How companies can use office space by 2022

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Many predicted that Covid-19 would spread across the U.S. in 2020, devastating offices and forcing businesses to quickly adapt to a remote work environment. impending crisis in the commercial office real estate market. But as the US economy recovers faster than expected a year later, the attitude of companies and workers now seems to have shifted towards a more optimistic, “Let’s wait and see.”

More than half of US companies expect to maintain a similar physical presence or even expand in a post-pandemic environment, according to a recent study. Professional and Financial Services Employees Survey by Arizent, parent company of National Mortgage News. However, Covid-19 still has a huge financial blow to the commercial office market, and it will be months before the full picture of the impact of the pandemic emerges.

“In the next 12 months, there will definitely be some weakness in leasing, because it takes time for actions in the real economy, such as hiring and GDP growth, to reach the demand for office space, because the leases are quite long, from a couple to 10-15 years, ”said Paul Leonard, managing consultant for CoStar, a research platform serving commercial real estate.

Although the volume commercial office financing after bottoming out in late 2020, current numbers are still well below 2019 levels. A study by Costar and Wells Fargo Securities found that net takeovers – the difference in size between new vacancies versus new occupancy rates – fell to their lowest level ever in the first quarter of 2021 amid a huge amount of sublease space available. The growing popularity of employees sharing time between home and office also signals that this is likely to be a permanent workplace option.

“Companies appear to be looking for flexible office space to better accommodate hybrid work models, which is likely to slow the growth of office demand in the future,” says Wells Fargo’s Economics. commercial real estate map

But maybe not to the extent that it was once intended… About 30% of respondents to the Arizent survey said worker preferences were a major factor in determining their return to the office plan. While employees are likely to perform more tasks remotely, they also expect a less crowded and safer environment in the post-Covid post-era when they head to the office.

“Even if you have fewer people in your office than we did before, you might have to leave that same space so people don’t stand out when they’re in the office where they used to be, to keep them happy,” Leonard said. …

Satisfying these desires is likely to mean accelerating the trend towards hot tables or pre-booked stations for hotel accommodations, while eliminating dedicated jobs. Renovations of this type of space will require major refurbishment of older buildings in order to make the necessary technical improvements, according to a Wells Fargo study.

“It really will vary by company, industry and city, and I suspect some of these hotel stations will end up in the suburbs, closer to where people live,” said Mark Whitner, senior economist at Wells Fargo, in his interview. interview. The suburbs are home to many older generation office complexes that will require modernization.

But even as the pandemic demonstrated that high production levels can be sustained with decentralized workforce, Witner says the trend of telecommuting hasn’t made the office obsolete. In any case, the events of 2020 demonstrated the need for employees to work together in one place to maintain one or another form of corporate culture.

“I think we’ve learned that there are new ways to work remotely that will allow employees to be more flexible, but I don’t think telecommuting will become the dominant way of working, or even the usual way. ” he said.

To illustrate this, many of the largest corporations have shown no signs of abandoning expansion. Peloton announced in December that it is leasing more than 100,000 square feet of additional office space on its regional campus north of Dallas. Facebook rented or acquired over a million square feet of office space across the country last year, even as it reaffirms its commitment to offering remote work options. Construction continues on the new 2.5 million square feet JP Morgan Chase in Manhattan.

Rather than encouraging people to leave the office, the pandemic may be driving the development of better-quality spaces. In the Arizent survey, 10% of respondents indicated that their firms do not plan to significantly reduce physical size, but expect them to move elsewhere to support a more distributed model that can facilitate migration to efficient buildings and better locations. This is similar to what CoStar found in his research.

“They’re not going to compromise on things like really high quality HVAC systems and air purification. And people usually look for that best ESG policy, and if they can do it with their real estate – more than ever, it becomes a priority for companies, ”Leonard said.

Office demand is likely to become clearer after Labor Day, the target date many employers have set for employee return. But according to Leonard, the Covid-19 disruption was so severe and unexpected that it made forecasting office demand more difficult than during a normal recession cycle. Only in 2022 will business leaders and developers be able to get a full picture of how the office environment of the future will shape.

“One thing that has been challenging over the past year is how much slower growth is due to constant teleworking?” said Leonard. “Last year the whole company didn’t rent premises, and did they do it because they don’t plan to ever return, or do they do it because they just need to take a breather here and wait until they get better at their own business? “



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