Remote work and changing demand: Bigger threats to the office market than recession

With the anticipated upcoming recession fueled by inflation and impending interest rate increases, Mexican building owners, tenants and investors are beginning to aggressively negotiate lease terms on expiring or even ongoing leases, be cautious about lending and generally prepare for what is to come in the hope that the recession will be swift. 

While the upcoming recession is an issue to evaluate for future office leases, the pain felt by the office market is much bigger than a recession. Companies are grappling with more strategic questions about how to leverage the office and how they incorporate remote work more effectively and efficiently into their work model.

There is a fundamental systemic change in terms of how the office will be used in the future or as I usually put it: change of office use culture.

The recession will not be the key point for tenants to abandon office space and create an exodus. What is really affecting the market is a set of trends that I have discussed in previous articles and the addition of new Class A+ and A inventory to the market that is causing the migration to more modern spaces with better and more amenities in less leased square footage, utilizing the new office design patterns to solve new work models. So far, larger landlords have not seen their tenants demand full-time assistance in the office and work-from-home and recession are unrelated phenomena, Companies are fundamentally re-evaluating how they use space and how they do business. That's not going to change with a recession.

It's not the first recession we've had and there's usually a process for them. But ultimately, barring something extraordinary, you usually get a healthier base on the other side.

This set of culture changes is a long-term trend and we have to be very conservative when looking for offices for our companies; we may lose great collaborators along the way because we do not know how to adapt or put the company's capital at risk.

At WOR we are office real estate experts in the areas of analysis, design, construction, marketing and customer service. We specialize in advising decision-makers to improve their human resources and financial strategy.