It’s not a good time to invest in office tower portfolios. Or shopping malls, for that matter.
The internet and COVID-19 are making them redundant as more (now-former) office employees work from home and more people shop online.
It’s bad news for big cities like Montreal, which is asking companies to bring back as much as 25 percent of their work forces for now to downtown office towers. The city is hurting economically. Businesses like restaurants, bars, parking lots and public transit depend on office workers. The city’s tax coffers depend on businesses.
But once the pandemic has passed in a year or two, why would companies that have successfully had employees work from home even think about renewing office leases? They can save a bundle by downsizing office space or eliminating it all together. For companies that have seen their bottom line reduced by the pandemic, saving money on brick and mortar is a no-brainer.
And why would employees currently working from home want to sit in traffic and pay thousands per year for gas and parking or stand on crowded buses and subway cars?
Times have changed. We don’t need all the office towers anymore. They are fast becoming relics of a bygone era — yes, history is evolving very quickly now. Maybe some of them can be converted into housing for the homeless.
It’s not a good time to be in the condo business in large city centres, either. People have been migrating out of downtown cores to more spacious digs in the suburbs and the countryside, where they can work from home and stretch their legs in the back yard if there is another lockdown. Homes outside of city centres have been selling like proverbial hot cakes.
Of course, big cities will not become the ghost towns they were when lockdowns were first imposed during the pandemic. There are a lot of companies that need employees on site. But even they have pencil-pushing employees who can continue to work from home.
COVID-19 has brought with it a new era for the business world, for better and for worse. Many companies will save money on brick and mortar, some office tower landlords will go broke, and cities will have less money in their coffers.
Ultimately, though, it will be a safer world for employees and a less expensive one, too, as they save money on all the expenses normally associated with commuting.
Welcome to the new reality, Mayor Valérie Plante, and all the other mayors of big Western cities.
The rat race has taken a new direction.