By Mike Sunnucks | Rose Law Group Reporter
The economy is projected to slowly start to recover from the COVID-19 pandemic in the third quarter for this year but office markets will not get back into positive territory until the third quarter of 2021.
That is according to a new research analysis from the NAIOP Research Foundation. NAIOP is a leading commercial real estate industry group.
“Due to the turmoil in the national economy, rising unemployment and continued uncertainty about future work arrangements, the U.S. office market absorption is forecast to decline into negative territory through the second quarter of 2021,” the NAIOP report concludes.
NAIOP expects to see negative absorption (net leasing) until the third quarter of 2021 with a negative 16 percent leasing rate in the third quarter of this year.
Economists Hany Guirguis and Tim Savage, who authored the white paper, project a 6.25 percent drop in U.S. GDP in the Q2 2020, 1 percent growth in GDP in Q3 and 1.25 percent growth in the fourth quarter.
They expect unemployment for the year to average out to 7 percent.
More than 40 million jobs have been lost (at least temporarily) because of COVID-19.
Savage said as U.S. states and workplaces reopen office tenants will be looking at how to give employees more space for social distancing and that could help encourage office demand.
“While U.S. states begin the process of a staged re-opening, employees will arguably put a premium on workplace cleanliness. They will also put a premium on personal space, which may contribute to increased demand for office space. Many large organizations have begun to consider a “hub-and-spoke” model for work arrangements, enhanced by technology that allows for the economic gains from agglomeration while recognizing the challenges created by the pandemic,” Savage said.