Companies to further downscale their office space due to low demand

Covid-19 related job cuts and working from home have reduced office space needs for many companies.

FNB’s Commercial Property Broker Survey for Q1 2021 shows that businesses plan to further downsize their offices. The planned downscaling is mostly as a result of the Covid-19 restrictions and more individuals working from home.

Nevertheless, FNB points out that office space demand is also heavily influenced by employment trends in finance.

“Employment in the Real Estate and Business Services Sector dropped by a massive seven percent year-on-year in the second and third quarters of 2020, and this alone is likely to translate into a significant drop in office space required by the sector,” according to the survey.

Notwithstanding this decline, the survey shows rising activity ratings in the industrial, retail and office classes. In all three markets’ cases, the activity ratings in the first quarter represented a further strengthening on the previous quarter’s readings. But the levels have not yet recovered to the pre-lockdown levels recorded in the first quarter of the 2020 survey.

The Q1 2021 survey indicated that the brokers agree that all three segments have been greatly impacted by lockdown and the economic downturn. It concluded that, “They don’t, however, perceive retail property to be as challenged by technological progress and online retail as what they perceive office space to be from the lockdown-induced surge in working from home and the great success thereof.”