You sell apples. Suddenly everyone wants oranges. What do you do?
Something like this dilemma confronts major office markets across North America and Western Europe, where the coronavirus pandemic has hit hardest.
The open question, as U.S. cases surge again and a speedy recovery seems less likely, is whether this is a temporary disconnect between supply and demand, one the market will speedily resolve as the pandemic and the social distancing it involves fade away, or has the coronavirus broken the property market in a more fundamental way?
“It’s an upside-down world,” Aviva Investors Director of Research for Real Assets Chris Urwin said. “What was good is bad, what was bad is good, one day we want lots of people together, the next we don’t.”
For years, office developers have sought to build increasingly dense buildings as close as possible to transit. "Densification,” “rightsizing” and “consolidation” have been corporate real estate buzzwords since the Great Financial Crisis as technology, the sharing economy and workforce preferences led companies to pack workers into high-rise office towers in the heart of downtowns.
But as social distancing and infection control take top priority, some companies’ focus has turned instead to low-density, suburban locations accessible by car.
The decentralizing impulse is being felt globally, as a recent Cushman & Wakefield examination of 40,000 global occupiers showed. The report suggests there will be no return to the office because the old office is no longer there.
The new workplace isn’t a building, the Cushman & Wakefield officials who authored the report wrote. Instead, it is a network of real and virtual places forming an ecosystem designed to support each individual business. Hub-and-spoke working may be part of the answer.
“The effect of three months of working from home has been that there is now a high level of trust between employers and employees, and more trust and collaboration between them,” Cushman & Wakefield International partner Charles Dady said. “So we’ll see corporations adopt various mixes of remote working, urban, suburban and drop-in locations.”
Cove founder Adam Segal, whose D.C.-based coworking company started with the concept of creating satellite-style offices for remote workers, said he expects to see a shift in companies looking to spread out their footprints. He believes it’s permanent.