The ‘hybrid’ work is the wild card in the fall in the price of offices

0
17
The 'hybrid' work is the wild card in the fall in the price of offices

Businesses can do much more to reduce excess space, which will ultimately translate into lower rents

Office building owners are facing a storm threat. Rising interest rates are reducing property values ​​while vacant properties are increasing. With a global recession on the horizon, companies can also start to take advantage of the hybrid work revolution, which combines face-to-face with remote work, and reduce office space.

London reflects the difficulties faced by office owners around the world. Property manager British Land, valued at £4bn, announced a nearly 3% drop in the value of its workspaces, a figure similar to that announced by its counterpart Great Portland Estates. For both, the main problem is the rise in interest rates, which raises the expected return on property rentals, which lowers prices.

The good news is that rents do not suffer. During the 2008 financial crisis, vacancy rates for London offices skyrocketed to over 10%. However, although they are now around 8%, owners report strong demand for high-quality properties, allowing them to increase the price.

To anything that digs below the surface, the picture becomes bleaker. Office owners are increasing the volume of short-term and flexible rental contracts in order to compete with companies like WeWork. Hybrid work could make an already bad situation worse. In the UK, wage earners go to work on average less than 1.5 days a week. In New York, the offices are still only half full. This means that businesses can probably do a lot more to reduce excess space, which will ultimately translate into lower rents.

Shares in British Land and its French counterpart Gecina are trading at just 59% and 53%, respectively, of their declared asset value, after adjusting for the amount of debt. This suggests that a more drastic revaluation is yet to come.

Previous articleiCloud for Windows shows photos and videos from strangers.
Next articleGoogle Maps launches augmented reality in cities, these are the first chosen
Brian Adam
Professional Blogger, V logger, traveler and explorer of new horizons.