What Factors are Impacting Office Demand?
In an era defined by unprecedented change, the dynamics of office space demand have been profoundly influenced by a number of factors. From the rapid integration of technology to a global experiment in remote work, the landscape of office occupancy is undergoing a seismic shift. Here are the factors we see making the largest impact.
Timing is everything. When COVID-19 was declared a pandemic and lockdowns were put in place, workers were forced to work remotely. In early 2020, technologies like Zoom and Microsoft Teams were already in place and allowed for remote collaboration. Also, cloud computing technology provides easy ways to share data and information. Had COVID occurred 10 years earlier, it’s unlikely remote and hybrid work would have had the same “stickiness” that is happening now.
2. Proof of Concept
The pandemic demanded that traditional office employees work remotely. This type of broad social “experiment” would not have taken place unless everyone was forced to try different types of remote work models. While it may be too early to tell, one of the key outcomes was that it could be done successfully, although productivity and efficiencies are not yet clear.
3. Broadening the Labor Pool
With labor shortages for knowledge workers tight and unemployment rates for college-educated workers hovering around two percent, there is a battle for talent. Remote work allows for a much larger labor pool of talent. Further, remote work enables efforts to broaden diversity and inclusion efforts by searching for talent in different geographic regions.
4. Cost Savings
Real estate costs are one of the highest expenditures for companies, along with talent and technology. The ability to reduce office footprints could potentially provide opportunities to substantially reduce costs.
Economic headwinds, geopolitical instability, banking bailouts, fluctuating consumer sentiment, and myriad other factors have made real estate decisions for occupiers more complex than ever. Because the office market is reeling, occupiers have something they have not had in recent memory, leverage on owners and landlords. This leverage has allowed occupiers more flexibility and the ability to be more patient in making decisions.
As we distance ourselves from the beginning of the COVID-19 Pandemic, the future of office demand is slowly coming into focus. To learn more about the state of the office market download Cresa's 2023 Office Demand report.