Attempting to Predict the Future

Tuesday Jul 14th, 2020

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Attempting to Predict the Future

 

Shortly after North American lockdowns began, we experienced office closures an employers scrambling to ensure their continued remote workforce productivity. As time goes on with no foreseeable pandemic end in sight, workers have settled into their home offices and serious consideration is being given to the future as leases may be expiring.

 

Can we realistically predict a future trend with no historical data?

The closest we have come to a similar situation In North America is the post 9-11 market when there was fear-based talk of relocation towards suburban office space to avoid high-profile urban buildings, but those plans fell by the wayside. This is markedly different in that 9-11 was a single event versus what is turning out to be a lengthy crisis with serious ramifications expected to affect the economy and our psyche for the long term. Will we continue with work-from-home arrangements, renew urban commercial Leases, move to lower cost areas or find a happy medium and create a new normal?

 

The buzz in the marketplace

On The one hand:

• Gartner Survey Results, April 2020 report that almost a quarter of CFO’s indicated their intention to arrange for permanent remote positions for employees who were previously on site.

• Dr. Victor Canalog, Moody’s Analytics head of Commercial Real Estate Economics believes that distress in the office sector is subject to risk in the intermediate a long run and suburban office parks may become popular again thanks to larger foot prints and substantially lower rents.

 

On the other hand:

• Owen Thomas, CEO of Boston properties is expecting a return to regular office space citing the difficulties of mentoring, collaboration and creativity on video calls versus in person.

• Eric Schmidt, former CEO of Google expects commercial spaces to be just as busy, if not more, with a change in flexible working schedules allowing employees to travel and occupy office space during lower /slower traffic times.

• Jeff Olin, President and CEO, Vision Capital Corp. suggests that although there will be a greater number of remote workers, many will be happy to return to the office to avoid the distraction of children at home. He also suggests that the need for social distancing in offices will partially offset a reduction in commercial space.

 

The ever-changing state of the Covid-19 outbreak continues to present serious challenges for the real estate industry. No matter the outcome, it seems that the recovery process and eventual new normal will depend on business need, philosophy, culture and the workspace requirements. 

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