Reliance on mass transit is playing a key role in determining the pace at which office markets across the country re-populate, says Julie Whelan, global head of occupier research at CBRE.
Speaking on the REIT Report, Whelan noted that Texas is currently experiencing probably the largest return to the office, despite vaccination rates in some parts of the state lagging the national average. Other markets, such as California and New York, have higher vaccination rates but are returning to the office more slowly because of mass transit dependance, she added.
More focus needs to be placed on getting people comfortable on mass transit again and getting it back to normal schedules and routes. “It’s an essential piece of getting people back to work,” she said. Until that happens, “reduced ridership is really only going to sustain that reduced occupancy in buildings that we’re seeing.”
Whelan said best estimates point to current office occupancy at only a third of what was considered normal pre-pandemic. That is expected to change in the fall, however, as “the leisure of summer is going to abate and we’re going to get back into that normal routine.”
Whelan also observed that:
- Clear guidance is essential regarding the details of company hybrid work policies. Even with clear guidance, “most companies recognize we are in unchartered territory” and have to leave the door open for course correction.
- Shifts in working patterns have been growing since before the pandemic. “Now we’re seeing these changes on the surface that we just can’t ignore anymore.”
- Hybrid policies are not requiring a unilateral decision between working in the office or at home, leading to the rise of alternative workplaces. “Anywhere can be a substitute for office space…the options are really endless,” Whelan says, as long as there is a mobile connection. “I know we’re going to see extremely creative ways in the future that allow people the privacy, the power, the wi-fi to work almost anywhere on demand for short spurts of time as this drive to work out of the office becomes even stronger.”
- Office supply and demand will be out of balance nationally until around mid-2022, at which time a turning point should be evident that allows rents to start to recover.