What we saw in the year 2020 COVID-19 pandemic is still being discussed, even as we are four years on from the disaster. It changed our lifestyles. It changed the way we work. It altered the future of work and displaced an old concern – office vacancy. Until recently, employees who were allowed to go back to work early on, were seated behind barriers, partitions, and were on rotating schedules to minimize congestion within a certain area. So to those people who were in the workforce during that time, it was a different feeling. The unknowns were many at this time. Once upon a time, we stopped asking ourselves about when we would go back to life as we knew it. Nonetheless, even as we have started the process of transition back to that new normal, there is a lot that the COVID-19 pandemic has impacted.
Everyone is taking about the hybrid model and pajamas and how companies across multiple sectors are transitioning to it. As a demand, automation, technology, and practices prompted by the COVID-19 pandemic have enabled remote work – at least partially. That workers have been able to succeed. But none of it’s true for companies or employees four years later of enduring what is left. It is the landlords, the real estate companies, and the developers who are still struggling to find means of putting it back to where it was a few years back.
The Impact 2020 had on Office Vacancy
Then at the start of the year 2020, came the shift away from the conventional workplace setting environment. Some of this was because of the government regulation, while other were out of pure concern for its employees and the work surroundings they exist in. In any case, based on it, one might say that companies and landlords didn’t know what the future will be. In general, businesses and the commercial real estate market hemorrhaged money that rarely, if ever, could be recovered. Office vacancy thereby emerged as an anxiety for many people, and for the majority they still are.
Office vacancies have been a mixed bag since 2020 to today. We had situation where the occupancy level increased from the previous month within the same year, or even reduced from one day to another. Just from this area, the effects that the pandemic had on the offices are long-term, and there are many that are to this day attempting to cover their losses. The large, standard office environment has a lot of people asking what might become of it in the coming decades.
Is There a Future for the Traditional Office Despite Office Vacancy?
Analyzing a 2024 office market statistics report of Colliers, the average vacancy rate of the ten leading markets is 22,48 %. There are a lot of variables affecting rates such industry, population density shift, and the distance between the office and the employees, yet all these markets failed to experience such big bouncers again. The result of this is that landlords, developers, and the overall market of commercial real estate is having to change.
One of the issues the world has spent considerable time exploring is whether or not the hybrid model will ultimately be feasible. There are many examples for Companies, which have done well with this hybrid model, however, there are as well many examples of Companies who could not do well. And some are still experimenting. The given hybrid model has also hampered occupancy levels. Now, many companies operating with a hybrid model no longer require such arrangements to the extent they once did, but they still require some form of office space. Still, it doesn’t resemble the traditional approach.
Some of the coworking spaces that started growing like weeds several years ago have fallen even quicker to provide companies with what they require. It has indeed extended them how much is too much and how much is too little. Many have found that sweet spot and have been able to shift, but not the traditional office spaces to this day are yet to adapt.
How Is Commercial Real Estate Deal with Office Vacancy?
Although some markets are in better position than others with regards to inventory, availability and regional influence, there are still a number of markets that are quite challenged. To some markets, there is evidence of rebound, particularly where new construction has taken place, industries have grown in certain areas like the new AI technology boom in San Francisco, and new sectors. Though many probably wish that they were, not all markets are that fortunate, and the fortunate ones are not fortunate enough to fill up to occupancy levels of 2020. Some of these markets are having to adapt because the pace of change is steeper for them than for other markets classes.
There has been a relatively recent move to Class-A space, this has been in the past. These are not the old buildings located in the ‘not-so-good’ neighbourhoods, or buildings with limited use, but the newest buildings, the best buildings: Class-A buildings. These are high quality, turn key and modern office which has settled atop the hierarchal commercial real estate and are also priced higher.
As reported by BISNOW, from recent data, rent for Class –A office space is up by 2.4 % for lesser office space rent has dropped by 1.2%. They have added that these Class-A rates will either rise or remain stable till 2025. But what can be going on with Class-B and C office spaces? These evolutions of lower-class office spaces are as influential in the commercial estate market as is the success of the Grade-A spaces.
The Future of the Forgotten Office
Bar dash Class B and C office spaces are following in the footsteps of the upcycled office to some extent. The practice of taking older buildings with industrial shells or similar shells and retrofitting them for use as offices appears to be slowing down. With that, CBD red zone needs represented perfectly in all-in-one solutions including retail, residential, and even creative office spaces, the undesired office assets make sense to follow suit. Enter residential conversion.
Four years have already been more than enough to identify what should be done and what should not be done. Now it seems like the slow transition back to normalcy might be slowing down too, or even halting completely. This is resulting into conversion of office buildings to residential use. While much office space is not suited for this conversion because of location or function, according to BISNOW database, 1 out of 6 office buildings in the US is ready for this new method of conversion. Hence, while class-A office space has found its niche market, the developers are still trying to discover the right application for the unloved office blocks.
Moving Toward the Future of Work
Most businesses cannot afford to lease even the so-called class-A office space, to say nothing of having access to such space. Apart from the landlords, developers, as well as the commercial real estate groups, companies have not benefited from or enjoyed their stay as well. Empty shops and low turnover doesn’t necessarily equal no shops at all. It means that there isn’t a kind of option in order to satisfy their needs. In other words, what is out there is out there.
This is ever widening making it difficult for companies with special requirements to find a suitable class A or lower class option. But there are many examples of how companies are making what they have work for them. The hybrid model we have chosen makes the smaller office space possible. Remote model has eliminated the idea of office space as a requirement. Which has made one of the best options when starting ‘from scratch’, where the ‘starting’ is a clean slate – the hyper-flexible office.
At present, the class B and C offices have been making their utmost effort just to attract companies. The current trend is to design and construct better]));
performing, less energy consuming buildings. Offices are increasingly seeing feature of amenities. All this has taken some time – four years – and now everybody knows what they want. The office isn’t dead. What has happened is that the future of work just looks a little different than anyone thought it would.
StrongProject Can Help
As vital as it is to have an office building is what is ocupying the space. The office space does not fully facilitate the meeting of business needs that a company requires. Whether you work from both, an office and home, or are a company trying to have a balance between work and life, at StrongProject, we shall assist you in designing the perfect office for whichever type of setting you choose. Whether you operate from traditional office cubicles, multi-person workplace and collaborative work lounge seating, office is where your employees spend their time, let us help you create a Class A environment.
