For commercial real estate, particularly office space, there will be more woes as remote work is seen continuing into 2023 with the hybrid approach taking centre stage.
Across the world, it is predicted that as remote work continues to stay, the value of office real estate will decline significantly, by as much as $450 billion in the United States. The story is not any different in Nigeria where Grade A office market has seen significant drop in rent per square metre.
In places like Ikoyi and Victoria Island, notable Grade A office buildings like The Heritage Place and The Wings have dropped their asking rents from between $1,000 and $1,250 per square metre a couple of years ago to between $750 and $850 per square metre at the moment.
Though the great return to office debate will rage on in 2023, with select CEOs demanding that workers get back to their desks, experts are of the view that the hybrid approach will carry the day.
Workers still prioritise the flexibility and work-life balance afforded by the COVID-19 pandemic’s shift to telework, even as the economic outlook darkens across different countries of the world. That, according to Rand Ghayad, head of economics and global labour markets at LinkedIn, will continue this year.
“Hybrid allows for that flexibility, while still making room for occasional in-person mentoring and socializing,” said Nick Bloom, a Stanford economist, who pointed out that it is part of the key reasons for in-office collaboration.
In Nigeria, remote work is still in practice but not on large scale as it is in overseas countries. But because it is practised by corporate organisations, especially those of oil and gas, the impact is deeply felt in the commercial office market most of which have high vacancy rate.
“While some businesses will return to office buildings, others will not. Large office space customers are reconsidering their requirements. As a result of the post-Covid-19 reconsideration of office work, investors may need to reprice their assets,” Ayo Ibaru, chief operating officer of Northcourt Real Estate, said.
According to him, the demand for the Grade A office market has been poor as large corporates continue to implement key elements of work-from-home policies and this is expected to continue into the new year.
This, perhaps, explains why there are no new developments and those in the pipeline are very few, including A & A Towers, Famfa Oil Towers, Trinity Towers, Dangote Headquarters, and Aerobel Towers.
Read also: The new normal: Adopting remote work structure
It is also expected that companies will say farewell to expansive, sprawling headquarters, because it is going to be “Monday through Wednesday, work from home; Thursday and Friday, head into the office.”
As companies and employees grow accustomed to hybrid and remote work arrangements, the large, prestigious corporate offices will soon become a rarity, according to Erika James, dean of Wharton School and co-author of ‘The Prepared Leader’.
Overall, the flexible office space market is predicted to be even more in demand than it is today, with a variety of new offerings available to meet the needs of businesses and their staff.
Nick Riesel from freeofficefinder.com reasons that with a recession now in view, many staff could be facing redundancy as seen in the last recession which, he expects, will result in a sharp increase in one person start-ups taking initial advantage of coworking space before eventually moving into their own private offices.
Coworking space, he noted, could also be popular for large companies that don’t need their own private space and are looking to take advantage of more economical rental offerings.