Changing Work Patterns Effect on Office Space
The spread of COVID-19 has left the commercial real estate industry at a standstill with Americans hesitant to return to normal life and use pre-existing commercial spaces. However, the outlook of the United States economy is turning at a positive trend as COVID-19 vaccines are distributed at a rapid pace. Daily vaccination rates have already accelerated significantly, allowing society and the economy to reach normalization by mid-year.
As the rate of COVID slows down, we are finding that individuals are itching to return to normal life. Sublease activity has gradually been decreasing and is expected to continue to slow in Q2. This shows companies do in fact want to keep office space as they anticipate workers will want to work in person. After a whole year of stay-at-home orders, physical office occupancy began a slow increase in Q1. Positive effects in office activity is an informative indicator to invest now for a long-term investment as prices are low and life is gradually returning to normal.
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Ronad Medon
Statistics show in April, about 65% of office workers want to work remotely, 33% prefer a hybrid model and the rest want to return to the office on a full-time basis. This is because workers were still concerned about infection of the virus. However, due to the rapid vaccine roll-out, these statistics are no longer relevant. Companies need to find effective combinations to satisfy workers and understand the company’s need for office space. Workers that utilized the remote experience were able to find better work-life balance, reduced stress as well as cost and time savings. Working remotely from now on is not truly desirable for employees. Employees still need in office interactions to maintain drive and need for human interaction in the workplace.
In all, long term investments for office space would be feasible with extensive market research. Nevertheless, we do anticipate a decline in the need for office space, but there are still plenty of opportunities in purchasing office buildings. Due to the housing crisis in Los Angeles, we should prioritize investing and developing more multifamily complexes. Repurposing the office into multifamily could be a problem-solving opportunity for the housing crisis and the future of Los Angeles.