JAKARTA (TheInsiderStories) – Companies in the Asia Pacific are reviewing their commercial real estate strategy amid a lockdown policy imposed by the government and work-from-home arrangements due to the COVID-19 pandemic. Office rental activity globally decreased by 22 percent compared to the first quarter (1Q) of 2019 after many transactions were canceled or postponed.
But, office rental activity in the Asia Pacific region only declined 9 percent compared to the 1Q of 2019 and rose 14 percent on an annual basis. This condition has not yet impacted the vacancy rate in the Asia Pacific region, which was stagnant at 10.9 percent compared to the previous quarter.
In Jakarta, the most significant impact of COVID-19 in new transactions for office leases, is likely to occur in Q2 2020 because government regulations ensure that most business continues to run with work-from-home. However, we expect demand for office space to increase again after the worst crisis has passed. COVID-19 has proven that many companies can work from home but also underline the need for physical office space. In some ways, COVID-19 has accelerated changes in the workplace.
The current situation creates disturbances and challenges for the office business. The way people see and use office space for companies will change. However, we hope that offices will remain a major part of the work strategies of business people in the Asia Pacific in the medium to long term.
As companies prioritize the health and safety of their employees and apply social distance when returning to work, changes in office property will remain inevitable. The company’ CEOs are retesting the strategy and might consider recalibrating the amount of space dedicated to traditional office space after the rental period is over, or even faster.
However, despite the unfavorable situation, this global real estate consultant believes that offices are still needed. Even in some considerations, this pandemic can lead to expansion of office space, because the company is trying to increase physical distance between employees. The current office configuration can be modified by increasing the need for additional space. By doing so, companies can consider utilizing flexible space from third-party operators, in addition to the implementation of ongoing remote work for some employees.
Not all Remote Work can be Made Equally
Although the work-from-home trial seems to be successful globally, office demand will continue to increase in the region. This pandemic has changed perceptions about the effectiveness of long-distance work, but has not yet presented a sustainable or optimal long-term solution for all companies.
In Asia Pacific, millennials are struggling with smaller apartment sizes, living in shared spaces, internet connectivity problems or doing chores while working. While long distance work has provided more flexibility and life balance for employees, the office plays a central role in creating space for them to collaborate, interact and gather with shared values, improve employee morale and productivity.
Various companies are now in increasingly fast-moving conditions where innovation is the key to maintaining competitive advantage and company performance. A successful company is proud to have a collaborative space that can drive excellence and innovation.
Demand for Design and Furnishing
As the company’ needs grow, offices are inevitably affected by a major change, namely the rearrangement of office space. The focus is on realizing the use of the maximum and most efficient place to achieve the goals of an organization.
Offices, as we know, will develop. In fact, we have observed that clients are increasingly paying more attention to sustainability, feasibility and technology. Some have already begun implementing upgrades and environmentally friendly features in line with the commitment to build trust and ensure space matches its purpose. Owners and investors who can take advantage of this opportunity to consider long-term development plans and redesign their facilities will benefit greatly.
Impact on Coworking and Flexible Space
The flexible space and work space sectors are still stable h will be prospective in the short term because some of these sectors offer attractive alternatives to realize short and medium term expansion plans for companies looking for additional space.
Having a flexible business plan will be aligned with certain company objectives in the current situation, especially those related to capital expenditure. However, companies must be careful in choosing strong flexible space providers, given the projections related to consolidation in the industry. While, several companies have included flexible space as part of their office portfolio to attract and retain the best talent.
COVID-19 is likely to accelerate the evolution of offices because most of the workforce is preparing to reenter. In the end, people will still become real estate users. We think the office will remain the center of their daily business life. Going forward, we believe that this sector is a resilient sector that will continue to attract long-term investor interest and trust.
by Anthony Couse, CEO of JLL Asia Pacific and Head of Research JLL Indonesia James Taylor