How Will COVID-19 Change Office Demand?

April 14, 2020

Written by Steve Henderson MAIManaging Director

A large-scale experiment is currently underway.  Millions of workers who normally travel to the office to work each day have been forced to work from home.  If it turns out that these workers are just as effective at home as they are in the office, work-from-home policies put in place due to the coronavirus might endure, potentially decreasing the demand for office space after the pandemic abates.

The average commute time for workers in the United States is 26 minutes each way, which means an average of 4.35 hours is saved each week by working from home.  Not only does working from home create a time savings, it reduces personal transportation costs that are not typically reimbursed by the employer.  In addition, the flexibility of choosing which hours of the day and week to get work done is appealing to many employees.   Robert Schwalger, an office worker in the healthcare industry in San Diego, said he has been able to save 30 to 50 minutes each way by eliminating his commute to the office over the past few weeks.  “I enjoy working from home,” he said.  “I like that my family is here, and I can work longer than normal.”

Eliminating a portion of overhead costs for renting office space would also be a significant savings for businesses.  Employer concerns about the unknowns of employees working from home will likely be alleviated after being forced to try it out for a while and having time to work through potential issues.  In addition, advancements in technology are helping to increase productivity for those working from home which should help to further reduce employer concerns.

However, working from home is more feasible in certain industries.  The US Bureau of Labor Statistics indicates that in 2018, less than 25 percent of workers did some or all of their work at home, and this was relatively unchanged from 10 years prior.  BLS data suggests that management and financial functions are more conducive to working from home, whereas sales and administrative support require more in-office time.

Many believe there are other obstacles preventing a mass exodus from companies renting office space.  Peter and Kari Stowell are office workers in technology and marketing industries in downtown Chicago.  “I think this pandemic will definitely lead to an increase in work from home, but people with distractions at home will be excited to get back to the office,” Peter Stowell said.  “Even though we can do our jobs working remotely, it’s harder to have efficient meetings.”  Kari Stowell has a similar perspective, “Most of my team is ready to go back to the office now, including me.  I like meeting with people in person, and there is more room for miscommunication with the current setup.”

Beyond the desires of employers and employees is the reality of changing economic conditions.  Although still low at 4.4 percent, the sharp increase in the national unemployment rate in March 2020 will undoubtedly extend into the second quarter.  While there is hope that the economy rebounds quickly after the pandemic subsides, it might require months or years to fully recover.  Higher unemployment will almost certainly cause a near-term drop in office demand.

For some companies, however, COVID-19 could actually lead to an expansion of office space.  Generally, managers try to maximize space with higher densities of employees, but social distancing guidelines suggest six to ten feet between people to reduce spreading this virus or other similar illnesses.  If desires or mandates for social distancing continue, current office configurations might need to be modified, thereby increasing the need for additional office space.  In addition, some technology and healthcare companies have seen a recent surge in business due to increased demand brought about by the pandemic.

With shelter-in-place orders in effect for the next several weeks, it remains to be seen whether the benefits of work-from-home policies will outweigh the challenges. Ultimately, many different factors will determine how demand for office space morphs in the coming months, but one thing is for certain: COVID-19 will have a big impact.



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