Cushman & Wakefield recently released a report and complementing article on the growing shift to the suburbs, as COVID-19 changes the way people live. Per this insight, the discussion about office real estate has shifted from strictly urban to a broader range of alternatives including the suburbs. While it’s unlikely that occupiers will need less real estate, the report suggests that where an occupier’s real estate is located may change in response to the events that have transpired since the arrival of COVID-19.
Highlights from the report & complementing article on the shift from urban to suburban:
- The positive experience that many occupiers are having with working from home is now being considered a potential major turning point in how they think about real estate.
- After a decade that increasingly focused on central cities, it feels like everything has been turned inside out. The next big thing is now not only the big new development in an urban core, but also a walkable suburban development near a transit hub.
- Some companies are talking about a return to “hub and spoke” model with a higher quantity of smaller offices in suburban locations. Other firms will come back to the office providing more individual flexibility, allowing employees to work from home more often.
- The trends driving this renewed look at the suburbs are not new and they are not solely related to COVID-19. The shift is being caused by the single most important long-term driver of economic and real estate trends: demographics. Millennials are the catalyst and that is because they’re getting older.
- The suburban share of total occupancy has been rising steadily for the past 15 years. And in the past two years suburban submarkets have seen better leasing performance—stronger absorption, faster vacancy decline and stronger rent growth.
- The West Region features many of the most active submarkets in terms of total suburban net absorption (occupancy growth) of office space from Q1 2018 to Q1 2020.
- Plurality of home buyers are Millennials, and majority of their purchases are in the suburbs. Millennials have been the largest group of home buyers for the past three years.
- As the suburban population grows, occupiers will move more offices to suburbs. COVID-19 could further the move as the barriers to working in the city on a daily basis make suburban space more attractive to workers.
- The in-demand suburb of the 2020s may not look like what has been the norm in decades past. The most attractive suburbs offer the best of the city center without some of the challenges.
CLICK HERE to access the full report.
