SAN FRANCISCO—During COVID-19, the office market has gone dark. Firms have embraced the ability to work remotely, company heads have announced the reduction of space and the reported 40% increase in remote employees foreshadows tough quarters ahead.

"Fortunately, fears and figures don't tell the full story," Zain Jaffer, founder and CEO of Zain Ventures, tells GlobeSt.com. "While it's too early for conclusions, there are a number of counterforces and niche considerations that make up the larger picture. COVID-19 is a global pandemic, but the impact it leaves on the office real estate market will not be distributed equally."

A Shared Reality

Every landlord will need to allocate significant capital toward enhancing building safety. This means everything from increased janitorial hours to full-scale renovations including improved air filters, touch-less faucets and automatic doors. Having already lost revenue, this non-negotiable spend may be a barrier for landlords re-entering the market, Jaffer says.

"Conversely, there will be realities that all tenants will have to face. Predating this pandemic has been a trend of densification, as business owners squeeze larger teams into smaller spaces," Jaffer observes. "An employee today has an average of 40% less space than they would have 20 years ago. With social distancing protocols and a general awareness for space and safety, employers will be need much more space to properly equip their team."

A Time And Place For Return

In a recent study on office real estate, UBS predicts some industries are likely to return sooner than others. Technology, securities trading and government-oriented operations are likely making a quicker comeback while industries in which employees already spent time out of office such as consulting, accounting, real estate and sales-based organizations are likely to return slowly, and some not at all, he says.

Rates are also influenced by geography. Densely populated cities, once the hotbed of office real estate, pose challenges of crowded commutes and increased exposure to people within buildings. Suburban office spaces, on the other hand, tend to be significantly less expensive while more accessible and spacious. It's possible that the suburban market will see a total revitalization in the new age of office real estate, Jaffer ponders.

"To understand the role of location in market outcomes, San Francisco is a great example," he tells GlobeSt.com. "Previously the most expensive hub of commercial real estate in the country, rent prices were rivaling Tokyo, London and Hong Kong. And with a city-wide restriction on building before the pandemic, the market was said to be unshakable. But San Francisco companies were some of the first to go remote. The occupant rates have dropped from 90% to 10%, and considering the rate of evacuation, business owners may remain remote long after a return to office is deemed safe. While the prevalence of technology job growth bodes well for the city, it's unclear that the market will experience a full recovery."

Perhaps the only certainty is that landlords, tenants and investors across the board will all experience changes. Some seemingly indestructible sectors may be set back significantly, while new suburban markets may rise to the top, he says.

"Regardless, it's important to note that the reality of office real estate is both more complex and more hopeful than one might glean from current headlines," Jaffer tells GlobeSt.com. "People need a place to be with people, and the day we say the words 'business as usual' is somewhere ahead and approaching."

Zain Ventures is an investment firm with more than $100 million in assets under management and a current portfolio of 17 projects across 11 states.