Picture: Dean Hutton/Bloomberg
Looking to the future, it is expected that companies will require less space and building owners will have to look for other ways to use the space.
Erwin Rode, managing director of Rode & Associates, a company specialising in real estate economics, property valuations, property research, town planning and property consultancy, says the jury is still out on exactly what the end result of the work-from-home trend will be once Covid-19 is conquered.
He points out that on one hand, humans are social animals and need human interaction to stay psychologically healthy.
“On the other hand, for some job descriptions, work from home will save on commuting costs and time on the road, as well as increase productivity as meetings are now much shorter once you cut out the time to travel and park.
“Obviously, all jobs simply cannot be done at a distance. There are many benefits and challenges, depending on the type of job, the psychological need for interaction in person, the induction of new staff members and training. Training can be done online for some office jobs, but it is probably not as good as physical mentorship.”
Rode’s advice to managers is to be flexible. “Give employees a choice to work full-time from home or come in to the office, for example, once a week for some physical meetings, or work in the office full-time.”
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He expects these changes to happen slowly post Covid-19, as office leases come up for renewal and employers weigh up the choices as they get used to the new world. “My best guess is that after the dust has settled in a few years’ time, office users will require about 20% less space if all other factors remain constant.”
Hot desking, where nobody has a permanent desk, will grow in popularity and save employers office space. “In this changing world, tenants will want to sign shorter leases to reduce their risk of sitting with surplus space, especially if one also considers the dire situation in which the economy will find itself over the next few years,” Rode says.
Shorter leases will make it more difficult to start new office developments because banks will see it as a risk factor. Rode says there is such a huge oversupply of space already that few new office buildings will be developed for the foreseeable future.
He believes that tenants who have too much space will try to sublet in the short term. “However, given the state of the market, they will probably have to sublet at a lower rental rate. Therefore the volume of office space on the market has the potential to increase significantly from the present already high levels.”
John Jack, chief executive officer (CEO) of Galetti Corporate Real Estate, agrees that remote working has fast become the new normal. “While flexible work arrangements will remain the norm for some of 2021, I believe that this will change towards mid-year, with major corporates driving the movement back to ‘business as usual’.”
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According to a recent survey by Global Views that had 555 respondents from the commercial sector, four major trends are expected to emerge in 2021:
The survey also identified subletting commercial real estate and prioritising worker safety as additional trends.
Jack says there will be major pressure on landlords to fill buildings. “We are currently weathering a storm. While things will change in the long term, landlords now have few options to consider to improve cash flow and generate yields.
“Besides the option to sub-let, landlords may want to consider creating collaboration spaces for co-working. Another option is to reinvent the space and look towards mixed-use developments, consisting of residential, commercial and retail spaces. These unprecedented times require adaptability and flexibility to survive,” Jack says.
A recent series of surveys done by Galetti indicated that 76% of respondents did not believe that office space will become obsolete, with only 42% saying their companies have evolved to cater to a remote working setup. In addition, 85% felt they had lost their work-life balance due to working remotely, with 83% saying they look forward to returning to the office.
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