The office sector has struggled with vacancies due to so many offices shifting to remote work during the pandemic. However, it’s no secret that many businesses are pushing their employees back to the office.
Is remote work declining, or will office vacancies continue to be the standard for years to come? We looked at trends in the office sector that can help lenders prepare for opportunities and risk.
Is Remote Work Increasing or Decreasing?
As of June 2024, remote work is increasing in the United States—but not fully remote work.
Many companies that switched to fully remote work during the pandemic are now pushing to get their employees back into the office at least some of the time, so hybrid or flex work schedules will probably be the dominant form of remote work.
Although many employees are seeking fully remote work opportunities, there has actually been a decrease in the number of fully remote job listings. With the economy tightening up and rising competition among job seekers, employers are in a higher position of power and don’t need to cater to demand for remote work.
So, throughout 2024 and beyond it’s reasonable to expect many white-collar workers to commute to an office at least 1 – 3 days per week. The number of hybrid / flex workers may continue to grow for years to come.
How Could This Impact the Office Sector?
Remote work has not completely taken over; many employees are still commuting to offices, so there’s potential for commercial real estate lenders to make lucrative investments in the office sector.
Large offices are struggling with vacancies, but smaller offices—especially complexes that have modest-sized spaces for co-working and small businesses—are much safer.
As we’ve mentioned in many of our commercial foreclosure blogs, offices in large, city centers are struggling more than offices that are closer to suburban areas, so keep that in mind when you’re planning your investments.
On a related note, the retail sector is doing surprisingly well. The National Retail Federation estimates that retail sales could increase by 3.5% in 2024, thanks to industry innovations that are helping it keep pace with online shopping.
“You hear some people talk doom and gloom about the commercial real estate market post-COVID. Consumers and businesses are adjusting to a new normal, but there are still excellent opportunities in the office and retail sectors. They’re not anywhere near as volatile as what people say.”
-Randy Newman, Founder and CEO of Total Lender Solutions
The fact that most people aren’t working entirely from home may be fueling retail growth. It’s helpful for lenders to study the local housing market when determining whether or not to invest in a retail property because the local housing prices have a significant impact on spending habits—not only how much money people are spending, but what products they’re buying. This has always been good practice, but it’s especially important now that housing prices are changing so drastically in many parts of the country.
Remember That the Market is Unpredictable
Lenders can always benefit from keeping up-to-date on the latest market trends, but sometimes a commercial property can become distressed for unexpected reasons: for example, poor business management or a non-monetary violation of the mortgage agreement.
If you’re a commercial lender who’s facing an imminent default or if you want to pursue foreclosure, make sure to use the resources we provide at Total Lender Solutions.
Our team of commercial foreclosure experts can manage every aspect of foreclosure processing, or help you reach an alternative solution with your borrower to avoid a public auction. We’ll help you pursue a foreclosure strategy that best protects your investment. Contact us today to learn more.
