As we imagine what the office market may look like in a post-COVID-19 landscape, it is tempting to look back at data from how the market reacted after 9/11 and during the Great Recession of 2008–2010. However, today’s market presents unprecedented uncertainty. The office market specifically is dealing with an overall shutdown paired with a dramatic reduction in personnel, and since the driver of this is a new and extraordinarily contagious virus, it’s impossible to project when or if the office market will return to business as usual.
While no one is able to accurately forecast exactly what the implications of the COVID-19 outbreak will be for the office market in the coming years or even months, we can already see that we have learned to do business in a new way by necessity. It is possible that working remotely may become the permanent new normal for some companies or types of employees. We cannot tell to what extent this change will extend, but it is fair to say it will affect the office market as a whole overall. Moving forward, companies with employees who have been able to successfully adapt to videoconferencing and work-from-home lifestyles with positions that are adaptable to long-term remote work will most likely move toward reducing their office space when the time comes to renew their leases.
In fact, this has already happened in the Minneapolis CBD. One company backed out of a sizable, multi-floor lease just as the buildout was about to begin. It scaled back its footprint to 25% of what it had planned, as the company’s workforce productivity and measures of success held steady after its employees began working remotely in March.
While this is an extreme example, we may see similar situations in the future. It is also worth watching the decisions companies that are downsizing now make in the future based on their employees’ experiences working remotely. Even with improved technology, humans are remarkably social creatures, and the tide may change from employees asking to work from home to employees asking to office away from their living spaces. On a different note, many companies, including Colliers, are considering having employees come back to work in shifts to reduce person-to-person transmission, altering the workplace experience but not affecting overall lease sizes.
Finally, as this report tells us, we saw another and more significant decrease in net absorption in this quarter. This is the second consecutive quarter of negative absorption in the Twin Cities market, and it also represents a pre-pandemic landscape. Based on the trend coupled with the current situation regarding COVID-19, we are predicting a market that will be much more favorable to tenants than it had been previously.
Senior Vice President
Colliers International | Minnesota
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