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Go back to the winter of 2020. Remember what the word on the street was when states and nations locked down?
“It’ll come back!”
The mainstream narrative was that after Labor Day 2020, workers would be back to work and commuters would be commuting.
Wrong.
Not only did they not go back to work, as the facts show, tens of million don’t want to. As we have detailed, as the facts show, and everyone with a brain knows, businesses across the globe are having difficulty finding workers… especially in the hospitality, restaurant and retail sectors.
Fast Forward
Large corporations that once had September in mind to get their workforce back into their desks have been forced to reconsider plans due to the increase in new COVID-19 cases and lingering fears over the Delta variant.
The New York Times reported on Thursday that companies like Google, Lyft, and Apple have all pushed back their return-to-office dates. Dara Khosrowshahi, the Uber CEO, said in an email to employees that the rise in cases “are a real reminder that we still need to be cautious, look at the data and listen to experts as we return to the office.”
The report pointed out that September seemed like a logical month for the great return. But the number of new cases and a troubling report by the Centers for Disease Control and Prevention that breakthrough cases can spread the virus just as easily as those who are unvaccinated have crushed hopes in the country.
“You’ve got parents now who are thinking that maybe their children won’t go to school in the fall,” Kate Lister, the president of the consulting firm Global Workplace Analytics, told The Times.
The New York Post reported that LinkedIn once said by October it expected employees to be at work at least 50 percent of the time once restrictions were lifted.
The company now said it will allow its 16,000 employees to work from home full-time.
TREND FORECAST: Fighting the Delta variant will keep more people working from home which will also put more downward pressure on the commercial real estate sector. Indeed as JLL Research reports, Gross leasing activity “is still 41.6% below the pre-pandemic quarterly average, underscoring the road to recovery for office leasing fundamentals.”
This will in turn put more pressure on big city real estate. As we have forecast, Commuters will return to office centers, but not in the numbers that can support the pre-2020 economic ecosystems that depended on them.
With fewer commuters, there will be fewer cafes, restaurants, office-wear stores, and other retailers, leaving building owners competing to fill empty spaces by slashing rental rates, offering more generous allowances for remodeling or decorating, or agreeing to accept a percentage of sales as rent payment.
We again refer to a Fitch Ratings study concluding that if companies surrender 10 percent of their office space as workers remain at home at least a portion of the time, the value of office buildings could plummet as much as 40 percent.
A crash in property values will, in turn, crash city budgets, leaving cities unable to fund past levels of services in police protection, firefighting, education, and trash collection, among others. (New York City gained 40 percent of its pre-2020 revenues through property taxes.)
TREND FORECAST: The COVID War has created a new trend. The Trends Journal reported extensively on companies and how the work-life balance will look when the COVID War ends: SEE: (“WORK-FROM-HOME: 21st CENTURY MEGA-TREND,” “FACEBOOK: EMPLOYEES CAN WORK FROM HOME FULL-TIME,” and “BACK TO WORK TRENDS DOWN.”)
And as we also noted, not only do employees not want to commute to work every day, employers would rather have them come to the office less so they can scale down their office space and pay less rent. Ninety of the 100 companies surveyed by the consulting firm McKinsey & Co. will adopt a combination of remote and on-site work structures, the company said, indicating that office space across the U.S. faces major long-term, and perhaps permanent, vacancies.
TREND FORECAST: We had forecast this trend in 2020, predicting that the COVID War would accelerate the work-from-home trend; now 44 percent of eligible workers now want to make it corporate policy, according to a recent ZipRecruiter survey.
A May Bloomberg survey of 1,000 U.S. workers found that 39 percent would consider quitting if their companies demanded they return to the office full-time—a daunting prospect for employers in a labor market where skilled talent is in short supply.
A significant number of those workers have already moved farther than commuting distance away from their offices, making it even harder to lure them back to their company quarters.
We continue to forecast a broad decline for office property occupancy and values, especially those in suburban locations that lack the shopping and entertainment venues that make downtowns attractive.