Impacts of remote work
Photo by Lauren S from FreeImages
The current coronavirus hunker-down-at-home order has challenged the idea that all businesses need traditional office space for all workers. Necessity being the mother of invention, around half of the total U.S. workforce (up from the normal 5%) have had to work remotely from home during the pandemic. So will the short-term practice become a long-term trend and if so, what impact might that have on our commercial real estate market? It affects the insurance and real estate industries directly and indirectly.
As we reported in the last newsletter, Nationwide Insurance announced a permanent move to remote work. Its four main corporate campuses will remain open, with those employees working-from-office. But most of the rest of its buildings across the country will be closed by November 1, with those employees working-from-home, including the Gainesville, Florida office. Nearly 98% of Nationwide’s employees have been working from home since mid-March.
Twitter told its workers earlier this month they can continue to work from home from now on, regardless of any continuing pandemic. Other major businesses have said their workers can continue working remotely for the foreseeable future.
“There’s going to be shifts, but I think the jury is out as to exactly what they are,” said Jeffrey Gronning, Chief Investment Officer for Columbia Property Trust, a New York real estate investment trust that has a portfolio of office buildings across the country, in a recent Zoom conference call.
Some organizations will and some won’t, depending on the nature of their business. Those requiring face-to-face interaction among employees or with customers will return to the traditional office. Those that do might actually require more office space now, due to social distancing rules to maintain distance among individual employees.
But those that were able to deploy working technology and practices to maintain productivity may indeed shift permanently to the work-from-home model to save on office costs. And that could mean a growing vacancy rate of commercial office space and an impact on new construction. Less property and fewer employees on-site has clear insurance coverage implications, too.
A survey by the Society for Human Resource Management this month reports 64% of employers had their salaried employees working remotely most of the time. However, most view remote work as a temporary solution and expect those still working remotely six months from now to be at pre-pandemic levels.
A MetLife Investment Management analysis seems to agree. “While we believe there may be a permanent shift to remote working arrangements…we expect remote working trends to have a relatively limited impact on overall demand for office space in the long term, but also expect many firms to try (and fail) with permanent work from home arrangements in the near term,” MetLife states.
LMA Newsletter of 5-26-20
