Real estate challenge: office space in freefall

The teleworking boom

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The pandemic was the catalyst for a radical change in working behavior. Confinement and restrictions forced many companies to adopt telecommuting on a large scale.

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On the employer's side, this experience has shown that it is possible to maintain high productivity while working remotely. On the employee side, the flexibility offered by telecommuting has proved very attractive, and a return to 100% face-to-face working is no longer an option.

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As a result, employers and employees alike have turned to new ways of working. In the wake of the health crisis, numerous telecommuting agreements have been signed, and companies are now banking on hybrid work models and the widespread use of flex office.

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This rapid transition has created a major challenge for the commercial real estate market: office occupancy rates are falling.

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Real estate strategy: optimization at the forefront

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Against this backdrop of under-occupied offices, companies are looking to optimize their real estate assets to save money:

• reducing the size of the real estate portfolio by terminating leases ;
• reduction in office space with fewer square meters leased ;
• transforming workspaces to make the most of floor space ;
• sub-letting part of the offices via corpoworking ;
• transition to flexible office real estate.

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Offices are therefore smaller, but more flexible - a trend that is also reflected in lease terms. Today, companies are opting for shorter leases, preferring 12-month contracts for example, rather than the traditional 3/6/9 lease. Favoring short-term commitments also enables companies to adapt quickly to market changes.

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All this translates into falling demand for traditional offices and rising demand for on-demand workspaces, such as coworking.

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Divide and conquer

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Gone are the days of 5,000 square metres of office space in a tower at La Défense! To meet the new demands of companies, office floors are being divided into smaller areas, and tenants are multiplying.

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Offices shared by several companies and corpoworking - which consists in subletting part of one's office space to other professionals - are all the rage. The office real estate market is undergoing a new dynamic.

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Nothing is lost, everything is transformed

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As an alternative to, or in addition to, reducing real-estate space, many companies are embarking on office space redevelopment. It's time for collaboration! To accommodate the new uses associated with hybrid working, workstations are being transformed into convivial spaces. To adapt to these new spaces, office organization is also being rethought, often in favor of the flex office.

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Since the office doesn't meet all employees' needs and uses, more and more companies are turning to coworking spaces. These on-demand workspaces will satisfy many of today's requirements:

• flexibility ;
• choosing a workspace adapted to your activities ;
• friendly, collaborative environment.

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The coworking market is growing fast. Converting traditional offices into coworking spaces is a real opportunity for office real estate.

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Search office or home

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The role of the office is no longer the same, and the emphasis is now on creating a real living space that encourages social interaction. This new vision of the office has an impact on space planning. We are witnessing the hotelization of the office, with hotel codes and services invading head offices - the concept of workspitality. New spaces are being created, combining workspaces, restaurants and even gyms. Some trends go even further, such as co-living, which merges the workplace with accommodation.

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The idea is to offer inspiring and unique places for an extraordinary work experience. These new trends hold great promise for the office real estate market, as the creation of these spaces requires considerable real estate and budgets.

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Office real estate is not doomed, but it must evolve. The emergence of hybrid working and new work behaviors have changed the game. The transformation of workspaces offers positive prospects for the sector. The growing demand for more flexible working environments focused on employee well-being is opening up a whole new world of possibilities. Architectural innovations and the redevelopment of office space are creating new opportunities in the commercial real estate market.

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