams – Extra coaching, mental health resources and workload reviews for teams that are moving offices, consolidating locations or absorbing colleagues from closed sites.
• Financial wellbeing programs – Guidance on personal finance, benefits education and risk protection can be especially valuable when the broader real estate and capital markets environment feels unstable.

In some organizations, the shift away from expensive commercial real estate footprints frees up capital that can be reinvested into people programs. HR can advocate that savings from exiting underused office assets or renegotiating leases are partially redirected into wellbeing, learning and career development, rather than entirely absorbed into debt service or short term earnings.

Using space and occupancy data to protect psychological safety

Earlier, we looked at how data from access systems, sensors and occupancy analytics can inform workforce models and portfolio decisions. The same data can also be used to monitor culture and wellbeing risks in a more objective way.

For example, if a newly consolidated office shows very low attendance on days that are supposed to be collaborative, or if certain teams consistently avoid the office after a move from a prime commercial real location to a secondary site, that is a signal worth investigating. It may point to psychological safety issues, poor design, or a mismatch between the stated purpose of the office and the lived experience.

HR can work with real estate and finance teams to build simple dashboards that combine :

• Occupancy and badge data by team and location
• Engagement and pulse survey results
• Turnover, internal mobility and performance trends

By correlating these indicators, HR gains a more nuanced view of how real estate decisions are affecting people. This is especially important when the organization is managing a mix of office, industrial and data center sites, each with different working conditions and cultural dynamics.

Embedding culture and wellbeing into real estate governance

Finally, culture, wellbeing and psychological safety need a formal place in how organizations govern their commercial real estate strategy. In many companies, decisions about office leases, asset sales or conversions to multifamily or industrial use are still made primarily through a financial lens : net operating income, cap rates, basis points, CRE financing terms and capital markets sentiment.

HR can push for a more integrated governance model where :

• Every major real estate decision includes a people impact assessment and a culture risk review.
• Cross functional committees bring together HR, finance, real estate, operations and risk to evaluate options.
• Success metrics for portfolio changes include not only savings and returns on capital, but also engagement, retention and wellbeing outcomes over the following year.

In a post Covid environment where many office markets are under pressure and distressed assets are likely to remain part of the landscape, this integrated approach helps ensure that the pursuit of financial resilience does not quietly erode the human foundations of performance.

New skills for hr leaders in an era of real estate disruption

Strategic fluency in real estate and capital markets

HR leaders can no longer treat commercial real estate as a distant line on the balance sheet. When office buildings become distressed assets, it directly shapes workforce design, hybrid policies, and even employer brand. That means HR needs a working fluency in how the real estate and capital markets environment is evolving.

At a minimum, senior people leaders should be able to hold an informed conversation with finance and real estate teams about :

• Cap rates and valuation – how rising interest rates and wider cap rates (often measured in basis points, or bps) are changing the value of office, industrial, multifamily, and data center assets.
• CRE financing conditions – how tighter capital markets, higher insurance costs, and refinancing risk affect decisions to sell, repurpose, or reinvest in commercial real estate.
• Market specific dynamics – why a class office tower in york city or san francisco may face very different vacancy, rent, and sublease pressures than a logistics or data centers hub in another market.
• Distress signals – what it means when lenders mark down assets, when cap rate spreads jump by hundreds of basis points, or when owners start talking about handing back the keys.

This is not about turning HR into real estate analysts. It is about understanding how a shift of billions of dollars in commercial real estate value will cascade into workforce moves, location strategy, and employee experience. Credible HR leaders can ask grounded questions, challenge assumptions, and help avoid people blind spots when the organization is going through a portfolio reset.

Useful sources for staying current include quarterly reports from global real estate services firms, central bank commentary on interest rates, and sector specific outlooks on office, industrial, and multifamily markets. These sources regularly analyze cap rate trends, cre financing conditions, and regional distress patterns in markets such as york, san francisco, and other major hubs.

Translating space and occupancy data into people strategy

Earlier in the article, we looked at how space and occupancy data is becoming a strategic input for HR. Turning that into a real skill set requires more than reading dashboards. It means learning to interpret commercial real estate metrics through a people lens.

Key analytical capabilities include :

• Occupancy pattern analysis – understanding which teams actually use the office, on which days, and for what kind of work. This helps decide where to shrink, where to invest, and where to pilot new workplace formats.
• Scenario modeling – working with finance and real estate to model how different office footprints, lease terms, and locations affect not only costs but also talent attraction, retention, and engagement.
• Linking space to outcomes – correlating office usage with performance, wellbeing, and turnover data, while respecting privacy and ethics. For example, comparing teams that rely heavily on the office with those that are mostly remote, and looking at differences in collaboration or burnout.
• Risk mapping – identifying where a sudden exit from a building or market would create critical people risks, such as loss of specialized skills or damage to psychological safety.

HR teams that build this analytical muscle can participate credibly when the organization is deciding whether to exit a lease, convert an office to another asset class, or invest in a new data center or industrial facility. They can quantify trade offs between real estate savings and talent risks, instead of relying on intuition.

Research from major workplace analytics providers and global real estate firms shows that post covid, organizations that actively use occupancy data to redesign their workplace policies report higher employee satisfaction and better space utilization than those that rely on static policies. These findings underline why data literacy around space and usage is now a core HR capability, not a niche specialty.

Designing people experiences for distressed and repurposed assets

As commercial real estate distress accelerates, organizations are not just shrinking office footprints. They are also experimenting with new uses for space : converting underused floors, sharing space with other tenants, or moving some functions into different asset classes such as industrial or data centers.

HR leaders need skills to design people experiences that work across this patchwork of locations and formats :

• Experience design across asset types – understanding how work feels in a traditional class office, a converted commercial real space, a data center, or an industrial facility, and tailoring policies, safety standards, and amenities accordingly.
• Change navigation for relocations – supporting teams when they move from a flagship york city office to a smaller hub, a flexible space, or even a different market. This includes communication, rituals, and support for managers.
• Equity across locations – ensuring that employees in lower profile sites, such as secondary markets or repurposed buildings, do not feel like second class citizens compared with those in iconic headquarters.
• Community building without a central hub – creating new ways to maintain culture and psychological safety when the office is no longer the main gathering point.

Evidence from workplace and organizational psychology research suggests that perceived fairness in how different locations are treated strongly influences engagement and retention. When some teams feel they are being pushed into distressed assets while others stay in premium spaces, trust can erode quickly. HR needs the skills to anticipate these reactions and design mitigating strategies.

Financial and risk literacy for HR decision making

In an environment where billions of dollars in commercial real estate value can be written down in a single year, HR decisions are deeply intertwined with financial and risk considerations. People leaders do not need to structure cre financing deals, but they do need a solid grasp of how financial constraints shape people options.

Core capabilities include :

• Understanding cost structures – knowing how rent, operating expenses, insurance costs, and tariffs flow through the profit and loss statement, and how changes in interest rates or cap rates affect available capital for people initiatives.
• Reading the balance sheet – recognizing how real estate assets and liabilities sit on the balance sheet, and what happens when office buildings or other commercial assets are impaired or sold.
• Risk trade off analysis – weighing the financial benefits of exiting a lease or consolidating sites against the risk of losing critical talent, damaging culture, or undermining psychological safety.
• Partnership with finance – building routines where HR and finance jointly review scenarios, instead of HR reacting after real estate decisions are already locked in.

Reports from global consulting and real estate advisory firms consistently highlight that organizations which integrate HR into capital allocation and portfolio decisions tend to manage restructuring with less disruption to talent and culture. This reinforces the need for HR leaders to be comfortable with financial language and risk frameworks, not just people metrics.

Leading hybrid, distributed and cross asset workforces

Earlier sections explored how distressed office portfolios are giving rise to new workforce models : more hybrid, more distributed, and more fluid across locations and asset classes. Leading in this environment requires a different leadership toolkit for HR.

Key leadership skills include :

• Hybrid operating model design – defining clear principles for when and why people come to the office, how teams coordinate across time zones and sites, and how performance is measured in a distributed environment.
• Manager enablement – equipping managers to lead teams that are split between home, office, industrial sites, and data centers, with practical guidance on communication, inclusion, and workload management.
• Location strategy for talent – working with business leaders to decide which roles should stay close to key markets like york or san francisco, which can be fully remote, and which might benefit from being near specific asset classes such as industrial hubs or data centers.
• Cross site culture building – designing rituals, communication rhythms, and recognition practices that connect people across multiple locations, including those in repurposed or distressed assets.

Studies from organizational behavior and remote work research show that clarity of expectations and manager capability are the strongest predictors of successful hybrid work, more than the specific number of days in the office. HR leaders who invest in these skills can help their organizations navigate the post covid reality where the office is just one node in a broader network of work locations.

Ethical, human centered change in a volatile CRE environment

Finally, HR leaders need the ability to steward ethical, human centered change as the organization responds to commercial real estate distress. Portfolio decisions can trigger layoffs, relocations, or role redesigns. How these changes are handled will shape trust for years.

Critical capabilities include :

• Transparent communication – explaining why the organization is exiting certain markets or buildings, how decisions are made, and what support is available for affected employees.
• Psychological safety during uncertainty – training leaders to acknowledge anxiety, invite questions, and avoid minimizing the impact of change, especially when people are losing familiar workplaces.
• Fairness in decision processes – using clear, documented criteria for who relocates, who can stay remote, and who may be impacted by restructuring, and checking for unintended bias.
• Support for transitions – offering reskilling, redeployment, or outplacement support when changes to the real estate footprint lead to role changes or reductions.

Evidence from change management and employee experience research indicates that employees are more likely to stay engaged and productive during restructuring when they perceive the process as fair, transparent, and respectful, even if the outcomes are difficult. In a world where commercial real estate markets remain volatile, this ethical foundation becomes a core competency for HR, not a nice to have.