When the coronavirus pandemic hit U.S. soil in the early part of 2020, workers across the country were told to pack up their desks and prepare to do their jobs from home for the foreseeable future. Little did we know back then that remote work would morph into a setup lasting nearly two years and counting.
All of this has dealt a huge blow to office buildings, as well as the people who invest in them. But will things get better in 2022? Looks like the answer is “yes and no.”
More workers should return
Earlier this year, in the wake of COVID-19 vaccines, companies began making plans to bring workers back to the office. In fact, a number of large employers made their feeling about remote work clear — it was a temporary solution, but not a sustainable one.
But then the delta variant hit, which kicked those office reopening plans to the curb. It was hard to make the argument for workers to return to the office at a time when COVID-19 cases were soaring.
And so companies shifted gears. They pushed back their reopening dates and established policies around vaccine mandates. And now, they’re ready to welcome workers back once again.
That, combined with the widespread availability of COVID-19 booster shots, should be enough to fuel a decent office return in 2022. And that should, in turn, benefit office REITs, or real estate investment trusts.
But should investors expect a full-fledged return? Not exactly.
A large number of companies have already made plans to keep workers remote on a long-term basis. And now that remote work has been happening for almost two years, companies could see more pushback on employees’ part next year, when office return plans come to fruition. As such, we should expect fuller offices — but not at 100% capacity.
Furthermore, many companies may still seek to downsize their office space as they adjust to hybrid schedules — setups that have workers doing their jobs from home but also reporting to the office a few days a week. Office building landlords may need to gear up for a series of intense negotiations as companies attempt to eke out cost savings at a time when office space doesn’t seem as essential as it once did.
It should be a better year
All told, real estate investors should expect 2022 to be a better year than 2021 on the office building front. But that doesn’t mean the sector won’t face challenges. Between companies upholding remote work arrangements and allowing employees to split their time, office REIT investors should not expect instant recovery — it may not happen until 2023, or beyond.
Furthermore, while employees may get back to offices in the course of 2022, that progress may also be slow. There’s a good chance companies will ease workers back into things rather than put a hard stop to remote work. And so while desks should start to fill up again, it’s certainly not something we can anticipate happening overnight.