Profimex Market Review Update – March 21, 2021
Office Vacancy Rate Increases Fastest in Tech Hubs
According to the national office report from CommercialEdge, technology hubs have seen the most significant increase in the office vacancy rate over the last 12 months. Austin had the highest increase in office vacancy, increasing by 720 basis points, followed by San Francisco and Seattle with increases of 550 and 480 basis points, respectively. Tech companies were able to make a smooth transition to remote work in the beginning of the pandemic, making it easier for these companies to shed office space. In addition to a high concentration in tech companies, the three markets also share two other commonalities: an influx of new office supply over the last five years, and single-digit vacancy rates prior to the pandemic. The national office vacancy rate increased by 160 basis points last year, and most analysts believe that, due to the long-term nature of office leases, we have not yet reached the bottom.
New Survey Says Workers Will Only Come in Half the Time
With the post-pandemic work environment up in flux, a February survey from CoreNet Global says that once the Pandemic ends workers will spend roughly half of the workweek at the office and the remaining time in home-offices or remote locations. Of the 200 companies surveyed, 54% expect the overall corporate footprint to be smaller in two years from now. Even within the survey opinion varies greatly, as 31% of those surveyed expected a reduction between 10-30%; 14% expect the reduction to be greater than 30%; 9% expect a reduction of less than 10%; and 18% project an increase in their global footprint of the next two years. Nonetheless, 85% of respondents see the future role of the office changing to an environment for teamwork and collaboration, with individual work being completed at home. Fitch ratings has been stress testing various scenarios on its 2012-2020 vintage office CMBS transactions, utilizing working remotely 1.5 days per week as its moderate scenario and 3 days per week as its extreme scenario.