BEERG Newsletter - Future Work: Roundup of recent developments

Hybrid work­ing will push US office vacan­cies 55 per cent above their pre-pandemic levels to a record 1.1bn square feet by 2030, accord­ing to a fore­cast that attempts to quantify the impact on the com­mer­cial prop­erty sec­tor wrought by chan­ging work pat­terns.

The report by com­mer­cial real estate adviser Cush­man & Wake­field found that 330m sq ft of office space — roughly equi­val­ent to all the office invent­ory in the Wash­ing­ton met­ro­pol­itan area — would be made redund­ant by hybrid or remote work­ing by the end of the dec­ade. That would come on top of another 740mn sq ft of space that it clas­si­fied as “nor­mal or nat­ural” vacancy.

Cush­man con­cluded that roughly a quarter of US office space was already undesir­able and another 60 per cent was at risk of obsol­es­cence and might require “sig­ni­fic­ant invest­ment” to upgrade or repur­pose it. While such trends were most acute in North Amer­ica, they were also evid­ent in Europe and Asia, the com­pany noted.

“Obsol­es­cence is kind of the word of the day right now,” said Andrew McDon­ald, Cush­man’s pres­id­ent, call­ing the report an acknow­ledg­ment of “an inflec­tion point, per­haps”.

On a recent earn­ings call, another major property figure, Steven Roth, chief exec­ut­ive of Vor­nado Realty Trust, acknow­ledged that hybrid work­ing would not be a passing phenomenon, telling ana­lysts: “I think you can assume that Fri­day is dead forever . . . Monday is touch and go.”

In an interesting article, Financial Times writer, Tim Harford, look at why hybrid work is sticking. Harford says that the pandemic showed that remote/hybrid work works and can be highly productive. He also notes that people have invested in it, buying decent chairs, microphones, and the technology, such as Zoom, Google Meets, Microsoft Teams that facilitate remote working.  

One of the UK’s biggest banks, HSBC, is looking for a new London office that is less than half the size of its current site. The bank is seeking a new global headquarters of between 400,000 and 500,000 sq ft (37000 - 46500 m²) – far smaller than its 45-storey skyscraper at Canary Wharf, which spans 1.1m square feet. Having embraced remote and hybrid working to a greater extent than peers such as J P Morgan and Goldman Sachs, HSBC wants to reduce its office space by 40% globally compared with pre-pandemic levels.