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If the good news keeps flowing, vaccine rollouts should commence this month, a hugely positive development, but one that leaves some remote workers wondering when they’ll be called back into the office.
Companies largely aren’t yet moving in that direction. Two studies published this week, one from VTS, a real estate software firm whose platform manages 60% of Class A office space, and the other from the commercial real estate trade association BOMA International, show that demand for office space continues to lag.
“This is, by far, the worst contraction in recent history for the office market,” VTS CEO Nick Romito says. “We expect it’s going to be a bumpy ride for months to come, although we’re confident in a long-term recovery.”
No surprise, BOMA, the trade association, had slightly more bullish results, reporting that 74% of the study’s 3,000-plus respondents think an in-person office remains vital (though perhaps with less space than before the pandemic).
VTS, meanwhile, finds that current demand has cratered to less half of pre-Covid levels, after bottoming in May at an 84% decline. The results vary by region. San Francisco has suffered the worst decline of any city surveyed, with a 76% drop since before the pandemic. New York is down 67%, while Los Angeles has made up the majority of its drop-off; demand there is down just 27%.
The trend is particularly stark in the tech world. Alphabet, the parent company of Google, is reportedly considering a “hybrid” model when it eventually brings workers back; Facebook will let some employees work remotely forever; Stripe is incentivizing its staff to leave New York and San Francisco.
The declines haven’t altogether halted commercial real estate activity. In October, Michael Shvo and his partners closed on the $650 million purchase of the TransAmerica complex in San Francisco, one of the largest deals this year—though Shvo managed to negotiate a $61 million discount due to the pandemic.
Elsewhere, real estate startups are feeling the heat. As one example, the WeWork competitor Knotel faces claims and lawsuits over unpaid rent, The Real Deal reports. (Knotel declined to comment.) The company, previously valued at $1.6 billion, has endured multiple rounds of layoffs this year and is looking to dramatically scale back its portfolio.
For businesses like Knotel, a vaccine can’t come soon enough. For remote workers, plan to stay put for the time being.