For a long time, the sign of success for a company was a tall, shining building. The bigger and more imposing the structure, the more prestige the corporation could project. These days, however, many of these towering behemoths lie empty, victims of the work-from-home revolution. While the effects of the covid-19 pandemic are slowly starting to recede in most countries, remote work appears to be here to stay, which means central corporate headquarters are increasingly looking like a thing of the past. This raises the question: if businesses do not need to house their workers anymore, what does that mean for the once-stolid commercial property market?
While the covid-19 pandemic has hastened the development considerably, the truth is that remote working has been on the rise for quite a few years now. Studies show that office space per worker peaked around 2009 and declined for about a decade before the pandemic even started. Financial pressure caused many companies to start cutting down on office space following the 2008 recession, and that trend has continued. Remote work has also become more feasible with recent technological advancements in internet speed and telecommunication solutions and continues to be an attractive option for employees who prefer to skip the daily commute and work from the comfort of their living rooms. All of this points to the idea that the work-from-home revolution has been impending for a little while now. Add the pandemic to the mix, and one thing becomes clear: remote working is here, and it is here to stay. As employees and employers negotiate on coming back to work, many companies have indicated that remote working will continue to be a part of their plans in the future. Even tech companies, longtime holdouts against the work-from-home trend, are starting to fold, with Google and Pinterest both canceling plans for new in-person headquarters.
The conversion to remote working during the covid-19 pandemic has been quite the hit among employees, unsurprisingly. Cutting down on time-consuming commuting and allowing workers to do their jobs from the comfort of home has done wonders for work-life balance, leading many employees to resist any return to an office environment. A recent Harris Poll study showed that only 25% of workers want to go back to an office full-time, with a majority preferring to work entirely remotely. It is clear that remote work is a trendy option for employees, and a return to the old central office way of doing things may be out of the question.
However, that does not mean that remote work is without its flaws. Workers enjoy the flexibility and comfort of working from home, but many struggle with a lack of collaboration and overall social interaction. Companies have also resisted work-from-home solutions because of these concerns. The pandemic has shown that corporate fears over productivity loss during remote work were overblown, but the loss of collaborative work culture has been felt. This has led many companies to move towards a hybrid model, with employees working both at home and part-time in the office. While the demand for office space has been reduced, that does not mean that the market is dead entirely.
In the short term, the economic effects of covid-19 have been as devastating for the commercial property market as they have for pretty much every market out there. Businesses completely stopped expanding over the past year and a half, with the majority focused on simply weathering the storm. Small businesses suffered the brunt of the economic pressure, leading to a wave of shuttered doors across the country. This also has a significant short-term effect on the commercial property market, leaving it flooded with sellers and bereft of buyers. However, signals of an economic recovery have been strong, and there is no reason to believe shoppers will abandon brick-and-mortar shops entirely. The market for storefronts should rebound as restrictions loosen, and entrepreneurs gradually start opening new small businesses again. Office space should see a rebound too, at least partially, as the economy gets up and running again. As for the long-term effects of the work-from-home revolution, all we can do is speculate.
Let us rip the band-aid off now: as remote work becomes more popular, demand for office space is likely to fall. Unfortunately, not much can be done about that – other than speculate on what it might mean for the housing market, of course. Still, that does not mean that the commercial property market is going to collapse entirely. There is still plenty of money to be made, and office space will continue to be a requirement for plenty of corporations. The trick is to try and figure out how the office of the future is going to look. The old towering central corporate headquarters may be going the way of the dinosaurs, but both employers and workers miss the collaboration of the workplace. So, what does that mean for you?
The key here is going to be flexibility. This force is not restricted to the commercial property market by any means; many facets of the 21st-century economy have been focusing on this for years. Just look at the demise of the expensive cable package and its replacement by a la carte streaming services. Savvy investors and business owners are seeing the advantages of offering customers just what they need, replacing large sales with a higher number of small ones. Could this be the way of the future for real estate as well? It is too early to tell, but it is certainly a possibility. The pandemic saw companies using several cost-saving measures, including sharing or subletting office space with other businesses. The a la carte model could be applied here, too, with businesses renting space for a few days a week, or a couple of weeks a month, allowing the owner to rent to other companies at the same time. Ultimately, the buzzword for the next few years is going to be flexibility.