| Just the Peaks
This newsletter, at a glance
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Top companies’ return-to-office timeline gets pushed back
While remote work reigns supreme, landlords shouldn’t worry
Over the summer, big employers such as Google, Microsoft, Target, and Ford Motor Co. anticipated a return to the office sometime this winter. Now, with new coronavirus cases cropping up across the United States, the majority of companies have pushed back their move date to summer 2021—specifically, the month of July.
The announcement comes as a huge blow to landlords who remain worried about the long-term health of their investments. A ‘couple of week’ ordeal has now grown into a year-long pandemic with no clear start date for a vaccination program. If workers can’t return to their cubicles, what does this say for America’s greater office outlook?
Experts say the future’s not exactly bright. But luckily—it’s not bleak either.
Glass half full in Q3
Let’s start with a quick look at last quarter’s market stats.
Between July and September of 2020, 55% of all leasing came from renewals. After weeks (and in some cases, months) of stay-at-home orders, markets saw a nearly 30-million-square-foot occupancy decline. Overall, office vacancies surged to 16%. The sub-lease market also experienced a massive boom with available office space estimated to hit 150-million-square-feet by the new year.
Sure, the statistics look scary on paper. But economists remain somewhat optimistic—even amidst an ‘unprecedented’ pandemic.
“Moving forward, conditions will remain highly volatile and rapidly changing, dictated by the trajectory of broader economic indicators and public health conditions,” reads a Q3 U.S. Office Outlook Report from JLL. “The relative stability of office-using employment sectors will provide a degree of buffer, combined with growing concerns over productivity losses and threats to collaboration, innovation, and workplace culture as the current work-from-home period is drawn out.”
So, what’s it all mean?
Experts are confident that today’s biggest leasing industries will continue to seek space including tech companies (32%), financial and insurance services (14%), government and non-profit organizations (11%), manufacturing (8%), healthcare institutions (6%), creative industries (6%), and legal teams (2%), among others.
In fact, Amazon negotiated $1.4B in new physical office leases back in August. Public health concerns aside, companies are starting to see the negative long-term effects of the work-from-home model. This and other factors give investors an overall hopeful outlook, with researchers predicting market stability as early as 2025.
While you contemplate your building’s future, consider employers’ top considerations for planning an office return—or more remote work—through winter 2020-2021.
Top 3 Reasons Companies are Staying Home
- Coronavirus is spreading in all 50 states
Major news outlets report that confirmed infections saw a dramatic spike just ahead of Thanksgiving, with more anticipated due to holiday gatherings. Virtually every county in the United States has been affected—even more reason to keep workers at home.
- Parents cannot afford child care
While many smaller companies have returned to the office in order to compete, the education sector remains strongly opposed to in-person instruction. With the majority of children learning at home, employers have been forced to extend remote allowances.
- Workers are spooked about hygiene
In pushing back their return-to-work dates, some employers cited workers’ concerns about office sanitation. Staff are worried about working in such close quarters with so many people, especially in aging buildings and smaller office spaces.
Top 3 Reasons Companies are Headed Back
- Young workers want to build their networks
Millennial and Gen Z professionals are itching to get into a physical office, as it’s difficult to form meaningful connections and kickstart a career over Zoom. According to Joseph Gibson of CBRE, “There’s no longer this apocalyptic fear that there was in the spring.”
- Trump assures a vaccine is on its way
Most people feel that an authorized COVID-19 vaccine is our ticket back to ‘normalcy.’ It’s also the reason why many top companies are confident that by next summer, we will be able to return to the office without fear of another deadly outbreak.
- There’s no replacement for office work
Retailers, suppliers, manufacturers, and other industries requiring office space cannot effectively work from home. The same goes for some financial services that legally demand in-person meetings with clients. These folks are ready to resume work.
Everest says: Don’t worry! We’re in this for the long haul