Office buildings in the Post-Covid era

Covid and the post-Covid era have resulted in a significantly changed office building landscape. The pandemic accelerated trends that were already underway, such as remote work and the adoption of digital technologies, and led to a rise in vacant office spaces that, during the first quarter of 2023, reached 20% for the first time in decades in the U.S.

Many companies across the world were forced to implement new remote work policies, such as hybrid to fully remote work models, to ensure their employees' safety and business continuity. While there was uncertainty in the pre-Covid era about the feasibility of such policies, in most cases they proved successful.

As a result, companies have begun to downsize their office space requirements. Having less financial burden linked to leasing big spaces and opting for more flexible solutions allowed them to reduce costs. At the same time, the measures created a problem of vacant office spaces.

‍From Traditional to Flexible Workspaces

Solutions to the problem of vacancies vary from subleasing to offering coworking spaces to their employees. Compared to traditional offices, flexible and coworking spaces allow businesses to scale their operations up or down as needed. To confirm this trend, a recent report by JLL showed an annual increase of subleases of 10% leading to a low vacancy rate in comparison to the high vacancy rate without subleasing.

‍Office Outlook (Q1 2023)

According to JLL, as companies focus on efficiency and productivity, return-to-office efforts progress incrementally across major U.S. markets. In the final months of 2022 and continuing through the first half of 2023, a wave of significant employers in key industries has announced reversals of remote work policies or their adaptation towards hybrid models. This leads to a decrease of vacancies but requires rethinking of how the space is used in this new work context.

‍Repurposing and Redevelopment

Many property owners and developers are repurposing underutilized spaces for alternative uses. For instance, some are converting office buildings into residential units, hotels, educational facilities or mixed-use developments. However, some conversions may require following stricter regulations than commercial real estate. This trend is pushing governments to adapt to new needs and market demands while also to revitalize surrounding areas.

‍Overall Impact

Empty office buildings in commercial real estate have significant implications for property owners who need to find new ways of attracting tenants and filling vacancies. They are shifting their strategies towards improving the spaces’ quality through frequent refurbishments and enhancing the user experience.

Not only on a building level, but also at the city level, urban planners have been pushed to rethink city development strategies due to this shift in the market. The delocalization of offices and workers will change how cities are lived in and used by their dwellers, and, more importantly, will drive a more decentralized development of urban areas and office spaces.