COVID-19 and the economic implications for office occupiers

The COVID-19 pandemic has been a severe shock to the world economy and the renewed surges in late 2020 and early 2021 have been an unwelcome development. Nonetheless, the prospect of mass vaccination has opened up the possibility of a return to some kind of social and economic normality in the second half of the year. This paper focuses on economic prospects, both in the UK and elsewhere, and what it means for office occupiers. When the restrictions associated with the pandemic are eased and then eventually removed, there are several reasons to be optimistic about the prospects for economic recovery. Households have built up considerable savings over the last year as their incomes have been supported by governments and their spending plans have been thwarted. This is likely to lead to a rush in spending on travel and leisure services when the opportunity arises. Governments also appear committed to providing continued support for the economy for the time being. Both of these factors bode well for an economic recovery and a recovery in labour demand, including demand from office-based sectors. This is in stark contrast to the aftermath of the global financial crisis (GFC). It may turn out that the lasting impact of the crisis on real estate come not from any lingering effects on the economy but from some of the rather less expected consequences. Chief among these for office occupiers is the potential for a structural shift towards more working from home even when it is safe for employees to return to the office. Working from home versus working in the office is not a clear-cut decision and a hybrid model is likely to emerge that sees some but not all days spent working from home. There are also complications in realising the potential occupational cost savings from having more working from home. The overall result will be that a switch to more working from home will certainly have an impact, but it might not be the devastating impact on the office market that some expect. It will, nevertheless, be a topic of debate for many years to come.