Work from home and stabilizing densification are among the drivers.
Green Street has encapsulated two major trends driving the office sector right now to provide a tangible (and grim) number for office demand post-COVID: -15%.
COVID-19 has wrought a slew of changes to the sector, with social distancing stabilizing densification, or less square feet per worker, a trend that’s dominated office for the last decade. This development—taken together with a continued increase in work-from-home policies among companies— suggests that aggregate office demand will take a 15% hit in the future, according to Green Street’s analysis.
Citing surveys that show employee preference to spend at least one day a week from home, Green Street states that a “decent amount” of employees—or 10%—will likely continue to work from home on a more permanent basis. This is a threefold increase over pre-pandemic levels. Post-pandemic, Green Street predicts workers will spend around 20% less time in the office than they did pre-COVID, and that means companies will need less space.
But the calculus is not that simple, according to Green Street: companies will have to grapple with the “practical realities” of questions like how many workers will share desks, how much meeting space is required, and how to stagger employee schedules.
“These challenges will require a majority of pre-COVID office space to be kept, but suggests ~15% of office demand may be reduced given an increase in WFH,” the report states. While it’s possible that in-office density could go down post-COVID, ostensibly leading to increased demand, the reality is that many office users will continue to offer WFH for the foreseeable future. This, Green Street posits, will reduce overall demand if there is more hot desking and shared arrangements (and the firm predicts 10-15% of desks will head in this direction). Greet Street predicts the average daily occupancy of an office may fall as much as 20%.
“In sum, less office space would be needed for the same amount of employees who will be showing up less often to the office,” the report states. “The net result is an increase in ‘effective density’, which should be the yardstick for measuring density and its impact on office demand. An increase in effective density means less space per total employees and thus, lower office demand.”
Source: “Why US Office Demand Is Likely to Slump 15% Post-Pandemic“