Profimex Market Review Update – April 4, 2021

4.4.2021

20% of Corporate Executives Say They Plan to Reduce Office Space

According to recent survey by the American Institute of CPAs, more than 20% of corporate executives expect to downsize their office real estate space. Additionally, although about 78% of corporate executive surveyed do expect to downsize their office space, many are stuck in long-term leases. Ash Noah, vice president at the Association of International Certified Professional Accountant, explained that “As the recovery progresses and we move toward the next-normal, more and more people will return to their traditional places of work. But this doesn’t change the fundamental shifts we’re seeing toward more virtual and remote operations.”

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The Future Of The Workplace Is Uncertain, And Office Owners Are Preparing To Adapt

Although many firms are beginning to plan how to return the office, many landlords are altering their outlook on how office space will be used in the future. For example, landlords will need to accommodate a demand for flexible office space and leases. This is in response to a lot of uncertainty surrounding the future of office and a hesitancy for firms to make long term commitments. Additionally, many real estate experts believe that there needs to be a better understanding of the additional value that office space provides to tenants. Focusing on sustainability and energy efficiency are among the number of factors that need to be assessed for the future of work. Additionally, landlords are combating the long-term impacts of Covid-19 on office. For example, availability of office space in Manhattan is at record high and occupancy rates are around 10%, reported by many landlords. Alexis Michael, Hines Managing Director, explained that, “The buildings that are not quality products, not quality locations, are going to have vacancies for a substantial amount of time. We need to keep space occupied to pay our debt service and whatnot, so I think these abilities to reposition a building smartly now that we are within this Covid environment is even more important.”

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