The demand for commercial office space is expected to rise significantly higher over the next decade, with continued job growth fueling this trend starting in 2022. The country’s knowledge-based economy — consisting of attorneys, bankers, architects, consultants and others — will drive more employees into the workforce and, based on current research, up to 90% of these workers will prefer working in a traditional office environment rather than at home.
Those were among the key findings presented during a recent Cushman & Wakefield webinar entitled “Global Office Impact Study and Recovery Timing.”
COVID-19 continues to cause disruption in the economy, including the shedding of more than 23 million square feet of commercial office space nationally. Demand for office space, however, is expected to be higher over the next 10 years, according to Kevin Thorpe, Chief Economist for Cushman & Wakefield.
Factors that point to a full office recovery, as suggested by Cushman & Wakefield, include strong population growth long-term, office employment increasing as a share of nonfarm employment, and the high rate of office workers that continue to express the desire to return to the office. Employees place a high value on working from a traditional office based on increased worker productivity, achieving agglomeration and knowledge spillover, cultural benefits and the ability to mentor, train and onboard new workers.
“The work-from-home trend started well before the pandemic, but we see a clear office market recovery and glide path,” Thorpe explained. “Many other real estate sectors have bounced back, including the housing market and retail, although we are still very far away from a full recovery among hotels, malls and this will likely not occur until the virus is completely behind us. Workers are increasingly agile and are dividing their time between the home and office, a trend we only expect to increase. In addition, we expect the increased de-densification of the office environment to offset any future need for less space.”
Owen Rouse, Vice President of Investment Sales for MacKenzie Commercial Real Estate Services, agrees with this recovery premise but believes the timeframe will be accelerated locally.
“From a macro perspective, there will be a net zero result in the amount of commercial space being utilized, as any decrease in need will be completely offset by the requirement to maintain the proper amount of distance from coworkers,” he explained. “The way people work, and where they perform different functions, is becoming redefined and this is factoring heavily into the equation. Employees are accomplishing ‘head-down and supremely focused’ activities from the quiet of their home, while traveling to the traditional office to collaborate, mentor, plug into resources and partake in group creative discussions. There is no replication for engaging with others in person.”
Furthermore, after seven months of working from home, “many people are finding themselves in hardship situations,” Rouse said. “People are becoming increasingly frustrated spreading out their work on a card table in the living room and dodging their spouse, children and pets while keeping professionalism high. Most workers had to make do based on limited options, but with the world opening up, many yearn for an environment that is separate from their home.”