Although data indicates that the office market across major cities is seeing swift recovery despite rising cases of Covid-19, there is more than meets the eye.
Long-term planning for office occupancy is still at record lows, and brokerage firms collecting data have used different calculations to come to their optimistic conclusions, especially in terms of tenant requirements.
Prior to the pandemic, office tenants were already moving to take up smaller offices than the ones they had left. The last two years only accelerated this trend.
In fact, some of this decrease in office footprint ranged anywhere from 15% to 40% on average.
The remote and hybrid work boom hasn’t helped much either. More and more employees are preferring to continue working from home, causing tenants to reconcile with their current office footprint.
“When you look at those numbers, you’d normally think, ‘Oh, there’s positive traction and absorption,’” said Tom Birnbach, president of Cresa. “About 80-90% of requirements would have happened in a normal world, but in today’s world, that number is a lot lower. So those data points are a little misleading.”
Some brokerage research has also been altered by postponed return-to-office dates and unclear work-from-home policies.
According to Lauren Gilchrist, managing director of research at Longfellow Real Estate, some expected moves may suddenly be canceled or dead deals could be revived.
“The question has become, when is a dead deal really dead?” said Gilchrist. “On many brokerage lists, there are a lot of tenant requirements laying out there that may never happen, and other requirements considered dead that may come back.”