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Vaccine’s Won’t Fix The Office Market, Yet

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The struggles of the office market in today’s work-from-home reality are now well known to many. The issue is relatively simple: empty offices entail a reduced need for office space. Add to this the financial hardship caused by the COVID-19 pandemic, and you are left with a market riddled with investor and developer uncertainty. In light of this, many landlords have been especially eager for the much-anticipated vaccine rollout promising to end the pandemic. Developments have been promising, and the first doses of the vaccine have already been distributed to medical personnel and high-risk patients. So, the question on landlords, developers, and investors’ mind is, of course, “When will this get us out of the bind we are currently in?”

The answer: “Soon, but not yet.” Although the vaccine rollout signals the end of the pandemic, vaccines will have to be distributed en masse for their benefits to be realized. [1] Public health officials at both the WHO & the CDC have strongly recommended that organizations wait to reestablish in-person work gatherings. [2] They warn that the vaccination rollout campaign cannot be considered effective until “herd immunity” is reached. [3] What this means is that enough individuals have been vaccinated to ensure that viral spread is significantly reduced. That will not be for months, for a variety of reasons.

Mass vaccination will not occur until mid-spring at earliest, putting office return dates at late spring or early summer in the best case. [2] Vaccines are being distributed on a per-need basis. This will likely entail most office workers receiving the vaccine in the later stages of distribution, after medical personnel and at-risk workers. Put simply, if you are working from home, you will likely continue to do so for the first quarter of this year. 

This is not the great and immediate relief office landlords, developers, and investors were looking for, unfortunately. However, it is the clearest sign that relief is coming; and many have begun to take note. Corporations are issuing return-to-office plans for the late spring, and increased interest has been shown in office space. The surge in interest is reportedly higher than it has been for all of the pandemic — a great sign for those most affected by the slowdowns. [1] 

As we approach herd immunity, social distancing measures will not simply halt, but will relax in proportion to the amount immunized. Similarly, return to in-person work will be gradual so as to mitigate risk and employer liability. Even then, remote work will remain as a newly added fixture of many companies’ operations models. Increased reliance on cloud computing and collaboration software over office space will almost certainly affect the office market. [3] This effect has yet to be understood, but will require investors, developers, and landlords to adapt to new market needs. WeWork and other rental office space companies appear poised to benefit in the interim, as displaced companies look for temporary spaces to reestablish in-person work. [1] 

Looking forward, one can expect the proverbial return to normal when the chance of contraction is as negligible as before. In such a scenario, we will have reached a nearly perfect rate of immunity, with each person carrying antibodies from having been infected or vaccinated. [4] (Of course, it is highly encouraged that everyone, infected or otherwise, get vaccinated.) Financial activity will hopefully approach pre-pandemic levels as the pandemic slowly but surely becomes history. Until then, officials warn, we must exercise patience to ensure that infection rates wane as we approach herd immunity.

Sources:

[1] – TRD Staff, “Covid-19 vaccine won’t be immediate cure for office market,” The Real Deal, 29 Dec. 2020, https://therealdeal.com/2020/12/29/covid-19-vaccine-wont-be-immediate-cure-for-office-market/, accessed 4 Jan. 2021.

[2] – Grant, Peter, “Covid-19 Vaccine Outlook Prompts Businesses to Dust Off Return-to-Office Plans,” The Wall Street Journal, https://www.wsj.com/articles/covid-19-vaccine-outlook-prompts-businesses-to-dust-off-return-to-office-plans-11609237800, accessed 4 Jan. 2021.

[3] – Ip, Greg, “Covid-19 Propelled Businesses Into the Future. Ready or Not.,” The Wall Street Journal, 26 Dec. 2020, https://www.wsj.com/articles/covid-19-propelled-businesses-into-the-future-ready-or-not-11608958806?mod=article_inline, accessed 4 Jan. 2021.

[4] – D’Souza, Gypsyamber & Dowdy, David, “What is Herd Immunity and How Can We Achieve It With COVID-19?”, Johns Hopkins Bloomberg School of Public Health, 10 Apr. 2020, https://www.jhsph.edu/covid-19/articles/achieving-herd-immunity-with-covid19.html, accessed 4 Jan. 2021.

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