Covid-19 has turned office life on it's head. But even though more people are working from home, it does not necessarily signal the death of the office. Real estate experts share their insights with Funds Europe for the July/August issue.
As the prospect of a second wave of coronavirus still looms, many parts of the world are slowly reopening and people are returning to their workplaces, ever-changing social distancing measures in place. For many office-based businesses, this poses a challenge – it’s not always easy to maintain your personal space in a lift heading up to the tenth floor.
But in the midst of an accelerated trend towards more flexible working, offices are not dying out just yet. It’s the way companies will use them that is likely to change, according to Paul Kennedy, head of strategy and portfolio manager for real estate in Europe at JP Morgan Asset Management (JPMAM).
The future of city office lets is a major topic, he tells Funds Europe. This is not a new trend, he says.
“There’s been a trend towards flexible working, towards more technology-based solutions for many years now. If we look back, if this crisis had happened five or ten years ago, the technology wouldn’t have stood up as much. I think the conclusion we’ve reached as a business is that we can all work from home – but we don’t want to.”
Office rents can be pricey, though. Regardless of how governments lift lockdowns, companies will rethink how they manage their office space in terms of functionality and safety – and in terms of saving on capital costs.
Indeed, the commercial world is in new territory, according to Gunnar Herm, head of research strategy for Europe at UBS-AM Real Estate & Private Markets (REPM).
“There’s a lot of opinions and guessing, to be very honest,” he says. “A lot depends on how businesses will react post-Covid. It is unlikely that businesses will move to a full home office environment, but working remotely will become more standard.”
The firm recently bought a fully let prime office building in Paris [pictured above] for €43 million amidst what it calls a “challenging economic backdrop”.
The office sector remains a dominant force in the real estate market, however. In Germany, it accounts for around 54% of open-ended property funds on average, according to research by Hamburg-based Intreal.
These open-ended funds have remained resilient throughout the pandemic, seeing inflows of €1.3 billion throughout March, April and May. At the height of the crisis in April, open-ended real estate funds’ net assets still surpassed €110 billion, Intreal’s report shows.
Read the full article: Real estate: 'the office is not dead yet'
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