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Hybrid Is Here To Stay Despite Coming Recession, CRE Leaders Say

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While the recession may send employees back to waiting areas in the office sector, the reunion is likely to be short-lived, commercial real estate executives said at an industry panel in Atlanta this week.

Bisnow/Jared Schenke

Greenwood Commercial Real Estate Group Principal James Pitts and RCLCO Managing Director Eric Willett

Many economists and financial giants expect a recession to hit the US economy Over the next few months, employees may be required to report more frequently fear of losing one’s job.

But workers will have the long-term upper hand in deciding when to show up at the office, CRE executives said.

“In the last decade the balance of power has shifted to employees,” he said. Eric Willettmanaging director of a real estate consulting firm RCLCO at a panel discussion at National Association of Real Estate Editors annual conference in Atlanta on Tuesday.

“Aside from the vicious market cycle, workers’ power is entrenched. This social contract has been renegotiated.”

Tennants are frightened by gathering clouds that suggest a global recession is imminent. already, Number of Major U.S. Companies Initiated layoffs or hiring freezes. meta, microsoft, Amazon, ford and AT&T.

Employers, on the other hand, now see their relationship with their employees as a “partnership.” Mark Toroan Atlanta-based developer known for numerous versatile projects in the Southeast.

Toro said the pre-pandemic formula for expecting employees to be in the office 40 hours a day, five days a week, meant that the environment required companies to do more than recruit and retain talent. I said it no longer fits.

Getting them to the office has become a problem.


Bisnow/Jared Schenke

Mark Toro, founder of Toro Development Co.

“That command-and-control leadership style is no longer effective,” said Toro, who resigned. last year’s NAP Founds his own company, Toro Development Co.

Nearly 60% of remote-enabled jobs (an estimated 60 million in the US) have hybrid schedules, 32% are fully remote, and only 9% are in the office full-time. According to a Gallup report in March.

Over 70% of companies plan to pursue a hybrid work strategy, According to CBRE’s Occupant Sentiment Survey from this spring.

This will result in many companies reducing their overall office footprint.

Corporate shrinkage is already evident in office markets such as Metro Atlanta, where shadow office space is proliferating.according to CBREmore than 5M SF are sold by companies for subleasing.

just this week home depot shocked the real estate community when it announced that it would sublease a roughly 600K SF suburban office in the Cumberland/Galleria submarket as a home improvement support center. Employees have moved to a hybrid model.

Nationwide, tenant office shrinks are just beginning, with less than 50% of outstanding leases expiring since the pandemic, Willett said.

A looming renegotiation could lead to higher vacancy rates in commodity office buildings.

“In the next five years, we will see this Covid response burn out,” Willett said. “We have serious concerns about the stability of demand for these B and C properties. They are buildings that face demand challenges going forward.”

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