Let us say it from the outset: we are neither defeatists nor alarmists, but we believe that the office real estate sector will have to reinvent itself very quickly.
An “explosive” mix has been created with the unfortunate arrival of the COVID 19 pandemic. The need for office space has suddenly changed and many companies will be looking to reduce their real estate costs.
Several elements are combining in this area: teleworking, sharing of workspaces, the contraction of turnover for many companies and forced digitalisation.
This “cocktail” will put landlords under pressure, as many companies will have to either reduce their budgets, change location or both. The effects will not necessarily be felt right away, but at the next lease expiry date, the changes will be visible. These changes will also have an impact on Facility Management services: less space (often) means fewer services.
Through teleworking and the sharing of spaces, whether desired or imposed, the need for workspaces will change: the appearance of small cells instead of very large spaces without separation, the sharing of teams in two different locations to limit risks are only a few avenues that may develop.
Whichever formula is chosen, it is highly likely that the real estate sector will be under enormous pressure. Will some landlords choose to reduce prices to keep their tenants or will they be pushed to transform their premises to make them more “in line” with the tenants’ wishes? Time will tell.
One thing seems certain: the pressure will be strong over a long period because the consequences of the pandemic will be visible for a long time to come and the changes made by tenant companies will continue: digitisation, virtualisation, relocation, teleworking will be, when possible, priorities.
Local shops may be the only ones to make only minor changes to their floor space, provided they can survive cost pressures and changes in consumer habits.
All this does not sound very pleasing, but as always, society, landlords and businesses will be able to reinvent themselves. That is our wish.
Very nice end of summer