Can Office Real Estate Rebound After the Pandemic?

Fear is widespread among investors and analysts that the trend toward remote work will increase office vacancies, especially in cities. Other experts still see value in offices and don't necessarily think there will be much lasting damage to the office real estate market.

In this clip from an Oct. 22 Fool Live show, Fool.com contributor and Millionacres REIT analyst Matt Frankel, CFP, discusses the future of office real estate with fellow Millionacres contributors Matt DiLallo and Kevin Vandenboss. 

Matt Frankel: I want to start with the topic that I get a lot of push back on from the audience because I've a very controversial opinion about this apparently. That's office real estate. There's a lot of worry that after in the post-pandemic world, the work-from-home trend is going to be permanent. No one's going to work in offices anymore and office real estate will plunge in value and you're going to see widespread vacancies and stuff like that. I don't buy it. But I'm curious to see what you guys think because I keep getting a lot of push-back from people saying that everyone is going to work from home and I know you're both working from home right now, so I want to get your opinion. Whoever wants to start can go ahead.

Kevin Vandenboss: Yeah, I will start. So I'm with you there, Matt. It's not usable. This work from home thing right now is it's short-term solution to help with the pandemic. It's not sustainable. There really isn't going to be any cost benefit for any companies to send their employees out to work from home in order to save office requirements. The added infrastructure needed to be able to sustain that, the lack of collaboration, and I think, overall, you have people working from home, productivity is bound to slip. But on the flip side of that, I actually see in a possibly going the other way. I think, when we're outside of the pandemic, things are cooling down there. A lot of people are going to start re-evaluating certain standards. One of those being, how many people can you cram in a workspace? I mean, my office leasing days. That's what we will do. We'll look at, here's the space, how can we fit as many people into this space comfortably as possible? Where I think now, even besides COVID just, in general, looking at maybe the cost impact of anything else, whether flu or colds, whatever, thick days and just workplace standards will probably shift that way to require more spacing between people and actually potentially require larger office spaces. I know I workout a lot of Regus (IWGFF -1.97%) office, and recently, they gave everybody an offer that had multiple employees. It was half off the difference if you were to upgrade to a larger office to be able to accommodate social distancing better. It might actually have the opposite effect personally.

Matt DiLallo: I'm kind of like in the same boat as you, guys. Even though I've worked from home for years, I love working from home. I can't imagine going back to an office, but from what I've just read and heard from a lot of the big office reads and office owners, they just don't see it being disrupted. I'm going to read a quote from Brookfield Property (BPY) (BPYU) CEO Brian Kingston. One of the biggest property owners in the world, they don't like a lot of iconic office buildings. He said, this is out there in the Investor Day. "I think we can all look back and say that while we've been able to manage through this period, working from home or living at work at some like the call, it really doesn't work." It goes on to say, "people can stay in contact through things like Zoom and things like that." But the big issue that Brookfield and Boston Properties (BXP 0.02%) and CEOs of even major companies like Netflix (NFLX -3.92%) and have honed in on things like water cooler discussions, just the innovation and collaboration that they can get from the office thing, they can't do that working from home. A lot of them, they just really feel that they're going to go back to office. It will look different. Like Kevin said, it will be more socially distance. I know a lot of office companies are putting in better HVAC systems and stuff like that to handle viruses and keep offices cleaner, and it encourages their business, but they're all saying that this is not the end of the office. If anything, it's just an evolution of the office.