- FNB Property Finance says property brokers expect vacancies to continue rising in offices.
- Most people don't want to go back to working in the office five days a week.
- But rising vacancies aren't just expected because people are working from home - sectors that rent offices are shedding jobs.
"I'll be back" are the immortal words of Arnold Schwarzenegger's character in the Hollywood blockbuster The Terminator. But some office workers are expected to express the opposite sentiment when life returns to normal once the Covid-19 pandemic has ended.
While some workers miss human interaction and are feeling exhausted by the never-ending Zoom calls, landlords and employers should prepare themselves that not many would want to return to the office for five days a week, says FNB property strategist and economist John Loos.
Speaking at the bank's quarterly property market outlook webinar on Tuesday, Loos said the working from home (WFH) debate has been "overhyped".
On the one hand, there are predictions of the "death of the office". But, on the other hand, some landlords now say that such predictions were false alarms, and it is starting to look like they are going back to business as usual.
Loos thinks that the reality will be somewhere between these two extremes.
"Neither [prediction] is probably correct. The truth lies somewhere in the middle. It takes a bit longer for leases to be cancelled, [and for] companies to rearrange and late adopters to accept change," said Loos.
He thinks the rollercoaster of "overexcitement and under-excitement" will still continue for a while, and only in the longer term will we see what a more realistic pace of remote working will be.
The unemployment effect
Loos said he feels that landlords need to start accepting that office vacancies will continue to rise because this was a trend even before the pandemic. In addition, he said office occupation is more closely linked to the formal employment rate.
He pointed out that the 7.5% decline in the finance, real estate, and business services sectors cut deep because these sectors are the key drivers of demand for office space.
"When there are cutbacks like that on staff in the sector, that must have contributed quite noticeably to a decline in demand for office space … So, the office fundamentals are still very weak, regardless of the work from home surge," said Loos.
The FNB property broker survey also showed that while they've seen a notable recovery in activity in the industrial and retail property space, the office sector's recovery has been the most muted since the end of the hard lockdown.
FNB expects the office segment to continue underperforming in 2021, especially because the brokers said oversupply was the worst in office property. Brokers had "very strong" expectations of rising vacancy rates in the office space while the other commercial property segments have started to see stabilisation in vacancies.
Loos said when more vaccines are rolled out, he does expect a significant portion of workers to return to the office and operate as normal. But being forced to work from home has exposed late adopters to the benefits of not commuting daily. So, while initially, when people can go back to the office, many will embrace that, it does not mean that they will be back permanently, said Loos.
Landlords, employers are the ones 'missing' the office, not workers
On the other hand, wellness experts are saying that people are tired of remote working that has forced them to put in longer hours, affecting their mental and physical well-being. Redefine said some CEO tenants also want employees back in the office because WFH does not support a productive and engaged workforce.
But Loos said some confuse statements about some people wanting to go back to the office with everybody wanting to resume the routine of being stuck in traffic for an hour or three every weekday.
"Many employees want that flexibility, and they want to spend more time at home than what they did prior to the lockdown. It is true that many do not want to spend all their time at home. They feel isolated.
"But what one tends to find is that it's more the employers, and I think landlords to a certain extent, who want to believe that everybody wants to go back to the office," said Loos.
He said there is no denying that remote working potentially means more productive days for many people.