Reports Of Office Real Estate’s Death Were Greatly Exaggerated


Kyle Crown is the President of Crown Commercial PM. He holds a B.S. in business from the University of Pennsylvania’s Wharton School.

If you’re sick of reading articles about the pandemic’s impact on real estate, imagine how sick I am of writing them. There are only so many synonyms for “pandemic.” But the truth is that we’re all living in a reality that’s been irreversibly altered by Covid-19, and the commercial real estate market is no exception.

Since the beginning of the global crisis, the perceived fate of commercial real estate (and office real estate in particular) has ranged from grim to hopeless, depending on who you asked. However, new circumstances provide a less alarmist outlook, and it appears that the sky isn’t falling after all. Essentially, reports of office real estate’s death were greatly exaggerated.

On April 4, Google began requiring its employees to work from their physical offices again (starting with three days a week) for the first time since March of 2020. Since the company is widely regarded as a bellwether and standard-bearer in corporate culture and typically seen as at the forefront of employee empowerment, it follows that many major corporations may be back in-person soon, which bodes well for the future of office real estate. The pandemic has proven that certain jobs could exist without a fixed physical location, but its aftermath has proven that more companies than initially expected may return to traditional workspaces. Only 16% of companies worldwide are fully remote. In other words, for office real estate, the glass isn’t half empty; it’s roughly 84% full.

In the case of Google, it’s important to note that their three-day-a-week expectation of employees doesn’t mean they require any less physical space for their offices than they would with employees working on-premises full-time. Even companies using a hybrid approach (partly remote, partly in-person) need the same square footage they would if all their employees were in-person full-time. I know this from experience: My team has been in-office four days a week since July 2021, and the days we take from home don’t lessen our need for space when we’re on the premises. It’s possible that some companies might develop plans to rotate employees in and out of different spaces based on their home days, but it’s hard to imagine those employees responding well to having to uproot and move all of their things accordingly.

Furthermore, it’s conceivable that the recent foray into a bear market will contribute to a faster leveling-out in the balance of influence between employers and employees, where companies end up with more leeway to ask team members to return to their physical offices. Essentially, this could expedite the end of what’s been called the Great Resignation, during which employers have struggled to keep positions filled. That should mean higher demand for office real estate.

The most important and actionable takeaway from all of this is that the long-term outlook on office real estate is much better than it was two years ago and a bit better than it was a year ago. That trend could continue, so I believe those who are rushing to sell should pump the breaks. Those who think they can buy at a bargain should go ahead and do it.

It’s human nature to overreact and fear the worst. Remember the Y2K bug? It did pose a threat, but preparations rendered it irrelevant, and in the end, it didn’t cause the destruction many had feared. Think of office real estate in the post-pandemic landscape the same way: Experts were right to predict reduced demand, but those who foretold the end of the industry as we know it were likely getting a bit ahead of themselves. Don’t let the fervor get between you and the highest potential returns on your real estate portfolio.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.


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