NEW YORK (Reuters) – The novel coronavirus may do to U.S. office rentals what e-commerce did to malls, or so goes a line of thinking running through commercial real estate circles.
If anything, millions more Americans working from home may hasten corporate moves to downsize their offices, a decade-old trend partially responsible for the office sector underperforming other property asset classes in recent years.
This has come even as the leasing business boomed in New York with a surging jobs market and economic expansion that was upended by orders to close offices to prevent the spread of the coronavirus.
Now technology threatens to further reduce the amount of square footage companies lease after seeing how well the work-from-home experience has fared.
Apps such as Zoom, Microsoft Teams and Google Hangouts have made it possible to collaborate remotely and for staff to be as productive as they are in the workplace, said Gina Szymanski, a portfolio manager at AEW Capital Management LP in Boston, one of the largest real estate investment managers.
“Work collaboration apps will likely have a long-term impact on office (space) similar to the impact that mobile shopping had on retail,” she said. “Corporate footprints will continue to shrink.”
In Manhattan, whose skyscrapers have long been the most valuable U.S. property class, further downsizing could pressure leasing prices that soared to record highs during the good times but now may slip as they typically do in a recession.
Space per worker slid in half to about 150 to 125 square foot (14 to 11.5 square meters) since the financial crisis, according to conventional estimates,