In the last decade we have seen a falling interest in commercial real estate as the “Cloud” becomes the answer to working remotely, Until now working remotely has been a lifestyle decision, rather than a health and safety issue.
But, now as we see staff members of all different businesses, and walks of life transition to a home based working environment or becoming unemployed as their current employment closes its doors, will this mean the death of commercial office space. I think so!
The need for a desk, in an office, with a power bill, and cleaning costs, in a building in the city that takes 40 minutes each way to get to now looks like a prehistoric way of doing business as employees are being asked to work from home… and they like it!
Recently I had the opportunity to speak to Harry Hills from Bimba Projects
His firm assists with commercial shop fitouts and has seen a shift in the last 5 years with retail on the downward trend, and food and beverage on the way up! But when I recently spoke with him regarding his thoughts on the effects of COVID 19 he shared this insight, “In the last few years big business have been scaling down their need for commercial real estate, offering flexible work spaces and more of a “hot desk” style environment. With the push from the Australian government to work from home and undertake social distancing, the opportunity for people to try working from home over the next few weeks or months could be the catalyst that pushes commercial real estate into a new direction.” Harry also mentioned that he observed that businesses with multiple offices were condensing their work force into key locations such as the CBD rather than also having satellite offices in the suburbs. Meaning you are either in the HQ Office or at home.
Also given the announcement today regarding the closures of certain businesses within the economy such as Gyms, Cinemas, Bars, Restaurants ect. The pressure on commercial land lords will start to pile up and could result in prolonged vacancy of commercial property spaces and then subsequent pressure on landlords with the effects on cashflow.
With the true effects of the COVID 19 situation still to take hold, we are all together on the rollercoaster ride with no clear end in sight. But what does appear to be clear, is that commercial property rather than residential will be hardest hit.