A research conducted by the National Bureau of Economic Research (opens in a new tab) (NBER) examining the effects of the Covid-19 epidemic on our work environments has predicted what it calls an office real estate epidemic.
The NBER forecasts a significant 45% decrease in office values in September 2022, but the average is shorter termally down by 39%. Despite the findings, however, there is a hint of the way offices can protect themselves against the imminent catastrophe.
The following notes indicate that higher quality office buildings were somewhat weakened by such fluctuations due to a flight to quality, while lower quality office buildings see significant changes.
Should I rent an office?
While an article on the San Francisco Standard (opens in a new tab) Isnt the Solution You Think It Is suggests that repurposing old office buildings might not be a savior, nevertheless, renovation costs remain high as the cost of living crisis persists.
Ahead of the epidemic, an estimated 95% of physical offices were empty, a figure that dropped to just 10% in March 2020. While many companies are now warning their employees of a return to work, the figure had just crept up to half of what it was pre-pandemic, at 47%.
Higher quality offices, with added amenities, are performing at their best, with rents increasing or maintaining. Moreover, less equipped office spaces are facing tougher challenges and are being subjected to potential need to renovate.
However, the future remains uncertain. Nearly two percent of US office leases have not been renewed since the epidemic, and NBERs research suggests rents may not have dropped out yet.
While hybrid working habits have sparked interest across the globe, however, it may be possible that working from home is on track to experience another boom.