Commercial Giant Predicts Office Market Will Return by 2025
September 30, 2020
The COVID-19 pandemic has caused many employees to work from home, hitting the office sector hard as vacancies skyrocket. While cautions over the disease’s effects may continue for some time, commercial execs are bullish that workers will return to shared and common office spaces. Growth of both the nation’s population and economy will likely lead to a full recovery in the office real estate market over the next decade, according to a new forecast from Cushman & Wakefield.
Until then, a net 215 million square feet of global office vacancies will likely be the result of the downturn caused by the pandemic. The coronavirus’ impact on office space will likely surpass that of the Great Recession as vacancies likely reach all-time highs. The situation will be worst in the West’s office sector, the report warns.
However, don’t count the sector out. Global office vacancies will likely return to their pre-COVID peak by 2025, the report says, even with the work-from-home trend becoming a “very real” phenomenon that likely will continue as the pandemic eases. Cushman & Wakefield recently surveyed some of the largest firms worldwide to learn more about the future of the office.
“We conclude that the structural impacts of work-from-home trends will be offset by factors such as economic growth, population growth, and office-using penetration, which means demand for office will continue to grow over the 10-year forecast horizon,” researchers note in the report.
The forecast estimates that 82% of the impact from the pandemic will be related to cyclical factors, such as permanent office job losses and the increase in co-working. Eighteen percent of losses will be tied to structural factors, such as permanent remote or hybrid workers. The share of workers in the U.S. who work permanently from home likely will increase to 10% to 11% following the pandemic; before its start, those percentages were typically in the 5% to 6% range. The share of hybrid workers—those who work from home and office—likely will increase between 32% and 36%.
But as the economy and employment recover, the global office sector will begin absorbing space in the first quarter of 2022, and vacancies will begin trending down then, according to the report. The global office vacancy rate is expected to return to pre-pandemic levels of about 11% by 2025. Also, rents will likely bottom out in the first quarter of 2022 and return to growth from that point, returning to their pre-crisis peak levels in 2025, the forecast says.
“Office Real Estate Market Will Get Back to Pre-COVID Level, in 2025: Cushman & Wakefield,” CNBC (Sept. 27, 2020) and “Global Office Impact Study & Recovery Timing Report,” Cushman & Wakefield (Sept. 22, 2020)
Updated: October 27, 2020