It’s on the minds of workers — not to mention commercial real estate owners and developers: Will workplaces make a post-pandemic comeback? It’s difficult to predict exactly what the future holds given the ongoing uncertainty of the global health crisis and the ensuing economic upheaval, but one thing is for certain: The workplace as we know it has been forever changed.
Case in point: A Pew Research study from late 2020 found that 54 percent of workers would prefer to continue working remotely. There’s no doubt that the rise of remote work has its advantages — for employees and for employers. However, as the world returns to a “new normal,” Zoom fatigue worsens, and the real desire to interact and collaborate with colleagues in person increases, offices will take on a reinvigorated importance, although perhaps not in the same way or for the same reasons as we used to think of them.
That same Pew Research study found that about a quarter of workers are less satisfied with their jobs than before the health crisis, citing such concerns as less connection with their co-workers, fewer opportunities for advancement and decreased work-life balance. Many of these issues can be solved by more solidly delineating a worker’s personal (home) and professional (office) lives.
But does this mean an imminent full-scale return to the physical workplace? Questions remain: Will businesses require as much office space in a hybrid work model? Will retailers who shifted more of their operations online during the pandemic cut back on storefronts? Will businesses resume spending on travel after having accepted video conferencing?
The Economic Reality: Are We in for a Historic Turnaround?
It’s impossible to overstate the economic impact the pandemic has had on companies that own office buildings, hotels, restaurants, bars, retail establishments and other commercial ventures. But even as the U.S. economy appears set to resteady itself, demand trends for commercial real estate could take longer to recover as businesses reassess their post-pandemic profiles as the world rethinks how we work, travel, shop and socialize.
The good news is that so far this year, the commercial real estate market has seen some positive trends as many businesses that had to shut down or operate on a limited basis are being given the green light to re-open by governments amid a ramped-up rollout of vaccines.
Still, commercial real estate owners face uncertainty as tenants reevaluate their long-term needs. Retail and hotels have been hit especially hard. Moody’s Analytics is projecting vacancy rates for retail properties to climb to 11-12 percent as businesses reconsider their brick-and-mortar storefronts after last year, when the percentage of online retail purchases nearly doubled to 20 percent. Hotels saw occupancy rates sink as leisure and business travel ground to a halt, dropping from 66 percent in February 2020 to 21 percent that April. While leisure travel is bouncing back as people feel more comfortable hitting the road, business travel trends remain flat as professionals gauge the necessity of in-person meetings in the Zoom era.
Office space vacancies had been hovering around 15 percent nationally pre-pandemic and currently sit at 18 percent. This could potentially be explained by the fact that leases typically last between 5 and 15 years, but the larger implications of the way we work — and where — are still being fleshed out in a world turned upside down.
The New Workplace – What it Is, What it Isn’t
Commercial real estate experts are weighing in on how office space will be utilized in this time of increased vaccine rollouts and the advent of workplace health mandates. Recognizing that humans are social animals and aren’t meant to live and work in isolation, these pros seem optimistic about the future of the office. If anything, the pandemic has proven just how valuable in-person interaction is for a person’s and an organization’s overall satisfaction and success.
Identified trends range from more flexible workspaces to accommodate hybrid schedules, increased interpersonal space, centralized offices and downsized footprints, all of which is to say: The office isn’t going anywhere, but it may not look the same when you return.
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