COVID-19: Commercial real estate loses to Work from home – With millions working from home due to the coronavirus pandemic, there are fears among realtors that many companies could continue to cut costs and spend less on renting office space after the health crisis.
With the emergence of the coronavirus, most businesses opted to operate remotely as governments/authorities declared a sit-at-home protocols, as well as physical distancing culture to contain the spread of the pandemic.
As of April 28, 2020 more than 3.06 million cases have been reported across 185 countries, and territories, resulting in over 213,000 deaths and few recoveries from the novel infectious disease.
Some of the sector operators believed that even if the disease spread cease momentarily, adjusting to previous business model where people gather in large numbers in offices may be a mirage, couple with the reality that Covid-19 experience has opened up knowledge to executives on possibility of working remotely with gains especially reduction in the cost of running business operations.
Asides, they said for a lot of industries, the lockdown has shown the potentials of working from home with the Lagos authorities advising the working population to take advantage of model even as the partial lockdown of Lagos begins today.
The growth of remote working has been driven by technology, with zoom and other teleconferencing platform encouraging proximity while living in tens of thousands miles apart, traditional office’s popularity may pass its peak as financial pressures could drive businesses to seek smaller, more flexible and cheaper offices.
Speaking with The Guardian, a real estate practitioner and member of trustees of the Nigerian Institution of Estate Surveyors and Valuers (NIESV), Dr. Austin Otegbulu said businesses and offices may require less space against the practice in the past. As a result, he said rents may go down for a while for office letting.
He posited that by the experiences of the COVID-19, ‘people are not able to mix up again, work in their offices and interact through physical businesses, works have to be done whether we like it or not and so the use of digital platform for business has come en-vogue and deployed remotely.
According to him, this, translate to the fact that a lot of businesses will go digital working remotely to save cost and people would like to minimise their expenditures. He said people might likely adopt perpetual working from home and would choose to come to offices, once in a while to interact when absolutely necessary.
Otegbulu said, “So many things we couldn’t do in the past are now been done and it has shown to us that we can save a lot of costs by going digital, and in remote ways than the physical means been adopted before. People may have a general desk where they could come to work briefly and go back to their home, no permanent desk and only few staff will stay in the office. It happens in insurance companies and banks and it may happen in real estate and other businesses. I know of Lady who operates a restaurant, she now supply food from her house which means people may not need much space or shop to do businesses”.
According to him, online shopping could become more acceptable en- vogue and commercial spaces letting, would be reduced except in a situation where people would like to see compulsorily what they are buying physically.
On how industry operators could survive the situation, he said, “Now if you designing shops or offices, there must be other attractions that would make people come. Real estate players in the commercial space must now bring to bear great creativity and diversification to the way of doing the business and utilise more of digital tools and by going digital, it means you require less number of staff, to do more job.”
He, however said, “We have under supply of real estate in Nigeria and so even if commercial real estate go down in the short run, in the long run, people will still need spaces in all segment of the real estate.”
NIESV past President, Chief Emeka Onuorah said, there might be depression in the property market be it commercial and all kinds of real estate. However, he expressed doubt about any major shift in letting market in the near future due to remote working because businesses will still continue.
Instead, he said there could be defaults in the payment of rents for commercial lettings as a result of the economic setback caused by CoVID-9.
Onuorah said, “The market will never be the same again, the way businesses will be done will involve more use of information technology and marketing of properties. Basically technology will assume more serious proportion in the real estate industry and remote working will only be in the short term, it can’t last because working at home also requires some technology.
“For those in the private sector how many people can effectively work from home. It is only few organisations like banks can provide technology for people to work at home. It will take a while before people could adapt to such culture and I don’t see it as a trend in the near future”.
“It thus appears that the idea of remote working is not going to continue following the speech of president and things will start easing off soon.”
The Chairman, NIESV chapter, Niger State, Dr. Kemiki Olurotimi Adebowale, observed that transactions are still going on, in the commercial space, tenants are still paying rents and operators are in the era of digitalisation wherein they could call on phone, collect rents by mobile transfer for high profile buildings. He said, “The only way it might impact heavily on the sector is when the culture of working remotely is extended to about six months.”