The Square surrendered to the Subarend in many regions of the United States is located at the levels that were observed after the collapse of the technological bubble in 2000 or the financial crisis of 2008, and sometimes exceed them, brokers say. It is expected that this indicator will grow further. This is a disturbing signal for the office real estate market in the long run.
Restoration of the economy will not helpMany large companies, including Bank of America and Salesforce, stated in recent months that they will need less office space, since many employees will continue to work remotely. Therefore, the damage to the office real estate market caused by the coronavirus pandemic will not be completely eliminated even after the economy goes on the amendment, some analysts believe.
"The country has just experienced that it will ultimately be assessed as a one-year experiment on the transition to remote work, and the results are evident. Companies regularly report how successful removal introduction was for them, and declare plans to reduce the office space they need, "says Daniel Ismail, an analyst at the office real estate Green Street Advisors.
The demand for office premises Even after the restoration of the economy can remain 10-15% below the pre-crisis level, and the rent in such major cities as New York and San Francisco will fall even more, says Ismail. Changes in working methods, which, as previously assumed Green Street Advisors, were to happen for four or five years, happened in a few months. "The situation has changed radically," says Ismail.
Offices owners have been to a certain extent protected from an economic strike inflicted by a pandemic, since companies usually conclude long-term lease agreements. However, the number of new treaties fell almost to zero. And the few transactions indicate the sedimentation of the market. The developer company SL Green, who recently opened the ONE VANDERBILT skyscraper in New York, the construction of which cost $ 3 billion, in December reported analysts, which reduced the requested rent by 5-10%. The company will also provide potential tenants additional services like covering redevelopment costs.
Get rid of officesThe data of brokers on the subgroup areas differ, but everyone reports a sharp increase in free space in the main US markets in 2020 in New York, the largest market of office space, 16.7 million square meters surrendered to the Subarent. m, according to Cushman & Wakefield. This is a record indicator, 9.75 million square meters. M is larger than in November 2019
According to Savills, the San Francisco District was especially strongly injured, where the technological industry focuses: there, by September, a 148% increased by subares. At the end of August, Pinterest canceled the lease agreement for 45,520 square meters. M in a building that was built in San Francisco, and wrote out $ 89.5 million a month later, Twitter surrendered 9755 square meters. M of your office space. Before that, the company reported to employees that if desired, they may not return to the office at all and continue to work out of the house.
"In March, all developers argued: this is an anomaly, everything will return to their circles. So: this is not the case, "said Michael Silver, Chairman of the Board of Directors of Vestian, which advises on commercial real estate issues. Silver counted that many companies need only half of office space engaged in a pandemic. His company also transferred employees to the remote. According to Silver, it allowed to make Vestian more and save money that can be sent to raising the salary. "The final result of this is to reboot a business," says Silver.
The demand for office space and the rental prices in the world will be restored to a dock level not earlier than 2025, consider in Cushman & Wakefield. According to a company, free office space on the world market has been reached by a peak of 15.6% in 2022 and will be 8.9 million square meters. m. It is more than 7.9 million square meters. M during the financial crisis of 2008, free space will be reduced to a level of 10.9% on average, which was observed before the start of the pandemic, only in 2025, believed in Cushman & Wakefield.
Coworkins poured oil into the fireOne of the factors with which the greatest uncertainty on the office market is connected is the fate of coworkings, like WEWORK, which is the largest commercial tenant of New York. "If the coworking is burst, because people will want to continue working out of the house, it will greatly affect the market," says a large investor in real estate.
According to the analyst CBRE Julie Wylen, the economic decline confirmed the usefulness of flexible planning of office space: she "gives companies freedom when placing employees who value the possibility of more choice regarding where and how they work." But in the short term, Ismail considers it as a factor that accelerates the fall of the market: during a pandemic, many coworkings are empty, and the future of some coworkring companies in question.
Translated Victor Davydov