Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.
Heads of major companies are touting the viability of their employees working from home for the long term…or even “forever,” as Twitter CEO Jack Dorsey said recently. This raises questions about the future of a post-coronavirus office market.
But like other disasters that hit the U.S. office market, some say it will recover fully from this over time…albeit slightly changed.
More offices may move from higher density downtowns to the suburbs, as jobs move closer to where employees live.
Companies may also seek more space, not less, as they reconfigure to accommodate for social distancing.
Newer, more environmentally sustainable buildings could see increased demand and pricing power while older, lower-quality buildings could face diminished demand and significant capital and leasing costs.
We believe it’s too early to write the epitaph for the entire office sector as there are a number of counterbalancing forces at work.
Companies and tenants alike will all be forced to improvise, adapt and overcome a number of challenges in the post COVID-19 world. That adaptation will include touchless technology, face coverings and social distancing standards.
About half of the 203 companies surveyed by CBRE said they will be implementing some or all of these. Just 1 in 5 said they intend to reopen as soon as government restrictions are lifted.
In a new forecast, CBRE predicts that the average office rent will gradually recover to pre COVID-19 levels by the first quarter of 2022.
Most companies, 72% according to CBRE, will do a phased reopening of their offices. Just about half said they expect to give employees the option to work from home for the foreseeable future. This of course would vary widely depending on the sector and type of work being done, as not all work can be done efficiently remotely.
We think you’ll see many employees that will continue to work from home, you’ll have many that will get back to the office and then you’ll have some that’ll do a little bit of both.
The recent trend in coworking, which is a super-social model of employees working in common areas using shared amenities, may have a hard time recovering. So-called “flexible office” companies, like Regus, which rent private offices and conference rooms, are already seeing higher growth.
“The ability to access office space on demand is a huge advantage,” said Bryan Murphy, CEO of Breather, a flexible office company that serves some of the largest urban market. “Office is not dead. Companies are just realizing they need less office than they did before.”
Murphy said he is now seeing demand up about 35%, with employers who have not yet opened their main offices seeking temporary facilities.
“You’d be crazy to sign a long-term lease with this much uncertainty going on. Those are the calls we’re getting,” added Murphy.
As regular offices do open though, one newer, supposedly more efficient and cost-effective element of the space could disappear…that is so-called hot desking or hotel desking. This is where employees do not have assigned desks, but instead share workstations in open seating areas.
In a post COVID-19 world, there may be a reluctance on the part of employees to utilize a space when they are unsure of the hygiene of the previous user and how thoroughly it has been cleaned.
Costs to renovate
Retrofitting offices for automatic fixtures and doors, as well as reconfiguring conference and common area spaces for social distancing could be time-consuming and expensive.
Should this prove to be the case, remote work policies could be in place significantly longer than when certain cities begin to normalize.
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About Beau Beach, MBA CCIM
Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.
Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.
He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.
Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com