Just a few years ago, the commercial real estate (CRE) world was on high alert. The rapid shift to hybrid and remote work had many in the industry bracing for a downturn in the need for physical office spaces. The concern was palpable. Fewer employees in the office could potentially mean less square footage required, signaling a rough patch ahead for CRE professionals. But, as seen in the Building Engines report, “The state of commercial real estate property management for 2024,” a silver lining is emerging–companies are returning to office buildings, providing ample reason for measured optimism.
Is remote work a thing of the past?
Last year, the majority of CRE professionals (84%) surveyed in the Building Engines report said that at least some of their tenants were using a hybrid work model. As we head into 2024, is the fear of tenant churn due to hybrid work still a factor? Maybe not, according to survey respondents this year. A reassuring 61% of survey respondents have observed a significant trend: companies and tenants are transitioning back to the office full-time.
Similar sentiments were reported in a recent Fortune article—“There has been a growing uptick in the number of employees returning to the office. In fact, it was recently reported by WFHResearch that only 12.7% of full-time employees work from home full-time, and according to Owl Labs, only 16% of companies across the globe are fully remote.”
And a study by ResumeBuilder.com found the same thing. They surveyed 1,000 company decision makers to better understand what companies are planning for in 2024. Their study garnered positive results, concluding that 9 in 10 companies with office spaces will return to the office by 2024.
The CRE industry’s resiliency has been tested
So, now the question is, does the shadow cast by tenant churn (stemming from the rise in remote and hybrid work) hold any weight? Survey results indicate that such fears may be unfounded.
When CRE professionals were asked if they were experiencing leases not getting renewed due to remote or hybrid work, 41% said no. Meanwhile, 35% said yes, they are seeing more leases not getting renewed. And 25% said not sure or not applicable.
Respondents from this report also said, for the most part, that they haven’t decreased the number of buildings or square footage they’re responsible for over the past year. In fact, almost half have increased their portfolios.
This is a telling sign that despite the disruption of traditional work settings, the CRE industry remains resilient and adaptive.
Adapting office spaces for tenants
This resilience is not born out of sheer luck but from an understanding of the evolving needs of the tenants. CRE professionals have tapped into their expertise to reimagine spaces that meet the needs of a workforce returning to the office, albeit with new expectations for flexibility, safety, and amenities.
“There is a long future ahead for corporate real estate,” says Chase Garbarino, Co-founder and CEO of HqO. “To continue to be successful, owners and operators need to better understand employee data and listen to tenant insights because the real crux of the problem is clear: For employees, the commute needs to be worthwhile.”
So, while the conversation around hybrid and remote work continues, it appears less likely to be an existential threat to the CRE industry as once feared. With most survey respondents in Building Engines’ report witnessing companies return to office buildings, it may be that the future office isn’t disappearing–it’s being reborn. As employees trickle back to their desks, CRE professionals are poised to navigate these new waters with an adjusted gameplan that captures shifting workplace trends.
Companies return to office buildings
In conclusion, the CRE landscape is proving to be dynamic and robust, ready for the challenges and rewards that the future holds. Because even as the paradigm of work has certainly shifted, there lies immense opportunity. So, while we watch this positive momentum grow, and see more companies return to office buildings, it’s critical for CRE professionals to keep a pulse on these trends and adapt their strategies accordingly.
Download Building Engines’ full report, “The state of commercial real estate property management for 2024,” to learn more.
