Commercial real estate investors have high hopes that major office markets will return to normal in the near future, but most aren’t betting on it just yet.
Nearly three-quarters of real estate industry professionals believe that office leasing velocity in major cities will return to pre-pandemic levels within the next four years, according to a new survey by law firm Morrison & Foerster, which polled over 500 CRE stakeholders across the U.S. in April and May.
When asked which markets are currently best suited for commercial real estate acquisitions, however, just 47 percent respondents ranked primary markets as one of their top choices, closely followed by suburban areas of primary markets at 46 percent and secondary markets at 37 percent.
A full 21 percent of respondents predicted that office leasing velocity in major cities will never return to pre-pandemic levels. Taken together, the results signal that investors may be finding value in new markets after the pandemic.
The office market has been hard hit by remote work, a trend that has inspired some employees to move away from cities — or buy secondary homes — as more companies embrace hybrid work models even as vaccines proliferate. Survey respondents were split on whether out-migration from urban centers represents a temporary shift: 59 believe it does, while 30 percent indicated that it is a permanent trend.
Even so, as office workers gradually return to their desks — with some companies directing 100 percent of their employees to come back as soon as next month — thoughts about working from home have evolved.
Though 77 percent of respondents of the May survey expect, in three years, to be working from home more than they did before the pandemic, that figure is down slightly, from 85 percent, when the survey was last conducted in October 2020. Seventy-three percent of respondents believe that a majority of office workers will return to the office full-time at some point after the pandemic.
Respondents predicted a quicker recovery for retail. Eighty-four percent expect in-person shopping, entertainment and travel to return to pre-pandemic levels within the next two years, and 51 percent expect it to happen within one year.
A minority of respondents were unconvinced. “Never. Consumers found new ways to shop,” one respondent wrote. “Retail patterns permanently changed,” said another. “Streaming movies will have some impact on theater experience.”
Still, it’s not all doom and gloom. The vast majority — 83 percent — believe the worst of the economic downturn is behind us.