Commercial Real Estate And Covid-19 – Is The Office A Thing Of The Past?
In the early days of the pandemic, a mass exodus of workers left the office to work from home. Leveraging technology on an entirely new scale to ensure that business could continue as close to ‘usual’ as possible.
There were and still are suppositions about this signaling the end of commercial real estate as we know it. If a workforce can completely diversify and work from home effectively, what purpose would a traditional office setting serve?
So it may come as a surprise then that recent research across a group of 126 senior-level global real estate executives suggested the opposite. 41% of the group said they felt that the importance of the physical office will only slightly decrease. 38% felt that physical offices will remain important and that the commercial real estate market may in fact experience growth.
A Sudden Shift
This is not to say that this will be the case with all businesses. In some cases, Covid has represented a renaissance for businesses that were stuck in a traditional approach of workers being in office. The dawning realization that workers can be just as effective, if not more so when a commute isn’t involved, has meant a shift in operations. The closure or downsizing of commercial office premises has meant better profits, less administration, and less stress.
So it is little wonder why there’s a general agreement or acceptance that commercial real estate is set to struggle as we enter 2021. For many operating a commercial real estate agency, this is no doubt worrying.
Not all commercial premises have experienced the same crises however, the stockpiling of goods in warehouses for instance has never been more prevalent. Meaning an increase in demand for some areas of the commercial market.
A Glimpse Of What’s To Come
As the pandemic plays out around the globe, different management strategies are yielding vastly different results. Meaning it is possible to catch a glimpse of what 2021 may look like in America with regards to commercial real estate.
Take South Korea as an example, where the pandemic was swiftly brought under control with life returning almost to normal by mid-2020. Asset management firm Brookfield stated that their offices there are already back at 90% occupancy. A representative for the company stated that their position is based on the belief that:
“Demand for high-quality office space may even increase in the long term as the psychological effect of the pandemic pulls back on the long-lived trend of office densification. […] While remote work can be effective in the short and even medium-term, it cannot replace human interaction forever, and can introduce a long list of risks. Ultimately, a company’s culture needs in-person connection—and the physical workspaces that support it—to thrive.”
It is certainly true that collaborative interaction is better-achieved face to face. For some, working from home has created new anxieties. The struggle to work with children at home and constant interruptions has been overwhelming for many. The feeling of claustrophobia or sameness from no change of scenery has taken a toll on mental health.
Aspects of office life that were likely not fully appreciated pre-pandemic, such as silence and motivating routine are now something many workers crave. Work from home cannot provide community and connection in the same way as an office environment can.
The Future Is Hybrid
Helpfully, the pandemic has been the catalyst for businesses to merge work from home and office attendance and be more flexible. There is no denying that office attendance will never be quite the same as it was. The forced propulsion into remote working has shown that traditional 9-5 office days are done. As Savills World Research outlined, we should:
“Expect to see a shift towards diverse location strategies and the emergence of a hybrid model – a combination of home working, local office hubs, and a head office. This is an opportunity to improve long-term employee wellbeing, organizational resilience, and sustainability. A reduction in the environmental footprint may arise from less travel, shorter supply chains and sustainable building design, to name a few examples.”
Meaning, the office, and corporate environment will continue to exist across many facets. With commercial property still playing a key role. It will be the office, but not as you knew it.
What Will This Mean For A Commercial Real Estate Agency?
Agencies and commercial property owners are going to need to be flexible. Tenants will likely have entirely new demands or criteria to fulfill when deciding to take on a property or extend an existing lease. These demands may include:
- Improved safety and hygiene elements, such as contactless lifts and doors.
- More efficient and sustainable spaces that focus on occupant comfort (following building rating schemes such as LEED and WELL).
- More floor space to increase distancing between staff.
- Lesser floor space to account for home workers.
- Flexi spaces with hot desk facilities may face a decline in demand in the short term.
- A need for larger warehouse spaces as the retail sector continues its upward trajectory triggered by quarantine/isolation online shopping.
There is expected to be an increase in supply chain onshoring – sourcing more suppliers from the home market. Which will boost the need for regional manufacturing hubs and large commercial spaces. Additionally, as work forces spread out across the country, there may be a rise in the need for more regional commercial locations.
Commercial real estate, like all real estate, will always experience shifts depending on the economic situation. A pandemic is no exception, however if you are a commercial real estate agency, there is no need to panic. There will be changes in how your business and clientele operate which will require, but the commercial real estate market will recover and experience new growth.
Wanting to find tenants for or to sell your commercial property, or need help managing your commercial premises? Maybe you need some inside advice and guidance about the next steps post pandemic? Contact the premier real estate agent for NWA The Brandon Group, today on (479) 787-3080.