COVID-19 has impacted all facets of life with ramifications that cut across all industries. The commercial real estate market is no exception. During mandatory stay-at-home orders and lockdowns, companies made quick decisions about how to keep their businesses running outside of office settings. As restrictions ease across the country, businesses are carefully reassessing their needs for office space, and this is likely to lead to dramatic changes to the market. Here are some of the potential impacts:
1. Some Office Will Become Obsolete
In recent years, there has been a big movement for working from home among employees, and many employers have resisted the trend. For example, in 2017, IBM banned work-from-home solutions for all employees. COVID-19 left companies with no choice but to work from home or stop operations completely. What many have found was that their fears about working from home are unfounded. Zoom and other technologies have kept employees working from their home settings. When you consider that rents on office spaces are often one of the biggest expenses for companies, it makes sense that many businesses will decide that they would be better off abandoning traditional offices entirely.
2. Many Companies Will Downsize
Not all companies will eliminate traditional offices entirely, but many may discover that they can downsize significantly. Day-to-day work may take place from home with employees only heading into the office for occasional in-person meetings or performance reviews. Other companies are opting for rotating scheduling to allow for social distancing with employees coming to the office two or three days per week or every day with staggered, shorter schedules. Both of these arrangements will leave countless square feet of office space unused.
3. Relocations Will Become Popular Options
Companies that still wish to have a tangible footprint may consider having a single office. If most employees are working from home, businesses will see less need in having their home bases be in central locations. Leasing office space in a major city increases the cost of doing business, adding to the appeal of relocating to less populated areas.
4. Rent Rates are Likely to Plummet
Traditionally, rent rates become impacted by downturns at a slower pace than the rest of the economy due to long-term leases that lock companies into their spaces. With many experts predicting that coronavirus concerns could loom until 2022, there is almost certain to be an eventual impact on rent rates. One expert believes that as little as 5 percent of tenants in a market shifting their thinking about office space could lead to market instability and plummeting rents.
5. Office Layout and Amenity Priorities Will Shift
Many companies that do decide to fully return to their offices will need to revamp their spaces to protect the health of their employees. Open floor plans are bound to become less popular, and there is a push to rearrange work areas to allow employees to move in one direction seamlessly throughout the office. Touch-less doors, voice-activated elevators and temperature sensors will be in big demand.
Wondering where to begin?
Related Content
Subscribe to Our Learning Center
