June 30, 2020

2020 has been a historical year for the office sector. Here’s what you need to know this month.

Office rebound to come, but not until next year

A recent report by NAIOP Research Foundation says that the office sector will see lower numbers through next year, but predicts a rebound in the summer of 2021. 

With employees working remote across the country, it’s unclear when companies will be heading back to their offices for good. And this is causing the uncertainty of the office sector.

But there’s one thing we know for sure: the office sector will look different in the future. Offices will have higher standards for cleaning, open concept floor plans, and more flexible lease terms. 

Buildings are restructuring their lease offerings

With businesses across the country deferring their rent payments to save money, owners now run the risk of lowering their building value, potentially negatively impacting their ability to borrow money. 

Now, buildings are looking to a lease extension known as the “blend and extend” transaction. This grants a rent-free period but extends the lease to compensate for the unpaid months.

Either way, moving forward, businesses will likely seek flexible contract terms given the uncertainty around their total number of employees, and remote working becoming more likely more often.

How tech will help us return to work

As buildings prepare to welcome tenants back in the near future, technology is going to revolutionize how people flow in and out of buildings. 

KastleSafeSpaces is an initiative dedicated to ensuring safety for building tenants. Their technology enables things like wireless and touchless door opening, elevators, and security card readers. It also has intelligent video monitoring to assess building traffic and when individuals are coming in close proximity with one another. 

With data about the flow of people, social distancing safety measures, and touchless activities, the hope is to reduce the likelihood of COVID-19 infections in the workplace—ultimately making it more likely that office spaces can be used again in the near future. 

Coworking spaces seem like they will come out the other side

Industry experts expected to see coworking spaces take a real hit in light of the COVID-19 global crisis—but so far they are proving everyone wrong. 

In the UK, data shows that from March to June, a major coworking space reported only a 15% drop in occupancy—not bad given the overall recession. 

It’s still too soon to tell what will happen to the office sector more broadly, and how people will use coworking spaces in the future, but demand is already rising—slowly but surely.

The challenge here moving forward lies in how these spaces can adapt to social distancing measures. Experts say businesses should expect to spend 3 times the money to have access to 3 times the space—something that's going to be difficult for businesses facing uncertainty. 

Businesses may instead rent smaller spaces and stagger the days employees come to the office to spread out the number of people in the office at one time.