This article was published in the Summer 2021 issue
by Julie Whelan, Global Head of Occupier Research, CBRE
Since the beginning of the COVID-19 pandemic, many new questions have arisen as global business leaders attempt to navigate an ongoing environment of uncertainty. As the largest global real estate services company, CBRE has unmatched access to real estate data and has expended significant energy into advising clients on how best to move forward in this era. To aid in doing so, the company launched a data-driven research hub titled ‘The Way Forward’ which explores the ways in which we will work, live and invest in a future that has been forever altered by COVID-19.
CBRE has conducted a series of occupier surveys throughout the pandemic to keep up with rapidly changing occupier sentiment. Occupiers, as the term is used in this article, refers to companies who occupy real estate—often better-known as tenants. Our most recent survey, conducted in spring 2021, highlights the actions that occupiers are taking as they look to return to the office while also accommodating new ways of working which were accelerated by the pandemic. While the health and safety of employees remains paramount, so is granting them the flexibility to better integrate their professional and personal lives. Though occupiers agree that the office is still integral to running a successful business, the ways in which we utilize office space while accommodating flexibility has opened the door to a new way of visualizing the post-pandemic workplace.
As a result of the most recent occupier sentiment survey, five trends emerged which highlight what can be expected in the commercial real estate sector during the second half of 2021.
1. The return to the office is here and will accelerate in Q3 2021
Companies are actively planning to bring their employees back to the office—and many have already started the process. Though global office occupancy remains low (currently hovering around 29% of pre-pandemic rates within the top 10 U.S. markets), it is beginning to gradually increase. Sentiment as of Spring 2021, when this survey was completed, suggests that there will be a noticeable return to the office starting in Q3 2021 which will ramp up as more people are fully vaccinated, new routines are established and the experiences of the first movers help spread back-to-office best practices.
2. Employers will encourage their employees to get vaccinated
Very related to employees’ comfort levels with returning to the office is the rate at which individuals are vaccinated. Though employers don’t plan to mandate vaccinations, they do plan to use their influence to educate employees on the benefits of vaccinations to create a safer workplace experience. In some cases, respondents are offering the convenience of testing and vaccinations on-site. This support is integral to a return to the office since the top concern of many is the rate of community transmission and percentage of population vaccinated.
3. Companies will define workplace policies around hybrid work and employee flexibility
As employees return to the office, the reality vs. expectation around hybrid work and flexible work arrangements will come into focus. As remote work has proven its efficacy, sentiment supporting a more fluid workforce has grown throughout the pandemic; 87% of large employers believe a hybrid work policy is the new normal, though conversely many smaller organizations are more likely to prefer a primarily office-based workforce. The survey indicates that most companies want employees to spend at least half of the week in the physical office where more collaboration and interaction can take place. Companies will define these hybrid work policies—leveraging employee feedback to solidify their approach—during the remainder of the year.
4. Occupiers will prioritize investments in collaborative office designs
Collaboration, culture and engagement are the top three areas that companies want the workplace to support. To accomplish this, large companies are currently focusing their energy on enhancing collaboration space in their existing workplaces to help employees work together in-person. In addition, with recent advanced video conferencing technologies, we are only just beginning to imagine the ways that technology can bridge the distance between the physical and digital world. With Proptech venture capital funding totaling $24 billion in 2020, the infusion of technology into the built environment is a growing piece of the collaboration puzzle.
5. Tangible experience will clarify future workplace decisions
Earlier in the pandemic (September 2020) 84% of large companies indicated they would reduce their office footprints, with 39% believing they would be “significantly smaller.” While consolidation remains a focus for most large companies, many have since moderated their sentiment. Planning the optimal amount of office space for a company has never been simple, and the current environment has made the process even more challenging. As companies return to the office in greater numbers and put their hybrid work models into practice, we believe it will provide decision makers with the information they need to make a true assessment of their future space needs.
Making decisions that best support business operations throughout this pandemic continues to be a challenge, but with a sense of normalcy returning to markets, occupiers have an opportunity to take a close look at the way their businesses operate and match their office space to fit these needs. The remainder of 2021 will give us a glimpse at the impact these decisions will have on commercial real estate, but we expect occupier sentiments to continue to pivot and adjust to the highly fluctuating business environment for years into the future.
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