About a month after the US lockdowns for the pandemic began, Morgan Stanley CEO James Gorman told Bloomberg Television that it had become clear to him that the firm could operate with “much less real estate.” The productivity of Morgan Stanley’s hastily-assembled remote workforce turned out to be strong enough that he could see a future where “part of every week, certainly part of every month, a lot of our employees will be at home.”
As the pandemic wore on, more and more companies were coming to the same conclusion, either mulling out loud the benefits of a permanent remote workforce or actively making plans to move in this direction. In a Gartner survey in April, 74% of CFOs said they intend to move at least 5% of their previously on-site workforce to permanently remote positions post-COVID 19. Nearly a quarter of respondents said they will move at least 20% of their on-site employees to permanent remote positions.
Examples of such firms include Nationwide, Barclays and tech firms such as Twitter and, most recently, Facebook.
CEO Mark Zuckerberg announced last week that up to half of Facebook’s employees could be working remotely in five to 10 years.
At first, office landlords were unsure what to make of these announcements. It seemed to be a trend but then again, emotions have been riding high during the pandemic. And more than one analyst has noted that similar intentions were vowed after 9-11—namely that companies were expected to move to the suburbs to escape high profile, urban buildings—which never came to fruition.
But increasingly analysts are starting to project a change in demand for office space in the intermediate and long-term following COVID-19.
“We might not see immediate distress in the office sector,” says Victor Calanog, head of CRE Economics for Moody’s Analytics, in a video on the subject. “However it is subject to risk in the intermediate and long run.”
Calanog, though, believes this shift will not necessarily lead to a mass movement of employees working from home, but rather a return to—does this sound familiar?—suburban office parks. “If dense, urban areas fall out of favor, nearby suburban offices may become popular,” he says. Besides their larger footprint, suburban offices typically have rents that are about 50% less than prime locations, which will be attractive as the economy is expected to struggle for a while.
It is possible that companies will forget their plans after the pandemic, Calanog says, much like what happened after 9-11.