The pandemic brought about a significant change in the commercial real estate market, especially for the office sector. With more people permanently working from home and the varying degrees of return to office scenarios, it is tough to decide what the future holds for these properties. We are intrigued by the return to office numbers-- they certainly support the reality that there is demand for heavily amenitized space-- and in this article, we get into the statistics and the office real estate outlook.  

Return to Office Statistics

We’ve seen a lot of data about the return to office, hybrid, and remote work but we are going to highlight a few stats that illustrate where some say opportunities lie in CRE space as it relates to office properties.

•       49% of U.S. employees have returned to the office full-time and this number is likely to increase as time goes on.
•       61% of remote workers are willing to switch to a hybrid working model.  Therein lies opportunity to redesign workspaces to be flexible-- accommodating rotations of employees utilizing the same workspaces.
•       56% of remote workers are comfortable returning to the office full time, which is another strong sign that commercial office investing will be expanding.

 

Commercial Office Space Outlook

Looking at the statistics, we can see that most companies have at least some employees who are willing to return and this gives hope to the commercial office sector.. Coupled with mandatory return to office policies, a rebound in Class A office is likely, especially once interest rates begin to ease.   

Company Needs for Workers Returning to the Office

Due to the shift in how employees who are coming back to the office function, we can see several needs and scenarios that should be addressed and they also present different investment opportunities. Let’s take a look at them.

Maintaining Existing Space The days of painting and carpeting may be over.  Employers, especially those who own their buildings, will be required to reimagine and reinvest in their space to ensure that employees return to an environment that promotes collaboration and also incentivizes them to be there.  Adding fitness centers, outdoor amenities, and more technology have been useful when requiring employees to return to the office. 

Updating the Office Vibe Most large companies have realized they will need to update their office space so that they can accommodate the needs of returning employees. Making the space more technology friendly will allow for better hybrid work. Landlords are starting to offer more tenant improvement dollars to refurbish spaces for renewing tenants and are frequently converting large blocks of vacant space into common amenity space for their buildings.

Relocating Your Office Many businesses have found that they do not require as much space as they once did due to more hybrid employee situations, and are now seeking to downsize, even if it means higher rent per square foot as their annual rental obligation remains competitive with their former, larger space.

Expanding Your Office A few companies are even expanding. In some instances, companies were forced to downsize (both head count and leased space) during the pandemic and are now rehiring those employees and requiring additional space.  Other companies are taking advantage of the glut of affordable sublease space on the market that they can grow into over time.

  While it may not meet everyone’s risk profile, there are statistical indicators that show the commercial office space sector showing signs of life and it has the potential to expand in the coming years. Demand for office space will certainly begin to rise as we exit the recession while rents will likely remain flat for some time. We expect Landlords will continue investing in Class A properties to maintain that status, while Class B and C properties will continue to suffer or be repositioned.    Contact Us Now for More Information Phone: 314-588-1900