No property type remained more in flux this year than office. While it became clear that once the threat of COVID-19 subsided, people were eager to travel, eat at restaurants and shop in person, propping up fundamentals for hotels and retail, both office tenants and landlords continued to face an ever-changing pandemic outlook and a lack of consensus among millions of office workers about whether they wanted to return, for how many days a week and with what safety guidelines in place.
There was some good news for office owners and investors in 2021. To begin with, massive loan defaults on office buildings never materialized as many office tenants have postponed making major decisions about their leases with the pandemic still underway. Meanwhile, a substantial number of office users began coming back to in-office work, reassured by both vaccine availability and, in many cases, vaccine mandates instituted by major employers.
Tech companies continued shoring up their office portfolios, in spite of being among the most vocal proponents of remote work in media statements. In fact, the markets with substantial tech company concentrations were among those seeing the biggest office rent increases since the pandemic began. And a substantial number of office workers, burned out from working in their living rooms and the ever-blurring boundary between their work and home lives, started to express a wish to return to the office at least for part of the week. This has benefited not only traditional office landlords, but co-working operators, who have been able to provide employees with still-closed offices an alternative space to work in that wasn’t their living room or kitchen. As a result, demand for office space has remained strong enough to reassure both lenders and investors that office continues to be a viable real estate play.
At the same time, the emergence of new COVID-19 variants, including Delta in the summer and Omicron in the winter, have disrupted existing return-to-office plans for multiple companies. So as the country experiences another holiday season disrupted by the virus, the future of office life remains as uncertain as ever heading into 2022.