For the past 15 months or so, countless people have been working remotely and staying away from office buildings. And the fear among real estate investors -- especially those investing in office-focused real estate investment trusts (REITs) like Piedmont Office Trust Realty -- is that the practice of working remotely will continue beyond the pandemic.
Not only is remote work convenient for employees, but it can save companies a lot of money by not having to rent as much office space. And even once it's safe to return to an office, there's a good chance a lot of companies will pass on renewing their leases.
Earlier this year, Amazon (NASDAQ: AMZN) announced that most of its staff would likely be back to the office by fall. But now, it's making plans to roll out a hybrid model that could lessen the need for office space. And once other major companies realize what Amazon's doing, they might seek to follow its lead.
A more flexible model
Amazon was initially set on an office-centric culture -- one that would involve having most people back to the office. But recently, it changed its policy and will now allow corporate and tech employees to do their jobs remotely two days each week. Employees also can work from another office location within their home countries for up to four weeks per year.
Meanwhile, Amazon will allow some people to work remotely for three days a week or more. Those employees will have to give up a dedicated desk at an office -- but they'll also gain the flexibility that comes with being able to work from home most, if not all, of the time.
Bad news for office REITs?
Office buildings have been sluggish since the pandemic began, and a lot of REITs with offices in their portfolios have seen their value decline over the past year and change. The hope among office REIT investors is that the remote work trend will wane as things improve on the pandemic front and society inches toward normalcy. But with large players like Amazon now making plans to uphold a remote-friendly model, the future of office buildings looks shakier.
To be clear, Amazon isn't shunning offices. Quite the contrary -- it's in the process of building out a massive campus outside of Washington, D.C. But the fact that it's letting workers continue to do their jobs remotely might influence other companies to go a similar route, all the while downsizing their lease space in the process.
Of course, as more companies gradually return staff to the office, some employees may be itching to do their jobs in person five days a week. On the flip side, there are plenty of people hesitant to give up remote work in any capacity now that they're used to it. In a recent survey by staffing firm Robert Half, one-third of remote workers said they'd rather quit their jobs than return to an office on a full-time basis. And if that sentiment prevails, it could influence companies to maintain flexible models that benefit employees but ultimately hinder office REITs' recovery.