The impact of hybrid work on the workplace and how it’s transforming commercial real estate
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Hybrid work or virtual work, as many call it, has existed for many years; however, it has gained popularity since the pandemic hit! With the mandatory quarantine, the world has found alternative ways to keep the workflow! Now, the majority of corporations are working from home although the impact of the pandemic has decreased with dwindling numbers of new cases compared to the past couple of years!
The transition to hybrid work for corporates now appears to be unavoidable. Other plans and activities, such as travel and entertainment, have recovered since the pandemic spike, but office attendance has not.
With the current situation, the opinions of employees are split into two: some employees seem to prefer the remote/hybrid or virtual work more because it gives them more work/life balance and also more freedom.
However, others appear to be stifled by hybrid work and prefer on-ground work from the office more as they prefer human connection and communication. The hybrid model makes them feel like robots, and the lack of interaction with coworkers and superiors might lead to missed opportunities. For them, the office is a place where they socialize and build connections at work as well as get timely support from their colleagues.
Moreover, as the lockdowns were extended, it became evident to many of those same people that the presence of children, pets, and domestic duties are not conducive to good work, and it's not professional as they thought it could be!
How's hybrid work affecting the economy and the environment?
As stated by Forbes, remote work affects the environment in a positive way, for example, hybrid work leads to fewer cars on the road, which in turn decreases emissions and helps with climate change. Furthermore, people driving less means decreased fuel use, which has an influence on oil businesses. On the other hand, fewer traffic tickets mean less revenue for the government and lower fuel sales mean less tax revenue, which is bad for the government as well.
Additionally, with fewer people in the city, money will begin to be invested outside of it. People who work from home will demand larger homes with extra rooms for offices, and they will relocate to areas where they can build larger, less expensive homes.
With that being said, how's hybrid work affecting commercial real estate?
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The pandemic and lockdown were a game changer indeed, they impacted the whole world, businesses, human connections, and everything in general! And speaking of businesses, the real estate field was affected from the beginning of the pandemic to this very moment!
Without deliberate thought, any business processes could be affected by the globe's circumstances and status quo! Henceforth, these circumstances have a great impact on commercial real estate!
The massive move to hybrid work has made a drastic change and impact on commercial real estate! According to recent data, a total of approximately 42 million square feet of commercial office space became available for lease in the second and third quarters of 2020 in the USA. Aside from employee preferences, many businesses recognize the significant cost reductions that may be realized by decreasing their office space.
The demand for office spaces is expected to decline; tenants will leave buildings. Expect to see commercial office space converted to residential and other uses in downtown locations.
Shifting through flexible, shared offices, and short-term lease office spaces!
Before the pandemic, the modern office concept was already beginning to shift. Since 2010, the number of co-working and shared office spaces has increased by 23% annually in USA. Furthermore, it's feasible that by2030, co-working spaces may account for 30% of the commercial real estate market.
Also, in Egypt the concept of the co-working spaces in Cairo was brought by a German non-profit project founded in Heliopolis by Ulrike von Ruecker. Her main motivation was to develop a work environment that encouraged sharing and collaboration.
Egypt's total number of co-working spaces is still unknown. The Egypt Innovate website (which is under of the Ministry of Communications and Information Technology) features this year 91 co-working spaces, 63 in Cairo and eight in Upper Egypt. However, according to the Database for Students and Entrepreneurs, the number of co-working spaces increased by33.7% in 2016, from 12 in 2011 to 210 last year.
Short-term leases are becoming a popular option for firms that want to maintain a physical presence but are unclear of their long-term demands. Short-term leases were once unusual since landlords could readily locate another renter willing to sign a long-term contract. However, because many experts anticipate occupancy rates may take years to return to pre-pandemic levels, landlords are keen on finding tenants in any form.
How can commercial real estate support in utilizing spaces?
For commercial real estate, space use and adaptability will be critical. Short-term leases should prove to be the most viable option for the near future, every square foot should be re-evaluated to ensure the total area can accommodate a variety of enterprises.
So, have the large office spaces passed their peak yet?
We, at Tayf, have done extensive research on this topic as we came to the conclusion that office spaces didn't lose their demand as there are still business owners who still prefer large office spaces. We believe that brokers and real estate employees have to understand companies' needs!
Brokers may find themselves chasing fewer and fewer major typical office acquisitions in the future. Alternatively, they may spend more time and money securing hundreds of small sales to match the value of a single huge deal in the past. However, there is a third option: they can adapt how they work to accommodate the changing realities of the corporate world and the real estate market.
Long-term market trends are shifting away from the classic office deal, with companies aiming to lower the amount of space they lease per worker, and brokers' strategies should reflect this.
Brokers also have to understand that they're not defending a threat, they can easily win this situation by finding a better opportunity that works better for everyone and themselves as well.
Still confused about this situation? Tayf can help you through it all!
Part of what we do is to ensure your understanding of the commercial real estate field, we manage the entire real estate process, from research to marketing and operations. In addition, we manage, maintain and control all aspects of your commercial properties. We understand the field and investors' needs and we implement it in the right way!
References:
https://group.atradius.com/press/news/hybrid-working-transforming-commercial-property-market.html
https://work.iwgplc.com/MediaCentre/Article/why-covid-19-has-been-a-game-changer-commercial-real-estate
https://www.forbes.com/sites/forbesrealestatecouncil/2021/07/19/the-impact-of-a-hybrid-work-environment-on-real-estate/?sh=3ab8b4d32058
https://www.docuphase.com/blog/hybrid-workplace-affects-business-processes
https://www.apollotechnical.com/working-from-home-productivity-statistics/
https://www.forbes.com/sites/shephyken/2021/02/28/the-impact-of-the-virtual-work-from-home-workforce/?sh=4acf15c92873
https://www.cbre.com/en/insights/reports/the-next-normal-how-hybrid-work-will-transform-commercial-real-estate#types-of-hybrid-work
https://www.us.jll.com/en/coworking-market-growthhttps://www.wsj.com/articles/corporate-tenants-dump-excess-office-space-sending-shivers-through-the-market-11605013200
https://www.egypt.regus.com/work-egypt/revolutionising-how-to-sell-workspace/
https://www.amcham.org.eg/publications/business-monthly/issues/272/August-2018/3759/capturing-the-rising-trend-of-coworking-spaces
