The Impact Of COVID-19 On Office Space Decisions

Decision makers are reassessing space needs, but in-person offices are still operationally vital to their businesses, long-term growth, and future success.


https://facilityexecutive.com/2020/12/the-impact-of-covid-19-on-office-space-decisions/
Decision makers are reassessing space needs, but in-person offices are still operationally vital to their businesses, long-term growth, and future success.
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The Impact Of COVID-19 On Office Space Decisions

Decision makers are reassessing space needs, but in-person offices are still operationally vital to their businesses, long-term growth, and future success.

The Impact Of COVID-19 On Office Space Decisions

BOMA International, Yardi, and Brightline Strategies have released key findings from the first in a series of nationwide commercial real estate COVID-19 impact studies. Fielded among 3,010 office space decision-makers and high-level influencers from across the country, the BOMA International COVID-19 Commercial Real Estate Impact Study assessed the latest in tenant sentiments relating to the pandemic as well as its impacts on their businesses, attitudes towards the physical work environment, and office space decisions going forward. The findings not only provide a clear indication of the pandemic’s broader transformational effects on the office sector, but they also enable owners and operators to model the financial and operational implications thereof and proactively implement measures to mitigate risk.

commercial real estate office space

“While COVID-19 continues to be a large, disruptive force across the commercial real estate industry and its tenancy, the findings demonstrate the perceived value of office environments as a key ingredient for business success remains strong,” said Henry H. Chamberlain, APR, FASAE, CAE, president and COO of BOMA International. “While study results indicate high probabilities around changes in size, use, and design of office space going forward, we have also seen a significant rebound in the utility of physical work environments since the onset of the pandemic, with 74% of all study respondents affirming that in-person offices are operationally vital to their businesses, long-term growth, and future success.”

office spaceKey findings from the study include:

  • 65% of commercial office decision-makers continue to see significant value in on-site business operations, particularly as they relate to the three Cs: collaboration, coaching and culture.
  • The economic headwinds on office tenants are far reaching, with 33% of respondents saying they have experienced at least a 25% revenue decline since the onset of the pandemic and an additional 27% saying they could experience a similar or greater decline by EOY 2020.
  • 61% of all respondents report they will reassess their space needs with 43% seeking to reduce the size of their office square footage, 24% maintaining their current footprint, 9% increasing their size and the remainder being unsure.
  • 78% approve of the response their current property owner or operator has implemented during COVID-19, and 77% are confident they understand how to reduce and manage risk in their physical office.
  • 47% of all tenants say their landlord’s coronavirus response exclusively has made them more likely to renew, the result of proactive communications and a renewed focus on safety and security. Almost half of tenant decision-makers (46%) are seeing more value in personal relationships with their property management teams.

Additional findings explore the implications of COVID-19 on rent payments, space needs and utilization, renewal and relocation likelihoods, confidence in the safety of office spaces, and return-to-work planning.

“Our collective charge was to help owners and operators better understand, and proactively address, emerging industry trends and shifts in workplace priorities resulting from COVID-19, as well as how market attitudes towards the physical work environment are changing and what issues, behaviors and perceptions are driving them,” said Robert Teel, vice president of global solutions at Yardi. “Such insights are critical for owners and operators to get ahead of the COVID-19 impact curve.”

office spaceCommissioned by BOMA International, the study was underwritten by a grant from Yardi, a global real estate software company, and developed by Brightline Strategies, a real estate research and advisory services firm.

“Understanding how tenant priorities and preferences have changed as a result of COVID-19, to what extent operational models and mindsets have shifted in response to the pandemic and what landlords can do to support the ‘new normal’ are key baselines for driving sector resilience,” said Michael Broder, CEO of Brightline Strategies. “Isolating the factors which will drive office space decisions going forward not only provides owners and operators the data models to forecast future portfolio performance, but also the actionable insight to mitigate downstream risk.”

The study’s executive summary can be found on BOMA International’s website.

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