76% of US CEOs Will Slash Office Space As Remote Work Dominates�
Tyler
Durden Sun, 10/25/2020 – 13:00
The virus pandemic has accelerated more flexible work options
for employees, with many companies instructing employees to work
remotely through 2021, or in some cases, permanently.
As a result, according to a new survey, CEOs have said they will
slash office space, a move that could ripple through commercial
real estate markets, all the way down into local economies.
In collaboration with Deloitte,
Fortune surveyed 171 CEOs between Sept. 23 to 30, found 76% of
respondents are expected to reduce office space size in the near
term. About 28% of them said they would need “a lot less” corporate
space.
The survey is an eye-opener for all the empty office buildings
in major metro areas as remote work continues to dominate. The
prolonged economic downturn and
persistent virus pandemic are whipping up a perfect storm where
companies must reduce their corporate footprint.
Remote working, continued virus pandemic, social unrest, and a
surge in violent crime have contributed to a mass exodus of city
dwellers who have escaped to suburbia. Among CEOs surveyed, 40%
said remote working has increased productivity. Inversely, 31% of
CEOs said remote working decreased productivity.
Corporate America scaling back on office space will continue to
pressure certain CMBS
tranches that are heavily weighted with office buildings,
suggesting as remote working continues, for at least the next 6 to
12 months, building operators could experience slumping rental
income, resulting in missed mortgage payments and could
send deliquesces soaring.
CMBS Deliquesces Remain Elevated
The scale-back of corporate space because of remote working will
also damage local economies that surround business districts. This
will be a mass hit to gas stations, restaurants, and other shops,
who depend on commuters, will see less and less traffic for the
next few years. In July, we noted remote working would
remove some 14 million cars from American highways.
The bad news here is that a commercial real estate crisis
looms.
