Office Real Estate in the Covid Years (2020-2022)
Since the breakout of Covid in 2020, the real estate market has experienced a structural change in these three years. The resident prices, rents, and sales in the suburbs have made an impressive rebound compared with the urban areas. People are more willing to live outside the hustle and bustle as transportation time is no longer a concern when they can work from home.
The changes in people's lifestyles have created an impact on the office real estate market. We can also observe this change according to the transportation data. The average daily commuters on the Bay Area Rapid Transit fell from over 400,000 in 2019 to under 80,000 in 2021. Even though the number has increased after COVID alleviated, which is close to 136,000 per weekday in 2022, it is still far from pre-COVID time.
In 2020, COVID hit the world, and most offices were left empty. In 2021, most people have injected vaccines and COVID was no longer as threatening as before. People expected to resume their pre-COVID life, companies started calling back their employees to work in the offices, and people expected the bounce in office real estate. However, reality strikes, and people failed to see the rocket fly in the office real estate market.
Different articles commented on this phenomenon and blamed the structural composition of San Francisco. San Francisco and Seattle are often the two cities regarded as the tech backbones of the country. While tech companies' employees prefer to work from home more than people from other industries. Even tech giants like Google tried to call back staff to work in their fascinating offices, but workers still pushed back on demand. The leaders in the company also approved 85% of employees' requests for relocation or permanent remote work.
However, even though San Francisco and Seattle are both regarded as tech hubs, the two cities have very different recoveries. The VTS Chief Strategy Officer Ryan Masiello says, “Seattle has become less reliant on prospective tech tenants throughout the pandemic, whereas in San Francisco, the reliance is largely unchanged. Given that the typical home value in the San Francisco area is nearly double that of the Seattle area, it is quite possible that San Francisco jobs are moving out of the area more often than in Seattle, and that companies are not planning for them to come back into the region or the office at all."
Another factor could also be the change in supply and demand. The vacant rate of offices was 4% but now rise to nearly 24%. With the increase in supply, the drop in rent price is not tempting enough for tenants. The rent prices are only down 13.1% since the first quarter of 2020 — from an all-time high of $88.40 per square foot annually to $76.86 in the second quarter of 2022. The competition on the supply side of office real estate has never been so keen.
All these changes provoke me to rethink the importance of office use. Offices may not solely serve the purpose of being the cubicle for workers to work, and workers do not go to work every day anymore. Landlords have to adapt to the change to find suitable tenants. Veery provides a platform that allows the listing to become much more flexible. Talk to us and see how we can help you to cope with the changes.
/https://techcrunch.com/2022/09/09/people-are-going-back-to-the-office-except-in-the-bay-area/
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