Life comes at you pretty fast. That is something anyone working in retail real estate in the past 10 years could tell you. But it is something the office sector today is possibly ignoring.

Changes in consumer behaviour that seemed relatively marginal and slow-moving undermined the value of retail real estate very quickly in the UK and U.S., especially shopping malls. There is the same potential in the office sector, with changes in human behaviour being massively accelerated by Covid-19, one investor speaking at Bisnow’s capital markets digital event warned this week.

“Offices are not dead; they are very much alive,” RealCorp Capital founder Chris Kanwei said. “But a word of caution I would sound: For most of us, we tend to look at how offices will work in the future from the perspective of our own orientation. An example, if you take UK shopping centres and look back a few years to 2006, before the GFC, shopping centres and retail parks were a huge deal, they were springing up left, right and centre. But just on the sidelines there was Amazon. And no one figured out in 2006 where Amazon would be today, and where shopping centres would be. It is just that sort of parallel you have to look at.”

Kanwei said part of the inability of retail real estate to see change coming is because a group of people with very similar backgrounds and experience could not envisage a future that might be radically different to their own past.

“There were arguments put up by mostly middle-aged people at the time: You will always love the shopping centre experience, you will always want to go there with your family or your friends at the weekend. And it was a great argument, but it was being made by people to other people who saw life the same way, who had the same future aspirations.”

There is the potential for the same thing to happen in the office sector: an expectation that the behaviour of future generations will essentially be the same as what has gone before. While the difference might not be as extreme as changes to shopping patterns, they have the possibility nonetheless to drastically alter real estate usage and value.

“We have a generation coming up now who are not seeing life the same way,” Kanwei said. “They are not always as interested in going out and playing with their friends. They making friends online in South America, in Russia, in Africa, playing chess games online and interacting. That is the trend: We see more and more people not wanting to engage with other humans directly. Humans collaborating will never be taken away. But we have to understand that there is a generation coming through that won’t just engage in the same way we did ...

“This same generation will be moving in to the offices of the future, and will look to engage differently, and could see the office structure of today as archaic — why would you want to bring all of these people in to the office? And that might well change the outlook people have on offices, in the same way it has in retail. I’m not calling an apocalypse for the office. But if you are investing for the long term, you have to bear in mind, your office investment may have been worth £200M, but down the line it may be worth £5M, as we have seen with shopping centres.”