Hybrid work appears here to stay—and with it, the role of the office has evolved. So what does that mean for the future of demand in the sector?
According to a new report from Cushman & Wakefield, demand is returning—and as with most cycles, it's being driven by job creation. Cushman researchers note that in the two years since the first COVID-19 lockdown, much of the world has returned to pre-pandemic employment levels. By way of comparison, it took three times as long after the Great Recession for that to happen.
The firm says that long-term, US office-using employment is expected to grow 50% faster than total employment by the end of 2030 with high-tech jobs forecast to grow twice as much. And at the moment, current demand "indicates confidence," the report notes, with the four-quarter national rolling leasing activity metric up 41% as of last quarter, and leasing activity clocking in as up twice as much on average in the six key US gateway cities, at 63%.
Recommended For You
How long will that last, you ask? For now, "tenants are enjoying favorable market conditions to act on future space needs," the report notes. "The extent of the tenant-friendly opportunities will vary by market but will not last forever. This is already apparent in the data across the globe where net absorption has turned positive, indicating demand is outstripping supply once again."
The report also says "the people have spoken," and they're overwhelmingly in favor of hybrid work. That means companies will need to test and learn how to curate office experiences and maintain flexibility for the future.
"There are two statistics that jump off the page in this report," said David Smith, Global Head of Occupier Insights at Cushman & Wakefield. "First, 60% of workers prefer a hybrid working arrangement, and the majority of companies that have made decisions are currently planning on hybrid, agile work environments. More will go in this direction as leases expire; the hybrid movement has just begun. Second, despite the work-from-home rhetoric, market data shows office leasing volume globally is surging back, up nearly 40% on a 12-month trailing basis compared to a year ago. To a degree, the hybrid solution is galvanizing the corporate need for office space as the workplace gets reimagined."
Cushman says the companies that thrive will be the ones that provide employees the choice of where to work, which could require businesses to continue the balancing act they've found themselves in since the onset of COVID.
"Employees need the office to support their desire to learn, make meaningful cultural connections to their organizations, and to engage more deeply with colleagues," the report notes, adding that many employees rate in-office experiences higher than remote work, and the workers who have the most meaningful experiences—typically millennial and Gen Z workers—are the ones who come into the office multiple days a week.
"To compete for talent in an environment largely featuring labor shortages, corporate leaders will need to create office environments that inspire employees and draw them in," states Despina Katsikakis, global head of occupier business performance at Cushman & Wakefield.
Katsikakis says, "Creating a comfortable workspace that attracts and engages will have to blend home and office environments. Companies should account for physical space, technology, the workplace experience, human and automated interactions, change management and communication strategies, and integrated delivery across the workforce in various locations—in-office, at home and at flexible office locations."
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
