The CEO of real estate company CBRE told CNBC on Friday that he expected the coronavirus pandemic to have had a lasting impact on offices – but he hardly sees a doomsday result.
“You will see a hybrid scenario. Many are returning to the office. We believe that 80% more of this occupancy, if not more, will come back,” said Bob Sulentic at “Power Lunch”. “There will be a flexible remote workspace. It will work from home, and there will be creative things going on with the use of office space. That’s for sure.”
The future of the office – and how many square feet it will take – has been called into question for months after the Covid-19 outbreak last spring caused companies to switch to remote working. Firms like Wall Street banks have resumed a small percentage of the workforce while others have chosen to employ the vast majority of their workforce digitally as the virus remains widespread in the US.
For some companies, like software company Okta and Jack Dorsey’s Twitter and Square, the pandemic has resulted in them offering their employees a permanent arrangement from anywhere if they so choose.
Sulentic believes that the introduction of a vaccine to prevent Covid-19 will be critical in getting more employees back in the building. “We believe there will be a lot more activity going on in office buildings in the second half of next year,” said Sulentic, whose Dallas-based company is the world’s largest commercial real estate services and investment firm.
According to Sulentic, he expects an additional recovery in the hotel and retail sector by 2022. “So it’s a mixed story,” he said, as there are now “parts of the market with a secular tailwind and other parts of the market with a secular headwind that were introduced by Covid”.
Warehouses and data centers represent an area of strength in the real estate market during the pandemic, Sulentic said, with e-commerce and companies turning to the cloud continuing to roll out. “There is no comeback in the camps. There has been mostly record activity throughout the Covid period,” he said. “Data centers are very strong, so you’re not talking about a comeback in these asset classes.”
CBRE’s exposure to these segments of the property market is likely why the company’s stocks are positive for the year despite pandemic disruption, Sulentic suggested.
“Our revenue streams have been far more resilient than expected, and that is exactly what you see in our stock,” he said. The Vanguard Real Estate Index Fund ETF is down around 9% in 2020, while CBRE stocks are up around 7.5% since the start of the year.
The stock closed a little lower on Friday at around $ 66 per share. On Wednesday, it hit a 52-week high of $ 67.70.