Rising Interest in Suburban Office as Companies Consider Increased Distancing Measures Due to Health Crisis
Office space faces a transformative future. The long-term impact on office space demand will be uneven in terms of both time and location. Many tenants will return to space during a period of social distancing, providing guidance as first movers. States that move forward with reopening will be watched closely to determine the likelihood of a flareup within office properties. Even when a medical solution is achieved through vaccination or antibodies, the nature of office space is unlikely to return to pre-pandemic conditions as the duration of the recession and subsequent recovery bring new possibilities into play. From coworking space to skyscrapers, operating during and following a pandemic generates unique challenges. Vacancy may climb more than 200 basis points to above 15 percent this year, modestly greater than the rise observed in 2008 at the onset of the financial crisis. The most dramatic movement in vacancy may not be realized until next year as the economic picture comes into focus and long-term planning can resume. Rents, meanwhile, will soften sooner than those during the Great Recession as social distancing, rotating shifts, and abrupt lease cancellations decrease demand for available space.