Working from home (WFH) is here to stay, and could reduce demand for office space by 10-20% in a post-Covid-19 world, said Barclays, a British multinational investment bank and financial services company.
“There is risk in either direction, but we see compelling evidence that the pandemic has revealed a better way of working for a large number of employees and companies,” Barclays said in its series on the Future of Real Estate, focused on office, lodging, and healthcare property.
“We expect partial WFH will become the norm for office workers and will be for an average of 2-3 days a week, with full-time WFH an exception. This will reduce office footprints and drive layout changes (more meeting rooms, break-out space, etc.) in favour of space designated for collaboration and social interaction,” it added.
Urban offices are likely to outperform suburban offices after Covid. As companies reduce space, we expect they will consolidate into fewer, high-quality, centralized locations that will provide premium fit-for-purpose gathering places. In the long run, this would support central urban offices despite their steeper drop-off in traffic during the pandemic.
Lodging has been hurt by travel restrictions and the loss of business travellers, but should recover over time, as it has after prior recessions and downturns. While videoconferencing may displace some business trips, others may be created (offsites and training) and hotels could try to replace business demand with additional leisure.
The 80% recovery of foot traffic to Las Vegas demonstrates the speed we could see in a broader leisure-travel recovery. That recovery has happened even as flight traffic to the city remains well below pre-Covid levels, suggesting more upside once people start flying again. Conference businesses outside Las Vegas will likely take longer to recover, matching the multi-year recovery cycle in lodging.
Senior housing demand will recover in the medium term. Within healthcare real estate, life science and medical offices clearly outperformed senior housing during 2Q 20. Barclays said demographic changes will reinvigorate senior housing longer term.
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