The global chief economist for commercial real estate giant CBRE says he’s optimistic about the long-run outlook for the office sector in spite of businesses’ rapid adoption of technology that facilitates remote meetings.
In a recent podcast conversation, Richard Barkham told host Spencer Levy that while the near-term prospects for the asset class are dim, he’s confident that demand will bounce back.
“I remain convinced that the office sector is viable in the long term,” he said. “It’s where people meet. It’s where creativity happens. It’s where clients get helped. That’s where we train and bring in younger people into the workforce. And all those things are going to need to reestablish themselves.”
Barkham acknowledged that the flight away from full-time office work for many employees is likely to be permanent. While 63% of office employees traveled to their workplace all the time before the coronavirus crisis, and pre-crisis projections forecast a dip to 52% by 2030, so estimates now pin that number at between 20 and 25%.
“We’ve had the wind behind us over the last 20 or 30 years, which is continual growth in the office sector, continual growth in the amount of space that’s devoted to office,” he said.
But he also said there’s reason to hope that a readjustment in how space gets used could offset this trend, as concerns about exposure to future pandemics result in the allocation of greater space to each employee.
Barkham continued that the outlook for data centers and logistics facilities is particularly robust at the moment, with the conoravirus forcing a pivot towards not only remote work but also digital commerce.
“Retail sales are now back to their pre COVID levels,” he said. “And not all of that is going through stores. that’s going through our industrial and logistics sectors. That’s very hot at the moment and looks likely to continue.”
Other non-traditional real estate asset classes aren’t likely to flourish in the same way.
Not every alternative benefits from COVID-19. Student housing, seniors’ housing…that kind of communal living has been a little called into question,” Barkham said. “But I think in that case, we need to remember that there will be a world after COVID-19 and the long term demographics points heavily towards more seniors’ housing and also more student housing.”
Looking at the big picture, Barkham believes that—in spite of the U.S.’s struggles in responding to the coronavirus crisis—the economy will bounce back in 2021.
“I can understand the lack of confidence that the flare up in the virus, particularly in the United States, has not been well handled. It dealt a big blow to confidence and that might delay the recovery,” he said. “We’re not, as I have said, I think, too far away from a generally available vaccine. It may not be a cure all, but therapeutics are coming. And so I think the outlook for 2021 is much better than people expect.”
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