The U.S. office market’s outlook is not as dire as the current economic downturn might portend. Though far from certain, two potential scenarios could unfold—the worst of which forecasts a downturn that is not significantly greater than any other since 1990 (Figure 1).
Figure 1: U.S. Office Rent Growth Forecast
Source: CBRE Econometric Advisors, Q2 2020.
However, several trends support a less severe scenario. One is that office-using industries have been less vulnerable to COVID-19-related job losses due to remote working. Though further office-using job losses are expected in Q2, they should be less than those of other more vulnerable employment sectors like hospitality and retail. Employment data confirms this trend so far, and the unusually high number of job losses classified as “temporary” suggests a rebound in employment when the economy improves in the second half of 2020 (see CBRE’s MarketFlash: “Rebound Expected in Q3 After Record Drop in Employment”).
The future use and value of conventional office space is perhaps under the most intense scrutiny ever. While some are clamoring for a return to the collaboration, social connection and efficiency of the office, others appear skeptical. Most occupiers are evaluating their current and future space needs to support both an increasingly remote workforce and less office density for health and safety reasons. In either case, the unmatched value of a dedicated space for commercial innovation and professional collaboration will endure, even if some long-term design changes occur.