The immediate effects of COVID-19 on office, commercial space and central business districts are by now fairly clear. Even in places where offices have reopened, signs suggests that few ‘white collar’ workers will fully return to the traditional 9-to-5 day at a commercial office. Many employers are also using the opportunity to embrace virtual work and rethink their real estate footprint.
Recovery for the sector will likely be slow, uneven and erratic. However, there is still significant capital sitting on the sidelines waiting to be deployed, and real estate continues to prove itself a strong, defensive and long-term move.
Take a look below or download the full report to see what KPMG leaders from around the world think about the digitization of work and office real estate in the new reality.
Sander Grunewald
Global Head of Real Estate Advisory, KPMG International, Head of Real Estate Advisory
KPMG in the Netherlands
There are mixed views on whether people will ever return to offices in the same way as they did in the past. What is clear is that daily routines, spatial requirements and corporate responses are under review and will change. How much of this is a direct response to the immediate crisis and how much of it will influence long-term work patterns is much less clear at this point.
Régis Chemouny
Partner in Charge,
Real Estate and Hotels sector
KPMG in France
Some city centers — places like Paris and Amsterdam, for example — will remain fairly resilient. These are places that had historically low vacancy rates before this pandemic and there are still plenty of companies keen to move into the downtown core. I suspect Paris, Hong Kong (SAR), London and New York, for example, will continue to attract premium prices.
Sarah Sipilä
Director, Global Strategy Group
KPMG in Finland
The pandemic has forced real estate players to really consider the broader disruption landscape. Technology is changing how office space is being used, and we are likely to see increasingly fluid movement between different locations and flex spaces. For landlords and investors, demand is going to become a lot less predictable. And in this environment, scenario planning will be key.
Sarah Hayes
Partner, Deal Advisory Real Estate
KPMG in the UK
While COVID-19 has accelerated the trend towards working from home, I don’t believe this signals the end of the road for offices. There are increasing concerns around the ability of businesses to encourage collaboration, coaching and innovation while working from home, not to mention the human need for social interaction. I think people will return to the office. The big question is how, where and when.
Hans Volckens
Head of Asset Management and Real Estate,
KPMG in Germany
Whether you are optimistic or pessimistic about the longer-term impact of COVID-19 on demand and pricing for office space, you need to recognize that the historic fundamentals have been disrupted. You can’t just sit back and hope to ride out the tide. You need to be looking at all potential scenarios and considering how they impact your entire portfolio at an asset level.
Jacy Li
Head of Real Estate
KPMG in China
The outbreak of COVID-19 had a dramatic impact on the real estate industry. But the pandemic, coupled with decent internet bandwidth, demonstrated that virtual working was possible. And that has forced many companies to reconsider their footprint and daily operations. Landlords and investors will need to carefully balance vacancy rates against rents if they hope to make it through the recovery.
Andrew Weir
Global Head of Asset Management, Global Chair of Real Estate, KPMG International, Regional Senior Partner, Hong Kong (SAR), Vice Chairman
KPMG in China
I think we are still seeing a bit of a distortion in the markets due to the ongoing availability of government stimulus and various efforts to provide rent relief. Over the medium to long-term, it will be interesting to see what rents and prices are genuinely supported by the market and what is being falsely propped up through indirect government supports.
Nigel Virgo
Head of Real Estate
KPMG Australia
With proof that people can work remotely, the need for office space has been disrupted. While it is certain that space will be utilized differently, it is less clear what the return to a new reality will look like. Post COVID-19 workplaces will need to cater for the shifts in use of technology and data, balanced with the needs for flexibility and collaboration. Greater meaningful dialogue will be required between landlords and occupiers to deliver more flexible leases that cater to such uncertainty.
Gregory Williams
Americas Lead, Asset Management / Building, Construction & Real Estate
KPMG in the US
There are two trends that bear watching. First, we believe that, pre-COVID-19, many companies were already reducing their footprints as technology, demographics, and environmental concerns enabled work-from-home activity; COVID-19 has certainly accelerated this movement. Second, the preference for returning to the office may be more slanted towards millennials occupying smaller urban apartments or living with their parents — the missed camaraderie with peers is one of the most profound impacts of the current environment.
Lorne Burns
National Industry Leader, Building, Construction & Real Estate
KPMG in Canada
It is clear that the longer-term outlook for commercial office space will be very market-specific. Some cities, like Vancouver and Toronto, will likely see vacant space absorbed by tech firms eager to access the talent and ecosystems in these hubs. On the other hand, Calgary – Canada’s oil and gas epicenter – may continue to see high vacancy rates as the sector adapts to the new economy.
Sidharth Mehta
Partner and Head of Building, Construction and Real Estate
KPMG in the Lower Gulf region
With demand for office space now muted by the impact of the COVID-19 pandemic, price and quality are likely to be key determining factors going forward. The current economic uncertainty has forced many businesses into a ‘wait and see’ posture. Indeed, for the short to medium term, the market will likely see relocations rather than an increase in demand for additional office leasing space.
Jun Okamoto
Partner, Global Strategy Group
KPMG in Japan
IIn Japan, ‘The Three Cs’ are now widely recognized key words — closed spaces, crowds, and close-contact settings. Remote work has become the norm especially in the metropolis. As a result, office rents are expected to go down. The progress of remote work is also being accelerated by the ‘work station’ in the suburbs. Many companies are now expected to offer both a formal office in the city center, and an informal office in the suburbs.
Chintan Patel
Partner and Head of Building, Construction and Real Estate
KPMG in India
The big question in India is whether people will fully return to offices once the COVID-19 pandemic is under control. Work From Home (WFH) was a rather foreign concept at the start of the year. And, in the short-term, it has worked very well for many companies and their employees. However, it remains to be seen whether the WFH trend will take root and what influence that will have on demand for office space in the longer-term.
