The commercial real estate landscape has undergone a significant shift since the pandemic. Initially, businesses pivoted to remote work, leading to a surge in office vacancies. However, companies have increasingly implemented return-to-office (RTO) policies recently in an effort to revive in-person office communities and increase overall productivity.
Many organizations now require their employees to either return to the office full-time or to operate under a hybrid working model, which typically involves one to four days in the office per week. In fact, according to a survey conducted by CBRE, about 87% of U.S. organizations mandate their employees work at the office in-person for at least part of the week, while 8% require in-office attendance for the entirety of the five-day workweek. This marked shift has stimulated a rise in demand for office space, reshaping leasing trends and workplace expectations. In addition to organizations putting RTO mandates in place, landlords are also doing their part to reduce vacancy rates by modernizing offices with appealing amenities and versatile workspaces. With landlords and organizations actively working to get people back in the office, we can make confident predictions regarding the course of CRE in 2025.
What to Expect from the Commercial Real Estate Market in 2025
With the impending CRE resurgence, we can expect a handful of changes to the market in 2025. RTO policies have the potential to increase the demand for commercial space, and landlords are modifying office buildings to attract and appease workers, making the outlook for 2025 more fruitful than in recent years.
RTO Mandates Will Drive Demand for Commercial Space
RTO mandates are bringing office leasing demand back to pre-pandemic levels — the highest it’s been since 2019 — and we expect that RTO mandates will gradually bring us closer to pre-COVID work routines with at least some days required in office. Rising attendance levels and RTO policies are providing companies with a better idea of their workplace needs giving them more confidence to make significant leasing decisions. The increased demand will likely encourage CRE developers to restart projects that were halted or paused around 2020, but those deliveries probably won’t hit the market for years so we expect the demand for existing office space to increase as the year progresses leading to higher rents and fewer vacancies.
More In-Office Amenities
Landlords will be especially focused on upgrading workplace amenities to reel workers back into the office. Upgrades — like fitness centers, food courts, outdoor areas, concierge services, event spaces, co-working spaces, and more — are being added to create more inviting, comfortable environments that workers would want to return to. While these amenities are costly, landlords are counting on a high return on investment with greater tenant satisfaction, less turnover, more rental income, and longer lease agreements.
Continued Work Model Flexibility
Another strategy that landlords will continue to implement is versatile office spaces to accommodate hybrid work models by turning large, traditional office spaces into smaller, more flexible units. Office landlords recognize that the transition back to in-person work is a gradual one. Many organizations are keeping a hybrid model, at least for now, to oblige their employees who may have built their lives and schedules around a remote structure during the pandemic. Over recent years, a lot of workers have gotten used to, and have grown fond of, the flexibility of a hybrid work model. Results from a Bankrate survey showed that 68% of full-time workers support a structure where they can work remotely at least one day a week and only 10% of respondents opposed a hybrid schedule altogether.
Give Us A Call
With RTO mandates and fewer deliveries, the CRE market is poised to begin its rebound. If you need help with your commercial property, you can count on EpiCity’s elite property maintenance know-how. Our team will keep your commercial property in tip-top shape to attract and retain tenants as the need for office space increases over time.
Our skill, passion, and experience will help you capitalize on the stabilizing CRE market. Contact EpiCity today.