'Though it is 18 months since Covid-19 swept the world, occupiers do not seem to be cutting office space in any meaningful way. Instead, they seem to be signing lease extensions in a "wait and see" approach.'
I looked up that Omicron is the 15th letter of the Greek alphabet. As the World Health Organisation works its way through such letters to name each variant of Covid-19, I was disturbed to confirm there are in all 24 letters of the alphabet, and we have only got through a few of them.
For how long the world is beholden to decisions around variants is unknown. What we do know is as of now, serious orders are being made by European governments regarding work from home (WFH) and mandatory vaccines.
The latter opens up divisive debate about personal medical choice and although it is a more important matter than WFH, the former has direct real estate implications, so I shall stick to that theme.
WFH and the modern routines of 3 days at the office + 2 days in the spare bedroom have become one of the most important property stories I can ever remember. Us reporters are certainly given to hyperbole, but when I say WFH is literally a game changer, you will know what I mean: it touches everybody and directly affects the most valuable and largest asset class historically in real estate.
As my colleague Marianne Korteweg reports in the cover story of the December issue, WFH has already taken many twists and turns since March 2020. First companies supported what was ‘safe’ as WFH orders were made, then people slowly started to return, then things were almost back to normal, now some countries are back to square one. But even before Covid, work patterns were shifting. I feel sympathy for employers and bosses. Some are 100% for everyone working in the office 100% of the time, while others are 100% in favour of a split between home and office. You already know my personal opinion if you have read previous letters - I don’t like WFH and prefer coffee shops and the office instead. But that’s not important!
Did you know that according to our report on offices, even though it is 18 months since Covid-19 swept the world, occupiers do not seem to be cutting office space in any meaningful way. Instead, they seem to be signing lease extensions in a ‘wait and see’ approach. In all of this time, occupiers have saved hardly any costs which must have been tempting. According to Colliers, the average costs saving made by office tenants due to WFH practices across European countries is just 2%. So, they have not made any hasty decisions.
To my mind, the thing to look out for is job losses in the wider economy. There seem to be some significant resignations in the US at companies where vaccines are mandatory, but it is not apparent that employers are making widespread redundancies for economic reasons.
On the contrary, they seem to be trying to keep workers amid tight labour markets. [There was that US mortgage company Better.com whose CEO fired 900 people on a Zoom call saying employees ‘working from home’ were only doing two hours of work, but that was exceptional.]
For the moment, it seems like occupiers are not needing to lay off staff in the US, which usually foreruns Europe. Investors continue to buy prime offices in our major cities, as long as they have ESG credentials. This looks set to continue.
Have a good festive break.