US property experts think office market shift here to stay

The property market is unlikely to return to its pre-Covid state and, in the office market, the success of the working-from-home phenomenon means that demand for office space will fall by between 5% and 15% in the next three years.

These are among the conclusions about the US property market contained in the Emerging Trends in Real Estate United States & Canada 2022 report produced by PwC US and the Urban Land Institute (ULI) and just published.

While the report found that  there is considerable optimism within the industry for property’s prospects in 2022, with investors switching into the sector from others and maintaining the current “flood of capital”, it points out that there has been a substantial shift in the functionality of homes, offices, shopping centres and healthcare space.

The ULI/PwC US survey, which polled 1,700 property experts, found that: by the early autumn of this year most office workers were still working remotely, for most of the time; fewer than 75% of workers will come to the office at least three days a week in 2022; and “under almost any conceivable scenario, firms will be leasing less space in the future”.

The fall in demand within the next three years has been put at between 5% and 15%.

Hub-and-spoke model fails to meet corporate goals

The report also concludes that the hub-and-spoke model suggested by some people– with reduced corporate HQs in the CBD and additional decentralised satellite offices – has not gained traction, “probably because it fails firms’ primary goal for wanting workers back in the office”.

An increase in employee relocations is now expected though as firms further delay the return to work or formally make remote work a permanent option. Workers are moving further away from their workplaces, some simply because they prefer a more suburban or rural environment and others so they can afford more space for a home office or nursery. This will have “profound impacts” on metro areas and property markets and “may prove to be the most consequential factor driving change in property market dynamics over the coming years,” the report said.

A further “unfortunate by-product” of the pandemic is that people have turned away from public transport, to avoid close proximity to other passengers. There is a “brewing traffic nightmare” as a consequence and will affect the viability of the transport operators and lower income passengers that are dependent upon them.

The ULI/PwC Emerging Trends in Real Estate® Europe report will be launched on 3 November as part of a global webinar – registration details here.