Office Use Has Gone Down Say CRE Pros
Some experts expect usage to expand in the next few years, but most don’t.
That corporate real estate professionals say their global companies are using less office space than before the pandemic is easy to see. The interesting parts of a new survey by CoreNet Global is how much confidence there is that, barring a major new and troublesome Covid-19 variant, office use could expand.
First, some numbers on the dropdown. About 57% of the respondents said their companies were using anywhere from the same amount of space to up to 20% less than in March 2020. Another 28% were using between 20% to 30% less space, while 15% had taken on more.
Keep in mind that the audience may not be a statistical match for the industry as they are all members of the same organization and only 300 participated.
Additionally, there can be a difference between not using space and reducing the footprint on a lease. If people aren’t coming into the office, it’s not as though the company is chipping in for employees’ mortgages or rents. The real estate expense component doesn’t change, so there is no negative effect on retaining property under a lease in the short term.
One of the problems is that companies are still trying to understand how work is changing and what their needs will be, which has led to mixed signals. Colliers International says value-added strategies will drive office investments this year, which says little about existing office space. A new JLL report says something similar, that premium office space has proven resilient. Corporate defaults are likely to be down according to Moody’s Analytics, which would reduce one source of uncertainty, although multiple factors could change that prediction. And more office tenants are expanding than contracting, says CBRE.
The CoreNet survey said that within the next five years, 41.2% expected office space use to stay flat or increase anywhere up to 30% or more. But then, 61% thought use would be flat or fall by anywhere to 30% or more.
All in all, uncertainty remains the name of the game. Because companies still can’t predict the future, they can’t plan accordingly. Maybe 2022 will eventually see more definitive information. Until then, keep those Ouija boards handy.