# Analysis-U.S. companies spend billions on stay-at-home tech, boding ill for office properties
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2021-07-01
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Hybrid Work Trend Impacting Commercial Property Prices in
Meta Description: Explore how the rise of hybrid work is affecting the commercial property market in cities like New York and San Francisco, as companies adapt to a new way of
URL: https://financedigest.com/analysis-u-s-companies-spend-billions-on-stay-at-home-tech-boding-ill-for-office-propertieshtml

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By Herbert Lash

NEW YORK (Reuters) – As the U.S. economy reopens, ramped-up corporate [spending on video systems and plans to increase](https://www.financedigest.com/should-we-be-more-cautious-about-contactless-1-in-4-young-adults-with-contactless-cards-say-theyve-increased-their-spending.html "Should we be more cautious about contactless? 1 in 4 young adults with contactless cards say they’ve increased their spending") shared workspace suggests hybrid work is here to stay, potentially weighing on commercial property prices in New York, San Francisco and other major cities.

After jumping in the wake of the pandemic, [sales of tech for facilitating remote work continues to trend](https://www.financedigest.com/why-sales-enablement-is-the-trend-to-watch-out-for-in-2023.html "Why sales enablement is THE trend to watch out for in 2023") higher. [Retail sales](https://www.financedigest.com/valentines-day-spending-boosts-british-retail-sales-in-february-brc.html "Valentine’s Day spending boosts British retail sales in February – BRC") of USB cameras and computer microphones rose 77% and 36% each from March to May from the same period last year, after doubling from those months in 2019, according to market research firm NPD Group.

Computer goods maker Logitech International SA said earlier this year it expected sales of webcams and cloud-based video collaboration equipment to remain strong in 2021, after tripling to $1.48 [billion in the 12 months ended in March](https://www.financedigest.com/uk-investors-add-1-2-billion-to-equity-funds-in-march-calastone.html "UK investors add .2 billion to equity funds in March – Calastone") from a year earlier.

And a Morgan Stanley survey showed that a majority of companies plan to increase shared workspace, as they try to reduce costly [real estate](https://www.financedigest.com/from-static-office-to-dynamic-brand-hq-five-steps-to-reviewing-your-real-estate.html "From static office to dynamic brand HQ: Five steps to reviewing your real estate").

Executives at many corporations would like everyone back, but technology spending plans [tell you they recognize the need for a flexible](https://www.financedigest.com/uk-tells-eu-without-flexibility-we-will-act-on-n-ireland.html "UK tells EU: Without flexibility, we will act on N.Ireland") workspace,” said Vikram Malhotra, a real estate analyst at Morgan Stanley.

The rise of the hybrid [office poses a headwind to workspace demand](https://www.financedigest.com/token-inc-launches-london-office-to-answer-demand-from-european-banks.html "Token, Inc. Launches London Office to Answer Demand from European Banks") in cities like New York and San Francisco, where there have been few big-name office building sales in recent months. Institutional holdings of office [assets in the two cities are valued at $231 billion](https://www.financedigest.com/french-asset-manager-amundi-posts-q3-outflows-of-13-billion.html "French asset manager Amundi posts Q3 outflows of  billion") and $128 billion, respectively, according to LaSalle Investment Management.

While leasing activity has rebounded since the lows of the pandemic, rental prices are weak and vacancy rates remain high, weighing on the value of [office buildings](https://www.financedigest.com/ireland-to-turn-heat-down-in-public-buildings-shut-empty-office-floors.html "Ireland to turn heat down in public buildings, shut empty office floors") and stymying deal activity.

Total sales of office properties in Manhattan, for example, slid by more than [half to $5.4 billion](https://www.financedigest.com/spotify-listeners-cross-half-a-billion-mark.html "Spotify listeners cross half a billion mark") last year and were just $41.9 million in the first quarter of 2021, according to Cushman & Wakefield Plc.

The work-from-home trend will weaken the pricing power landlords have on leases and the [returns investors expect](https://www.financedigest.com/lufthansa-expects-further-significant-improvement-after-return-to-profit.html "Lufthansa expects further ‘significant improvement’ after return to profit") from office assets, Malhotra said. The [bank estimates the changes](https://www.financedigest.com/climate-change-fight-a-core-duty-for-central-banks-ecbs-villeroy.html "Climate change fight a ‘core duty’ for central banks – ECB’s Villeroy") will reduce the amount of U.S. [office space](https://www.financedigest.com/a-guide-to-finding-office-space-for-your-startup.html "A guide to finding office space for your startup") by about 13%.

Green Street, a real estate advisory firm, forecast in June that remote [work may negatively impact](https://www.financedigest.com/how-has-hybrid-working-impacted-the-gender-gap.html "How has hybrid working impacted the gender gap?") office demand by about 15%.

Prices in those big global gateway cities – New York, San Francisco – they’re the poster child, they’re soft,” said Mark Zandi, [chief economist at Moody’s Analytics](https://www.financedigest.com/host-analytics-appoints-chris-labruna-as-chief-revenue-officer.html "Host Analytics Appoints Chris LaBruna as Chief Revenue Officer"). [ACCELERATED CHANGES](https://www.financedigest.com/why-change-in-banking-is-accelerating.html "Why change in banking is accelerating ")

Many corporations plan to allow at least some remote work, including [Swiss bank](https://www.financedigest.com/swiss-national-bank-says-inflation-battle-not-yet-won.html "Swiss National Bank says inflation battle not yet won") UBS Group, which earlier this week announced plans for a mostly hybrid workforce. Other companies, including Goldman Sachs Group Inc and Morgan Stanley, have resisted establishing a [hybrid workplace](https://www.financedigest.com/finding-new-pathways-to-efficiency-in-a-hybrid-workplace.html "Finding New Pathways to efficiency in a Hybrid Workplace").

At Cerner Corp, a U.S. healthcare technology company, 75% of its 27,00 employees could be “dynamic” and work half the time remotely, said Tracy Platt, Cerner’s chief [human resources](https://www.financedigest.com/the-importance-of-strategic-human-resource-management.html "The Importance of Strategic Human Resource Management") office.

“We want to get the best of both worlds and we’re confident we can through this model,” she said.

Not everyone [believes hybrid work](https://www.financedigest.com/1-in-5-uk-workers-believe-there-is-a-gender-divide-with-work-uniforms.html " 1 in 5 UK workers believe there is a gender divide with work uniforms") will shrink offices or maintain its appeal in the long run. Most employees will likely [work three- to four-day weeks](https://www.financedigest.com/spain-offers-to-pay-companies-testing-a-4-day-work-week.html "Spain offers to pay companies testing a 4-day work week"), making space consolidation tougher, said Alex Goldfarb, an analyst at Piper Sandler.

At the same time, “people want to be seen as though they’re part of the game, and there’s not a game out there that you can win if you’re not on the field,” he said.

Still, the [pandemic has accelerated](https://www.financedigest.com/post-pandemic-tech-innovation-the-role-of-accelerators-and-5g-testbeds.html "Post pandemic tech innovation: The role of accelerators and 5G testbeds") changes that had been afoot for some time. Vocon, an architecture firm, designed [offices before the pandemic that had 20% of employees](https://www.financedigest.com/hundreds-of-tyson-foods-employees-to-depart-as-company-closes-offices-wsj.html "Hundreds of Tyson Foods employees to depart as company closes offices – WSJ") at so-called hot desks, where multiple workers use a single physical work station at different times. Now, said Vocon, some clients are allocating more than 40% for what can be shared space.

Does it make sense to require [people to come to a certain specific location every day](https://www.financedigest.com/over-a-third-of-uk-people-think-thomas-whitmore-from-independence-day-will-be-joined-by-donald-trump-in-disneys-hall-of-presidents.html "Over a third of UK people think Thomas Whitmore from Independence Day will be joined by Donald Trump in Disney’s Hall of Presidents")? In some cases it didn’t make sense before the pandemic,” said Deb Donley, owner and principal at Vocon.

Demand for [office space does not need](https://www.financedigest.com/gdpr-and-the-need-for-a-data-protection-officer-whats-your-obligation.html "GDPR and the Need for a Data Protection Officer – What’s Your Obligation?") to collapse to adversely impact occupancy, rents and values, LaSalle analysts wrote. A demand drop of 5 to [10% could spur elevated vacancy rates](https://www.financedigest.com/boe-flags-risk-of-recession-and-10-inflation-as-it-raises-rates-again.html "BoE flags risk of recession and 10% inflation as it raises rates again") and delay the sector’s recovery five or 10 years, the unit of Jones Lang LaSalle Inc said.

LaSalle has underweighted its exposure to office buildings since well before the pandemic, said Rich Kleinman, LaSalle’s co-chief investment [officer for the Americas](https://www.financedigest.com/new-office-expansion-enables-vaisala-to-accelerate-growth-in-industrial-and-environmental-measurements-businesses-professional-services-and-customer-support-the-new-office-will-cater-for-all-vaisala.html "New office expansion enables Vaisala to accelerate growth in industrial and environmental measurements businesses, professional services and customer support. The new office will cater for all Vaisala’s customers in the Latin America region.").

Many people have not been accurately assessing the amount of capital that’s [needed over the long term to own an office building,”](https://www.financedigest.com/why-smart-buildings-need-smart-cleaning.html "Why smart buildings need smart cleaning   ") Kleinman said. It’s not as attractive of a risk-return proposition as some other [property types.”](https://www.financedigest.com/apartment-prices-rising-faster-than-any-other-property-type-new-data-reveals.html "Apartment prices rising faster than any other property type, new data reveals ")

(Reporting by Herbert Lash in New York; Editing by Megan Davies, Ira Iosebashvili and Matthew Lewis)


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