The Future's Uncertain For Post-Pandemic Office Market
The demand for office space is going to shrink even after the coronavirus pandemic recedes, according to a new survey of more than 400 finance and accounting executives by LeaseQuery, but will likely rebound from its current minimal footprint.
Some 31% of the respondents said they have reduced their real estate footprint in response to the pandemic, while 18% say they reduced their real estate leases. Looking ahead to next year, roughly as many say they will have a smaller real estate footprint (22%) as those who say they will have a larger one (21%). Most of the respondents, some 57%, say that there will not be a change in their real estate footprint in 2021.
Footprint decreases next year might be partially offset by increases, but it isn't unlikely that demand for square footage will return to pre-coronavirus levels. Nearly a third (29%) of the respondents are currently trying to get rent reductions, and just as many (31%) are angling for better leasing terms for the space they do keep.
The survey comes after other reports that posit a shrinking office footprint in the near future. A KPMG survey of 315 CEOs in August found that 69% are planning to reduce the amount of office space their companies use, and 77% will continue to build on their use of digital collaboration and communication tools, such as Zoom.
The fact that more people will work from home will be an important factor in helping depress demand for office space, though not the only one. Much has been said about how permanent working from home will be, and some companies are already moving in that direction.
In October, Bay Area tech company Reddit said that its employees now have the option of working from home permanently. Other tech companies have done that, but in Reddit's case, there was an important distinction: The company will not be paying employees less if they move to a place with a lower cost of living, SFGate reports.
Software company TeamViewer CEO Oliver Steil told CNBC that post-pandemic, most companies will not allow their staff to work from home all the time, but that many will permanently adopt a hybrid approach that allows employees to be elsewhere some of the time. Even that would be a sea change from before the pandemic, when employers were often reluctant to take that step.
"I think many companies will need to onboard new employees, they will want to meet customers, they will want to have physical meetings, work groups, every now and then,” Steil said.
Another factor dampening demand for office space will be the need for companies to cut costs across the board as the U.S. economy continues to suffer the lingering impact of the pandemic, the LeaseQuery survey found. Two-thirds of the respondents said that cutting costs will be a bigger priority going forward, and that real estate and lease portfolios appear to be top targets for savings. The respondents are also interested in the flexibility that comes with taking less space.