How will Covid-19 affect the future of commercial real estate?

There’s a lot of uncertainty around the impact on the future of commercial real estate. Over 100 countries went into full or partial lockdown – with social distancing measures implemented, shops and restaurants closed and people urged to stay at home. The impact on the global economy is undeniable. A quarter of the workforce in America have either been furloughed or laid off and over 7 million people furloughed in the United Kingdom.

With many of us now working from home, there has been debate over what the ‘new normal’ will look like in terms of office-based work. Plus, with investment in commercial real estate expected to be considerably reduced in the short term, the future of commercial real estate as we know it may have shifted significantly as a result of Covid-19.

So, how dramatically will new ways of working affect commercial real estate and how will it be affected economically? 

Learn from the past

Firstly, we can take a look at China who are a few weeks ahead of the rest of us in terms of getting back to normal. China lifted the lockdown on 7th May and life is beginning to return to normal. 80% of restaurants, shops and bars have reopened. The percentage of the workforce returning to offices varies by city, at a snapshot 80-100% have returned to offices in Shanghai and 75-80% in Chengdu and Chongqing.

One thing that has changed significantly is workplace conduct. According to NY Times: “Many of the new workplace rules are obvious: Use disinfectants and masks and keep your distance from colleagues. But some call for tracking and nudging employees in ways that workers in other countries may find unacceptable, including use of government-sanctioned health tracking apps.”

We can also look at how the world fared up the last time it endured something similar. In 1918, influenza (H1N1) spread globally and one third of the world’s population contracted the virus. The immediate economic impact was similar to what we’ve seen today, with many large cities temporarily locked down and social distancing measures implemented with schools, theatres and spaces for public gatherings shut down. Despite the massive impact to the economy and a devastating 5% of the world’s population killed, with a little time life did return to normal. A research report stated that: “Most of the evidence indicates that the economic effects of the 1918 influenza pandemic were short-term.” But they did mention that the disadvantage of the study was the lack of available economic data from that time.

The big work-from-home study

One drastic change to many people’s routines has been the shift to working from home full time. This will have a huge impact on the workplace as more people shift to remote work as a result.

Twitter recently announced that they will let their workforce work from home permanently. This time has allowed them to see that their employees can work just as productively as before. A spokesperson from Twitter said: “We were uniquely positioned to respond quickly and allow folks to work from home given our emphasis on decentralization and supporting a distributed workforce capable of working from anywhere. The past few months have proven we can make that work. So if our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen. If not, our offices will be their warm and welcoming selves, with some additional precautions, when we feel it’s safe to return.”

Linkedin’s Workforce Confidence Index discovered that: “55% of respondents now think their industry can be effective when people are working remotely.” With those working in software, finance and media the most optimistic at 75%. 

A report by economists Jonathan Dingel and Brent Neiman estimate that 37% of jobs in the United States can be entirely done from home.

As the attitudes towards the typical 9-5 office-based work changes, so will commercial real estate. There are of course many benefits to working in the office; for our wellbeing and for more collaborative face-to-face work, or wooing clients by building rapport and delivering stellar pitches – which is much harder to do virtually. But, we’re likely to see flexibility drastically increase and less need for as much space as we previously had. 

Corporate offices may become more like hubs, with increased meeting rooms and collaborative areas and less permanent desks. 

A focus on health and safety

It goes without saying that a huge focus on the short, medium and even long term future of commercial real estate will be a profound focus on health and safety. In the short and medium term people just won’t want to take the risk of going into the office, if they are able to work from home, unless it’s clear to them that steps have been taken to make it safe.

The Centers for Disease Control and Prevention has provided guidelines on returning to offices. Employers have a legal obligation to look after employees’ health and safety and have to complete a Covid-19 risk assessment, identifying what measures will be put in place to minimise the spread of coronavirus. One of the main factors is social distancing, ensuring people stay at least 2 metres apart. This could mean cordoning off certain desks, reducing meeting sizes and laying down floor markings for areas where people may typically queue like reception or the cafeteria.

The lasting impact could see a bigger focus on employee and tenant health with preventative measures such as social distancing and more handwashing stations readily available. Office design upgrades could put health & safety at the core. An article by the BBC stated that: “In the longer term, experts predict that society’s heightened awareness of contagious diseases could usher in a new type of office – one that has elements in common with a hospital.”

Landlords and employers at the forefront may implement technology to enable workplace safety, such as occupancy monitoring, air quality controls and digital health checks. 

Newer, more sustainable buildings with optimised HVAC solutions may attract more interest, while older, lower quality buildings deemed less safe could suffer.

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Is coworking dead?

In light of the new focus on health and safety, is coworking and desk-sharing dead in the outlook of the future of commercial real estate? In the short-term it’s likely many will steer clear. But, with the right technological solutions implemented, a reshuffle of the floor plan and a strict cleaning policy it need not be. 

Technology will enable coworking providers to allow members to book in on certain days and check out occupancy via a mobile app. They could select a desk in the least crowded area, and be rest-assured through building access that requires an up-to-date health verification that others in the building are feeling well and haven’t returned from any high-risk countries recently. Plus, with regular polls coworking providers can keep their fingers on the pulse regarding members’ satisfaction and adjust accordingly. 

The fourth industrial revolution

During the lockdown technology has played a fundamental role, and inevitably post-lockdown workplace technology and smart building sensors will be adopted in aid of making buildings and the workplace safer.

A report by JLL noted that: “The mass adoption of remote-working technology through the pandemic phase will likely increase the pace of the Fourth Industrial Revolution, including even more emphasis on robotics, the Internet of Things (IoT), Big Data, and unmanned vehicles.”

Data captured by smart building solutions will empower owners to make strategic decisions or changes to make the workplace safer.

Smart building sensors will allow tenants to enter the building at the swipe of their phone, and book facilities or speak with the concierge all digitally, and contactless.

For commercial real estate to truly thrive post-Covid 19, it must become smart.


District Tech is an award-winning workplace experience software provider. Keep your community informed, safe and connected with a branded app and truly understand their needs with real-time analytics. 

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