THE NEW NORMAL
The ongoing effects of COVID-19 have created a need for companies to re-evaluate space occupancy. Life as we know it has changed and so has the workplace. What is the new normal? Once unfamiliar, factors such as work-from-home (WFH) policies, stay-at-home orders and social distancing measures have become the new norm.
What does this mean for the sublease market? New and competing pressures have been placed on space considerations
THE SPACE CHALLENGE
While the pandemic has impacted the office and industrial markets differently, both asset classes are contending with two right-sizing scenarios: the disposal of unneeded space or the expansion into needed space.
As employee headcounts change and WFH measures expand, companies may need less space while others may no longer need anticipated expansion space.
On the contrary, some companies may expand square footage in order to de-densify and meet social distancing requirements, exemplified in the 6 Feet Office. Firms headquartered in urban environments may consider taking additional sublease space in the suburbs to avoid employee use of crowded public transportation in an effort to maintain social distancing.
Due to the pandemic, some companies experienced major disruptions to supply chains such as site closings and product shortages. As a protection method against future market shocks, companies may expand locations in order to create redundancies in supply chains.
When stay-at-home orders spread across the country, certain occupiers experienced a dramatic uptick in product demand (e.g., toilet paper, cleaning products) whereas others saw a drastic drop (e.g., automotive parts). Occupiers that have seen a sharp increase in demand may take more space to hold extra inventory. Conversely, companies with slow demand may dispose of unnecessary warehouse space as inventory levels decrease.
Similar to office, industrial users may also seek a larger footprint to uphold social distancing recommendations or de-densify.
Although it is still too soon to know the overall impact of additional sublease space across the markets due to COVID-19, this report is the first in a series that will provide updates on both office and industrial sublease space covering the U.S., Canadian and Mexican markets.
Stay tuned for the Q2 2020 update with market-by-market details. What does the COVID-19 era mean for sublease space? Will sublease activity stagnate or take over the market?