ISA Focus: Revisiting the future of office

The balance of virtual and in-person interaction is close to
a post-pandemic steady state. So we observed in
our ISA Outlook 2023, where we called this
out as one of our key global themes for the
year. We pointed out that after a long​ period of
gradual improvement in office attendance, the rate
of change has substantially leveled off, with weekly office
visits stabilizing below 50% in many US markets, and at
somewhat higher levels in Europe and substantially higher
levels in much of Asia-Pacific.​


In many markets, but especially North America,
work-from-home (WFH) headwinds have hit leasing demand as
leases roll. An anticipated boost from permanent social
distancing failed to materialize. At the same time, the
cyclical outlook for job growth has weakened with the
macroeconomy. These factors have contributed to deepening
worries about the prospects for office values, which have
made front-page news due to prominent defaults on commercial
mortgages backed by office assets.​


In this context, we thought it important to revisit the prospects
for the office sector, addressing key questions, while
highlighting differences and similarities among global
markets. Where are risks greatest and where are they less?
How should we think about the role of office in the
portfolio? How will current trends play out in the various
regions where we invest?​


This is also an opportunity to look back on our predictions to
assess where we got things right, and where we did not. As a
part of this, we introduce a new feature in our ISA
suite, “Looking Back”, in which
we check on our prior predictions and forecasts.





Contributors:


Brian Klinksiek


Global Head of Research and Strategy


Chris Psaras


Senior Strategist, European Research and Strategy


Dennis Wong


Senior Strategist, Asia Pacific Research and Strategy


Heidi Hannah


Senior Vice President, Americas Research and Strategy