When COVID-19 forced office workers into spare rooms or at kitchen tables, it led to the biggest change in professional life in decades. As with any major change, its effects are still felt at various levels of corporate hierarchies and the financial system. in 2024 Confrontation with reality awaits employees, managers, and real estate (NT) owners.
Managers and their subordinates do not yet fully agree on where work should be done. According to a survey by the academic group WFH Research, full-time workers in the US, UK and Canada with a high school education or higher work from home an average of one and a half days per week. They would prefer to do it twice as much on average. However, employers have a different opinion. Everyone from Wall Street giant Goldman Sachs to video calling provider Zoom is asking employees to come into the office more often, and they’re not exactly beaming with enthusiasm.
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No one expects or plans to return to a five-day work week from the office. Managers and employees are most likely to agree on a middle ground, although the distance work will be a little less than the latter would prefer. A lot also depends on whether rising interest rates will weaken the economy. As the unemployment rate starts to rise and the demand for workers decreases, managers will be forced to choose the less favorable option.
The shift to remote work has so far, somewhat unexpectedly, had only a limited impact on the commercial property sector. Offices are indeed less busy than before. U.S. employment is at half of what it was before the pandemic, according to Kastle, a data entry systems administrator. But long-term leases meant that, although unoccupied office space increased, it remained at a relatively low level. Goldman Sachs estimates that 12 percent all contracts will have to be renewed in 2024. This is twice as much as in previous years.
The bank’s analysts predict that 4.3 million additional jobs may be created due to remote work. sq. meters of unoccupied offices in the US, and this would be equal to the entire 2022 for the area of newly equipped offices. Modern offices that meet stricter environmental standards will continue to be in demand, but offices in older buildings may remain empty.
This does not bode well for real estate owners. As interest rates rose, their refinancing costs also increased. In the US market, the majority of commercial real estate financing is provided by smaller lenders, which after the collapse of Silicon Valley Bank in 2023. March, faces increased pressure. The cost of financing for less attractive commercial premises can be even higher. For example, the yield on commercial real estate mortgage bonds is higher for low-quality offices than for high-end properties.
It is likely that more premises of this type will be offered for sale at a discount to allow them to be renovated or demolished. Those with sufficient light and adequate plumbing can be converted into dwellings. Although such an alternative is usually not financially viable for many unattractive offices, the number of such conversion projects in London and New York is growing. A former newspaper office and bank building at 25 Water Street in Manhattan is being converted into a residential building. It will be equipped with 1.3 thousand apartments, spa, swimming pool and co-working space. Although the pandemic is over, in 2024 the telecommuting revolution will continue to change the way people work and spend their free time.
Rachana Shanbhogue is the business editor of The Economist