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The coronavirus hitting the office space market will surpass the financial crisis with a net loss of up to 95 million square feet of unoccupied real estate from the second quarter of 2020 to the third quarter of 2021, according to a new forecast by Cushma
Remote work experiment with coronavirus will become an ongoing trend, but at some point, employees will return to the office. When? It could take five years, according to a new forecast by Cushman & Wakefield.
Global office vacancies will not return to pre-COVID peaks until 2025, and a total of 215 million square feet of office vacancies will be lost to the pandemic, according to one of the largest real estate firms in the world. Between the second quarter of 2020 and the third quarter of 2021, when Covid-19 hits the US, net negative damage to office square feet will reach 95 million square feet, about 10 million square feet more than during the financial crisis.
The worst will be in the West. During the financial crisis, Canada, Europe and the United States recorded a total loss of 120.5 million square feet of occupancy from peak to trough. Cushman & Wakefield's analysis, including the second quarter of 2020, would amount to over 200 million square feet of "negative takeover" during the Covid recession.
Working from home is "very real"“We know this trend towards working from home is very real,” Kevin Thorpe, the firm's chief economist, recently told CNBC.
As part of the study, Cushman & Wakefield surveyed some of the largest companies around the world about the future of the office real estate market and tried to measure both the cyclical impact of the Covid recession and the structural impacts, suggesting higher growth in work from home.
Thorpe said there were two key findings. First, it will significantly affect the fundamentals of office rental, and the number of vacancies will reach a record high. But the second finding is more encouraging: The office market will fully recover, according to Cushman & Wakefield, thanks in large part to rising employment and the continuing shift in the concentration of the US economy in certain types of professional positions.
Overall, according to the real estate agency, 82% of the damage will be due to cyclical factors: constant losses of office jobs and the growth of coworking, and 18% is associated with structural factors: primarily the assumptions of permanent remote workers and hybrid employees - those who sometimes works remotely.
Home work will double and the number of hybrid workers will increase. The study estimates that the proportion of people permanently working from home in the US and Europe will rise from about 5-6% to Covid-19 to 10-11% after Covid, while the proportion of hybrid people is also mentioned. as flexible workers - will increase from 32% to 36% to just under half of all workers.
Chief Financial Officer, Levi Strauss & Co. Harmit Singh recently told a CNBC virtual event that he shut down any new commercial real estate during the crisis. "The myth that working from home is unproductive has been debunked," said CFO Levi Strauss. “I believe we will be immersed in a culture where working from anywhere will be the new norm, whether it's working from home or office or hybrid work.”
Google recently announced that it will try a hybrid work model as most of its employees don't want to be in the office every day.
Many young workers are using Covid teleworking to travel, adopting a digital nomadic lifestyle, a shift that could become permanent for a new generation of workers.
The Cushman & Wakefield study concludes that over time, as the economy is based on knowledge and professional services, this will offset the trend towards a flexible workforce. “But in the short term, the office sector will face major challenges,” Thorpe said.
Many workers still don't feel safe enough to return to the office. One study found that only 14% of workers said they trust their CEOs and senior managers to get them back to work safely.
The study predicts that global office vacancy will grow from 10.9% before the Covid crisis to 15.6% by the second quarter of 2022.
Some of the largest companies in the world expanded office space in major cities like New York during the crisis.
Facebook, which has acquired real estate in New York for years, last month agreed to a major lease on the old James A. Farley post office in Manhattan. Amazon also acquired the Lord & Taylor building on 5th Avenue, despite Facebook CEO Mark Zuckerberg saying that half of the company's employees may be telecommuting in the future. In March, when the Covid crisis hit the US, Amazon paid over $ 1 billion to acquire the Lord & Taylor building in New York, which includes more than 600,000 square feet of space.