Home News Hybrid work ‘bigger concern’ than inflation or recession for commercial real estate: expert

Hybrid work ‘bigger concern’ than inflation or recession for commercial real estate: expert

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According to one real estate executive, commercial real estate is sluggish, and hybrid work is a big reason.

Second quarter commercial real estate transactions were down 22% from the same period last year, according to MSCI data. Inflation and recession are both weighing heavily on the minds of real estate investors, “creating some hesitation,” but Hessam Nadji, his CEO at Marcus and Milichup, said, “In reality, the long-term Not a concern,” he said.

“The bigger concern is this hybrid work environment,” he said on Yahoo Finance Live (video above). “There is a lot of focus on facilities like fitness, childcare and entertainment, and it makes employees want to come back at least three days a week, four days a week, whatever it is, depending on the company. A lot of the focus is on how to create a reason for people to come together and come back to the office space.”

Amid the pandemic, many companies have been forced to shift their work environments from strictly in-office to remote working environments. As the number of cases began to decline and vaccines became readily available, many companies chose hybrid work (a combination of both in-person and remote work) for their employees.

Alex Swaton, USA, works remotely from Las Palmas de Gran Canaria amid the coronavirus outbreak, Gran Canaria, Spain, July 23, 2021. REUTERS/Borja Suarez

A hybrid work environment saves capital from companies because employees come to the office only a few days a week and do not need physical space for individual tasks, working with colleagues, communicating with customers, etc. less.

a McKinsey survey Of more than 25,000 respondents, 58% of Americans report having the opportunity to work remotely at least once a week, and 35% report having the option of a five-day week. And when given the opportunity to work flexibly, 87% would take it.

“Certainly, with office space consumption and new leases being signed, we can see that hybrid workspaces are playing a big role in reducing our footprint and space needs. [new] I look forward to the future,” Nagy said.

“The overall footprint appears to be shrinking.”

Companies like Yelp (bellow),PayPal (PYPL), Airbnb (ABNB), and Lyft (lift) dramatically Decrease Some even left physical footprints in major cities or transitioned to permanent work-from-home setups.

Accenture 2021 Survey found Sixty-three percent of high-growth companies are adopting a “productivity anywhere” workforce model, meaning that hybrid, in-person, or full remote work policies are all being considered.and some studies found Remote or hybrid work models aren’t negatively impacting productivity.

“Right now, the overall footprint seems to be shrinking,” Nagy said. “Looking two to four years out, I think the next economic cycle will be here, with more jobs and less overbuilding. There are two drivers for this: one is the reduced footprint of hybrid workspaces, and the other is the new demand it brings to the market.”

A man looks at a vacant storefront in a commercial real estate in Santa Monica, California, USA, June 16, 2022.  REUTERS/Lucy Nicholson

A man looks at a vacant storefront in a commercial real estate in Santa Monica, California, USA, June 16, 2022. REUTERS/Lucy Nicholson

At the same time, however, Nadji emphasized that some of the fastest growing companies in the US are acquiring buildings or land to build future buildings. Technology companies in particular are looking for additional space as large data centers are becoming more popular.

“The mix of space usage is definitely changing for individual employee spaces, accommodating more teams and collaboration,” says Nadji.

Further, he said, within the commercial real estate industry, clients interested in development are stepping up, “in all segments… take old office buildings and really old properties, improve them, We are looking for opportunities to upgrade, nurture, to the current kind of configuration that we believe the market needs as a really good investment, rather than building an entirely new project.”

Ethan is a writer at Yahoo Finance.

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