Will people who are now working from home because of Covid19 continue at home when the pandemic is over?
Anyone discussing office buildings will bring up that question in every conversation.
I’m a tenant representative and have worked with businesses throughout the pandemic helping tenants find office space.
Office Tenants Have Their Own Question:
Will there be great deals down the road when former office workers continue to work from home?
Honestly, I don’t think anyone knows for sure, including me. But I do have good reasons to believe that this is a good time to lease office space if you are considering it.
A number of indicators are pointing toward repopulating offices and that may have already begun.
But the good news for tenants thinking of booking new space? There is a lot to choose from and rents have remained flat to lower since the beginning of covid. Plus landlords are offering inducements go get leases signed.
Follow the Money
People who invest in real estate have not bailed on the commercial office market and are showing signs of getting more optimistic.
Chart of Office Building REIT Boston Properties. It’s flirting with a high for the year.
Columbia Property Trust, another REIT specializing in office buildings is already making new highs for the year.
Investors are looking at the progress of covid improvement and are liking what they see.
New cases of Covid19 may have topped out and are currently not growing.
Deaths due to Covid19 continue to decline!
And with the rapidly growing number of Americans taking the vaccination, deaths should continue to decline.
With mortal danger from the virus dropping daily, the risks of working in an office are diminished.
Perhaps this is why…
Office rental rates have held steady during a time of decline in occupancy. Even with growing office space for lease, rental rates have not declined.
This was certainly not the case in the last commercial office crisis in 2007-8.
What’s the Deal for Tenants?
Rents are not declining. However, They haven’t increased either. You can say in general that rates have held steady for over a year. Prior to covid, rates were rising steadily. So new tenants and renewing tenants can expect to pay about what they would have paid last year, all other things being equal.
More Good News for Office Tenants
There is a huge assortment of property on the market. If you are a new tenant, it will be much easier to find what you need in the way of size, location and layout.
Lease renewers also benefit. If their current landlord cannot offer what you need to renew your lease, you can probably find a lot of options to bargain with and other landlords to help you move to their building.
All tenants can benefit from choice in today’s market.
Additionally, many landlords are offering free rent as an inducement to sign a lease. For example, a 60-month lease might be changed to a 63-month lease with the first three months free. For a $10,000 per month lease, the free months would reduce the rent to $9524.
The Case for Reduced Office Use
The only evidence I’ve seen for a collapse in occupancy is chatter and snap polls.
The chatter is on the side of many more people working from home and commercial office space going empty.
Polls are just another form of chatter. Participants seem to be guessing.
And polls are reporting every conceivable scenario. I don’t see any consistency.
And until the covid restrictions are lifted and people return to the office and work together face to face without being freaked out by getting sick, we will not know for sure if the work-from-home concept will endure.
Tenant Rep Guess
The big money is betting on a renewed commercial office demand. I’ve found it’s better to follow the money rather than for-what-it’s-worth opinions.
My guess: maybe ten percent of workers working from home will stay at home.
If you are in the market for office space or want help in renewing your current office lease, give me a call and I can show you what’s out there. You will learn where you stand in today’s office leasing market. It won’t cost you a penny.