Office Landlords Face Steep Climb in Reducing Operational Costs

The future of office has been a question mark since the start of the pandemic, and many expect that the asset class would have a new look post-pandemic. Now, as tenants reevaluate how they will use space and integrate remote workers in  the long term, that vision is becoming a reality, whether landlords like it or not. Reducing operational costs will be their immediate answer.

Here’s the rough math: According to the 200 CRE executives Deloitte spoke with for its 2021 CRE Outlook, nearly half of respondents in the US agreed that office rents will decline next year and office vacancy will increase. At the same time, office owners have incurred increased costs to implement health and safety standards to combat the pandemic.  Deloitte anticipates that this will lead to increased operational costs of $19.40 per square foot, which would translate to a 5.8% increase in average annual office rents from the beginning of 2020.