If you watch or listen to any financial news this year you probably hear a recurring theme of the worries surrounding office real estate. Many pundits and people in the news are commenting that commercial real estate – specifically office space – could be the next “bubble” to pop.
This would be an obvious prediction based on what has happened to the work environment since Covid, which has spurred a work from home/work from anywhere moment in time. This has caused the stock prices for companies that are exposed to commercial real estate, specifically office space, to decline steadily. Here are some of the notable examples of companies ditching or downsizing their office space.
There are many companies that have announced plans to reduce or eliminate their office space because of the COVID-19 pandemic and the shift to remote work. Some of the notable examples include:
- Shopify: The e-commerce platform announced in May 2020 that it was becoming “digital by default,” meaning most employees would work remotely even after the pandemic. The company has since announced plans to reduce its office space in Ottawa, Canada, and shift to a “flexible office environment.”
- Dropbox: The cloud storage company announced in October 2020 that it was “going virtual first,” meaning remote work would be the company’s primary way of working. Dropbox has since announced plans to sublease its San Francisco office space and reduce its office footprint in other locations.
- Siemens: The German engineering conglomerate announced in July 2020 that it would allow its employees to work from home or from remote offices for up to two or three days a week. The company has also said it plans to reduce its office space in several locations.
- Zillow: The online real estate company announced in August 2020 that it would allow employees to work remotely indefinitely, and in November 2020, it announced plans to sell its headquarters in Seattle and shift to a “distributed workforce model.”
- Ford: The automaker announced in March 2021 that it was implementing a hybrid work model, with employees working both remotely and in the office. The company has also said it plans to reduce its office space by 30%.
However, even some of these same companies have pivoted away from this and have told employees they need to return to the office. Some of the notable examples include:
- Goldman Sachs: The investment bank has been one of the most vocal proponents of returning to the office, with CEO David Solomon stating that remote work is “an aberration that we are going to correct as quickly as possible.” The company has mandated that all employees return to the office by June 2021.
- JPMorgan Chase: Like Goldman Sachs, JPMorgan Chase has been a strong advocate for returning to the office. The bank has asked its US employees to return to the office on a rotational basis starting in July 2021, with plans for a full return by early September.
- Apple: In June 2021, Apple announced that it was planning a “hybrid” work model that would require most employees to come into the office for at least three days a week. The company plans to implement this model in September 2021.
- Amazon: The e-commerce giant has announced plans to bring its corporate employees back to the office by fall 2021, with a goal of returning to a “normal” in-office work environment by January 2022.
- Ford: While Ford has also announced plans to reduce its office space, the company has also stated that it plans to have most of its employees return to the office by July 2021.
There are several real estate owners who have announced plans to convert office space to residential use, as the COVID-19 pandemic has led to a decrease in demand for office space in some markets. It’s worth noting that converting office space to residential use can be a complex process that requires significant investment and regulatory approval. However, some real estate owners see this as a way to repurpose underutilized office space and meet growing demand for housing in urban areas.
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