Study predicts office sector recovery to be slow, but full recovery expected despite work-from-home trend.
Cushman & Wakefield (NYSE: CWK), a leading global real estate services firm, released its first-ever Global Office Impact Study, projecting that the world’s office leasing fundamentals will be significantly impacted by the COVID-19 recession and the work-from-home trend, but they will ultimately begin to improve in 2022 and will fully recover 2-3 years later. The full recovery timeline is consistent with what was observed during the Great Recession, but at a slight lag due to the work-from-home trend. The report was developed by the firm’s newly organized Global Think Tank, a team of senior researchers and economists from around the world. The study analyzed the cyclical and structural changes impacting the global office market and the implications for recovery.
Key findings from the 2020 Global Office Impact Study are concentrated on the full economic and employment recovery anticipated for Q1 2022, and the corresponding demand for office space as vacancies begin trending downwards and rental rates begin appreciating. By 2025, global office vacancy is anticipated to return to pre-crisis levels of approximately 11%, with rents returning to pre-crisis peak levels.
“Even though the impact of work-from-home trends will slow the office market recovery, the overall growth in office-using job sectors along with many other factors – including agglomeration, culture/branding, and productivity – collectively indicate that the office will continue to play an important role in the economy going forward,” said Rebecca Rockey, Global Head of Forecasting at Cushman & Wakefield.
In Vietnam, the office, especially the affordable and mid-segment and industrial properties will remain sectors with the brightest prospects and least impacted by COVID-19 with rents continuing trending upwards. The Ho Chi Minh office market in fact has proven very robust in 2020, with rents stable (a marginal increase in rents of 1-2%), supply side pressure low, and continued demand from large occupiers for space. Hanoi will face downward pressure on rents in Q4 which is largely a case of new supply putting pressure on pricing as opposed to the pandemic. Leasing activity and demand in Hanoi also rebounded well after lockdown.
“On a more positive view, we have seen developers reacting well to the pandemic and becoming more conscious of safe and hygiene. Indeed, we have witnessed one office building in design phase, OfficeHaus adjust design and go fully ‘contactless’ using RFID1 sensors, a direct reaction to peoples awareness of hygiene. This building will be a good indicator of office market performance in future, it is decentralized located near Tan Son Nhat International airport and will provide companies with a cost-efficient location,” said Alex Crane, Managing Director of Cushman & Wakefield Vietnam.
In Asia Pacific (excluding Greater China) 2, at the aggregate level, the impacts of the current global recession are more benign and shorter-lived than elsewhere around the world. For the most part under the baseline scenario, all economies in the region return to pre-COVID-19 GDP levels by Q3 2021. In the near term, office leasing fundamentals over the next 6-18 months will be challenged by the pandemic’s impact on the slowdown in new office job creation and outright job losses in the immediate term.
Despite the challenges, demand, as measured by net absorption, is forecast to remain positive from now through 2030. The most recent data provides early evidence that Asia Pacific will be somewhat more resilient relative to the other global regions. In emerging markets3, rapid movement up the value chain throughout the region will increase the region’s share of jobs that are office-using. More advanced markets, in contrast, will experience lower demand which will flow through to weaker rental growth.
The 2020 Global Office Impact Study is the first of a four-part series, which will provide a new and thoughtful look into the future of the office, and the role it will play in a post-pandemic environment.
Read the 2020 Global Office Impact Study here.
1 Radio Frequency Identification (RFID) is the wireless non-contact use of radio frequency waves to transfer data.
2 The 2020 Global Office Impact Study analyzes Greater China separately.
2Advanced economies include Australia, Japan, Singapore and South Korea. Emerging economies include India, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.