Offices have a great future despite the home working trend, experts agreed at Real Asset Media’s Global Outlook 2021 – Europe & UK investment briefing, which was held online recently.
The short-term effect of the pandemic has been negative for offices, but longer term more space will be needed to guarantee social distancing while allowing people to go back to the cooperation, mentoring and social interaction that can only happen in person.
‘The legacy of the pandemic will be better air quality, better facilities and more space’, said Richard Pilkington, Senior Managing Director, Head of European Real Estate, Cain International. ‘Building were jammed, people were packed into ever smaller spaces, but that won’t happen anymore’.
Some companies are looking ahead and leasing bigger offices, reversing previous decisions.
‘We’re already seeing people who thought of downsizing and are now taking more space’, Pilkington said.
‘More attention will be paid to the quality of the building and to the health of tenants’, said Herman Kok, Head of Research, MARK. ‘It will become a differentiating factor, so there will be a lot of upgrading of buildings to adapt them to new, post-pandemic standards’.
When the lockdowns end and life returns to normal, people will want to go back to the office, but may not want to do long commutes anymore, preferring to work more locally.
‘I see a bright future for regional offices’, said Pilkington. ‘Out of town offices will be a winner on the back of the pandemic’.
In 2020 office transactions in Europe were worth €94.2 billion and investment declined by 35% compared to the previous year, according to new Real Capital Analytics (RCA) figures. Paris offices remained the number one asset class on a global basis.
‘Demand for core properties seems robust and pricing hasn’t changed substantively, but the real test will be when secondary and tertiary assets come to market’, said Tom Leahy, Director of Market Analysis EMEA, RCA.
Despite last year’s upheaval, offices are still in the top three sectors as chosen by institutional investors.
The evolution and rethinking of offices has been accelerated by Covid-19, but that is a good thing.
‘Offices are a core element of a company’s strategy, they are part of the brand’, said Oliver Kummerfeldt, European Real Estate Analyst, Schroders. ‘The office is definitely not dead, it has a great future’.