The coronavirus pandemic has changed just about every aspect of life as we know it. We no longer pick up and go -- we mask up and bring sanitizer with us before leaving the house.
The pandemic has also changed the way people work. A year ago, working from home was a privilege employees would beg for in an effort to carve out more flexibility in their schedules. Now, in many industries, it's the current norm, which has office building investors worried.
That said, there's no reason to write off office buildings completely. Once the pandemic comes to an end, many companies will, inevitably, seek out to bring staff back to the office. But whether they make a full-time return is a different story.
Will the 3-2-2 workweek take over?
Late last year, LinkedIn published its list of workplace trends for 2021, and one idea that's really expected to take off is the 3-2-2 workweek. The concept is simple: Employees spend three days a week in the office, work remotely for two days, and then take two days off for the weekend. It's a concept that's more than feasible now that so many employees are used to doing their jobs from afar and have the tools to make that possible.
It's also a setup with the potential to save employers a lot of money. If workers return to the office on a partial basis, they can share workspaces and other resources so companies don't have to spring for nearly as much square footage. The result? Less expensive leases.
But while savings on office space is great news for employers, for office building investors, it's not the best. For offices to recover, leasing activity needs to pick up, but if companies start dumping larger spaces and downsizing, that recovery will only be prolonged. A recent CBRE (NYSE: CBRE) analysis suggests extended remote work could reduce the need for office space by 15% once the pandemic is over -- and that's far from ideal for office REITs (real estate investment trusts).
On the flip side, a recent survey by JLL found that 52% of working professionals don't feel productive doing their jobs from home, and 58% of remote workers miss office life. So some people may seek to return to the office full time -- and their employers may be happy to accomodate.
Still, it's fair to assume the 3-2-2 model will increasingly gain popularity as employers and employees alike embrace a hybrid system that puts colleagues under the same roof but simultaneously gives them the flexibility to spend part of their workweek at home. That's not the best-case scenario for office buildings, but it's also far from the worst.
Office buildings can come back to life
There was a point when many were led to believe remote work would evolve to become the norm. But that's unlikely to happen. In a January 2021 survey by PwC, 68% of company executives said employees would need to be in the office three days per week or more to maintain a strong culture. And while five days in an office may no longer be the default setup for employees, there's enough of a pull toward office life that investors should start breathing easier.