How Office Vacancies will be Impacted Post-COVID
It’s no surprise that COVID-19 has completely transformed and disrupted office space leasing and property management. As the virus spread and more communities locked down, millions of American workers moved from the traditional office setting into work from home environments. How will the continued effects of the Coronavirus impact office vacancies moving forward? Can employees effectively work from home? And will the office sector survive the dramatic economic impacts of COVID-19?
Productivity and Working from Home
There is a sense among many business managers that “working from home” somehow equals a drop in productivity. One study shows that’s not the case – but only under normal circumstances. And we all know current events are anything but normal.
In a study of 1000 workers in China (pre-pandemic), researcher Nicholas Bloom asked for volunteers to work from home. Five hundred chose to do so. In the subsequent months, Bloom found that those who volunteered to work from home showed a remarkable 13% increase in productivity. Moreover, they were 50% less likely to quit their jobs. With that said, shouldn’t productivity also increase as more workers than ever are telecommuting due to COVID-19? Not so, says Bloom. In the Chinese study, workers chose to work from home. These workers had jobs that didn’t necessarily require teamwork – jobs like data entry or phone calls to clients. Most importantly, these employees still came to a brick-and-mortar office at least once a week, connecting with other employees.
Productivity in the Time of Coronavirus
In our current climate, workers are forced to work from home. Those who work collaboratively with other co-workers are now relegated to Zoom meetings and phone calls. In Bloom’s experiment, when the work from home privileges were extended to all 1000 employees, productivity took a substantial hit.
Consequently, employers have seen a massive drop in productivity during this time. While some employees can effectively work from home, many cannot. Creative teams, for instance, just don’t have the same environment when working remotely. It’s hard to collaborate with one another virtually, and that isolation can drastically reduce productivity and job satisfaction.
How Coronavirus Changed the Workplace
While Bloom says those forced to work from home could be less productive initially, humans are adaptable. Much of the loss of productivity happened because we simply aren’t used to working from home. As the months wear on, and we establish systems of communication and new routines to help us cope with our new work environments, experts expect productivity will rise.
However, now that many states are starting to reopen to businesses, will managers and business owners allow employees to continue working from home? Or will they insist the workforce returns to the office?
One report says businesses might continue to allow employees to work from home for the foreseeable future – or even demand that they work remotely. That’s because many companies have invested large sums into telecommuting software and other programs that allow employees to collaborate effectively. Now that these systems are in place, companies don’t want to “throw away” that investment and return to the office.
Furthermore, returning to an office won’t be “business as usual.” CDC guidelines still recommend additional screening, sanitation protocols, and social distancing. To meet those guidelines, many companies would have to rehaul their office spaces, making expensive investments in cleaning, spacing, and supplies to keep their employees safe.
How COVID-19 and Telecommuting Might Impact Office Vacancies
For office building owners and property managers, the work from home trend is troubling. If companies decide to continue a teleworking model, what will that mean for office vacancies?
First, consider the economic impact on many companies during the Coronavirus pandemic. Retail sales dropped 8.7% in March alone – the most significant one-month drop since the Census Bureau began tracking this data. At one point, more than 14% of all Americans were unemployed. While the economy slowly begins to reopen, it could take years for us to fully recover from this crisis. The Congressional Budget Office estimates the Coronavirus pandemic will cost America $8 trillion through the year 2030.
So, where does that leave businesses and the office space they rent?
It’s difficult to find a business that hasn’t been impacted by this pandemic. Consequently, many business owners are looking for ways to decrease spending. One easy solution is to downsize office space, allowing many employees to continue working from home. Of course, this could spell disaster for office real estate owners and property managers as companies move away from traditional office space to save money.
However, not all jobs can be done from home. Many companies – banks, investment firms, legal firms, and the like – simply must return to their offices. Therefore, office space owners and property managers shouldn’t panic just yet. There are plenty of businesses that will return to their offices and thus continue to pay rent.
What Can Office Building Owners and Property Managers Expect for the Rest of 2020?
Unfortunately, no one knows for sure. We’re just starting to reopen. Many businesses are still considering when to return to their offices, or whether to return at all.
One report found that a staggering 69% of corporations want to downsize office space because of the crisis. New office buildings face delays in some of the nation’s biggest markets. The downturn could negatively impact office property owners and property managers for months and years to come.
In light of these statistics, office real estate owners and property managers will have to get creative if they are to survive this downturn. Offer shorter-term leases and reduced pricing, for instance. Or market your office building’s sanitation and safety procedures to make potential tenants feel more comfortable.
There may be some challenging months ahead, but investors are still optimistic that the office sector will remain an essential part of the world economy. If you are looking to expand your business, we may be able to help. Contact us today to learn how.