Another group has come out with a prediction about what the post-pandemic office environment will look like.
A February survey of nearly 200 people from CoreNet Global says workers will spend roughly half of the workweek at the office and the remaining time either in a home office, remote location or co-working space once the pandemic ends.
With fewer workers coming in, companies will need less space. Fifty-four percent of the companies surveyed say the overall corporate footprint is expected to be smaller two years from now. Fourteen percent expect to see a decrease of greater than 30% in space. Another 31% see a reduction of 10% to 30%, while 9% predict a decrease of less than 10%.
But not everyone sees a reduction in space coming. Twenty-seven percent report no increases or decreases, while 18% of the companies project an increase in their footprint over two years.
Still, a large majority of respondents see the role of the office changing. Eighty-five percent say the role of the office in the future will be for teamwork and collaboration as opposed to individual work. Another substantial majority, 68%, say that a 9-to-5 workday pattern is a thing of the past.
With the pandemic still raging, it is difficult to determine exactly how many employees will return to the office. The issue is being avidly monitored as it will have a profound impact on office valuations.
Fitch Ratings, for example, ran various stress scenarios to determine how telework would impact demand, rent and net cash flow on 2012-2020 vintage office CMBS transactions. Under its moderate stress scenario, Fitch assumes that employees will work remotely 1.5 days per week. That would result in a 20% decline in office workers and a 10% decline in office space demand. Fitch’s severe scenario doubles these assumptions. It assumes that rents decline at 1.25 times the reduction in space. In this occurrence, increased vacancies magnify declines in rent levels.
Under the moderate and severe scenarios, net cash flow declines 15% and 30%, respectively. Fitch assumes cap rates from its most recent surveillance review of 7.23% on average with these two scenarios.
In a separate report, Green Street estimates that office demand post-COVID will be -15%.
Citing surveys that show employee preference to spend at least one day a week from home, Green Street states that a “decent amount” of employees—or 10%—will likely continue to work from home on a more permanent basis. This is a threefold increase over pre-pandemic levels. Post-pandemic, Green Street predicts workers will spend around 20% less time in the office than they did pre-COVID.