According to CNN report, Remote work risks wiping $800 billion from the value of office buildings in major cities worldwide by 2030 as the post-pandemic trend pushes up office vacancy rates and drives down rents. losses in the valuation of workspaces in those cities represent a 26% decline from 2019 levels.
In a severe situation, office space values could potentially plummet by up to 42%. In a milder scenario, the demand for office space by the close of the decade might be 13% less than its 2019 levels.
In Nigeria, the increase of empty desks and vacant office buildings poses a significant challenge for commercial property owners and managers, a consequence of companies embracing the Work from Home (WFH) trend in response to the country’s economic circumstances.
Certain companies which had already shifted entirely back to in-office work may need to reconsider their office schedules in order to alleviate the immediate burden of rising transportation costs. Yes, most employees are having it tough with the current transportation cost due to rise in the cost of PMS.
Meanwhile, businesses occupying leased spaces will adapt their space utilization to accommodate essential on-site needs, resulting in a gradual increase in occupancy rates, particularly within the grade B office market. Some enterprises might also reduce their space requirements and postpone rent payments.
The repercussions on the commercial real estate sector have been substantial, as office managers and property owners grapple with the challenge of compensating for lost revenue, while government agencies experience declines in tax revenue.
According to Guardian reports, the demand for premium office space is still moderate, especially among tech companies, while demand for generic office has dropped considerably. By the end of the second half of 2022, vacancy levels at prime or grade A office facilities had declined by 42 per cent at the beginning of the first half of the year to 24 per cent, representing a 57 per cent drop.
The development has increased office vacancy rate in many cities across the country, such as Lagos, Abuja, Port Harcourt and Kaduna, leading to conversion of empty space into residential buildings.
At present, there is a trend of repurposing certain office buildings in areas like Surulere, Ikeja, Victoria Island, Ikoyi, Lekki Peninsula, and Maryland into residential spaces. Additionally, within the Lagos central business district, some floors in high-rise buildings near Balogun market are being repurposed for storage facilities by traders and importers.
State agencies have started cracking down on some of these conversions and imposing fines on property owners. Officials have noted that most of these office-to-residential conversions are occurring in residential zones where rental prices have skyrocketed, and there is a shortage of housing.
However, there is a boom in the virtual office and hotdesking businesses as commercial spaces make quick conversions. Remote work is beneficial to the workforce and is here to stay as more companies even go from full onsite to hybrid or remote work mode.