COVID-19 crisis very unlikely to be watershed moment for offices
The COVID-19 crisis is very unlikely to end up being a watershed moment for the office sector, which could outperform in the medium term, according to Nick Clayton, who was interviewed by Marek Handzel from IREI.
In Clayton’s view, there are a number of reasons why traditional offices will remain in strong demand, including the need for close and instant collaboration, ease of access to information and a requirement for greater space to accommodate social distancing rules. At the same time, most major office markets entered the crisis with low vacancy and relatively low supply pipelines. As these pipelines will now contract, the office sector may well experience a less volatile office rent market than it has historically dealt with in past recessions, giving investors a chance to make strong returns from the sector.
Office workers within certain demographic groups place a high value on being able to separate their work and home lives says Clayton, providing further impetus for companies to maintain current lease arrangements. Employees with young families, for example, may find they are more productive when based in an office environment, while young people who want to progress their careers and stay involved in social activities organized by companies will welcome returning to their places of work.
“There’s also something quite egalitarian about working from an office,” said Clayton. “There’s clearly a difference in ease of working conditions among employees and people working from home. Some people are in studio flats, and some people are in large mansions. The office is a much fairer solution.”
He adds a shift toward more employees working remotely either permanently or on certain days of the week was already well under way before the COVID-19 crisis within many sectors of the economy, meaning they already had planned to rent space based on the assumption that only a certain percentage of their workforce would be in the office at any one time.
“Although people will say that this crisis will reduce demand for offices, I’m not sure that this is going to be a huge watershed,” added Clayton. “The other point to remember is that the short term certainly, whilst the after-effects of this healthcare crisis rumble on, it may well be that for a net number of employees, the space requirements expand, because employers realize that they need more space between desks, and more social distancing going on in between that space. So on the one hand you can say that they will plan for fewer people working in the office at any one time, but they will actually plan for a greater amount of space per employee.”