The CEO of commercial real estate brokerage firm Cushman & Wakefield told CNBC on Wednesday he’s seeing encouraging signs in the office market as it overcomes significant coronavirus-related disruption.
“We lost about 2.9 million office jobs in April, May of last year. We’ve recovered 2.2 million of those jobs and we expect full recovery of office employment in the U.S. middle of next year,” Brett White said on “Squawk on the Street.” “That’d be two years from the beginning of the pandemic and to put that into context … it took six years” after the 2008 financial crisis, he added.
Office building tours, which are seen as a leading indicator of future leasing revenue, are up by 80%, White said. Currently, he said 75% of leases are being signed for more than four years, while the remaining quarter are 10-year leases.
Major central business districts should see about 88% to 89% office occupancy levels in the next couple of years, he said, adding that the U.S. is experiencing an increase in knowledge-based working jobs that are offsetting a Covid-fueled rise in hybrid workers and people who may permanently work from home.
Before the pandemic, White said the average office floor space was about 65% occupied on a given day, stressing it’s “not reality” that every desk had someone working from it every day. “So we think that the data tells us through the office job employment numbers and forecasts, that we’re going to be back to a fairly stable, fairly regular office occupancy environment in the next couple of years,” White said.
The “single largest determinant” of employees’ return-to-office plans and the overall health of the office market is vaccines, White said, which he believes changed the mindset of most workers and company executives to prioritize a safe environment.
White said while most companies are still waiting to see how the highly transmissible delta variant impacts the trajectory of the epidemic, the recent surge in Covid cases places post-Labor Day plans to reopen offices around mid to late October. He said Cushman & Wakefield, which provides real estate services, delayed its reopening plans by a month.
Many companies, including Amazon, Apple and Lyft, have postponed their in-person fall work plans due to the recent surge in Covid cases fueled by the highly transmissible delta variant. More than a dozen large companies in the U.S. have recently announced vaccine mandates for some or all of their workers to curb the spread of the virus.
“It’s just an overall fundamental trend of movement back to normalcy. It’s going to be rocky, it’s going to be different in every marketplace. … The office space itself may be a little bit different. Hopefully it’s more fun to work in and the technology is better, but I think we’re going to feel a year from now, that for the most part all this is behind us,” White said.
Earlier this week, on Monday, Cushman & Wakefield announced a $150 million partnership with office-sharing firm WeWork. The deal is aimed at helping businesses and landlords evolve the workplace experience for employees in the new hybrid work landscape.
“Companies are thinking about space very differently,” White said. “I think companies realize that the office needs to be a place that attracts people to the office. It needs to be a place that’s fun to work. It needs to be a place that … is rich in technology to help the tenant’s experience within the building.”