A future of hybrid work has boosted a new high-performance asset class

After over a year of paying rent on empty office spaces, countless companies are ending their leases and moving to hybrid methods.

Recently, Deloitte gathered together prominent CFOs to talk about the future of office space, but the outlook for investors is grim. More than half of these business leaders believe that office spaces will become increasingly unnecessary, as companies like Microsoft announce their entrance into a hybrid work era.

Even companies like Animalz and Boxmode have gone fully remote and are proving to the world that offices are outdated. What seemed like a temporary trend during an unavoidable lockdown has turned out to be a new challenge  for many asset managers, as they need to adapt to this trend and search for new operating concepts for their empty spaces. 

After over a year of paying rent on empty office spaces, countless companies are ending their leases and moving to hybrid methods. Even with a 30% decrease in office use (already an optimistic estimate), these hybrid models would still leave real estate investors with a massive supply of offices—and little demand for them. Many new start-ups are being founded in remote settings, without any need for conventional office spaces. A recent research paper from Knight Frank confirms this trend. 

There is some hope for investors: in mixed-use real estate. Renowned real estate magazine Building quotes Mark Allen, “I think German cities are actually doing really well… Berlin is really the place where you’re going to see really exciting mixed-use projects because there is lots of urban regeneration”. 

Still, this is hard to imagine for many investors, and the work environments of a post-lockdown world have only recently begun to emerge. The question for many is, how can they create reliable succession plans? The answer lies in a megatrend that is sweeping the travel industry: work-from-anywhere.

Remote work environments create the perfect opportunity for people to work from foreign countries while they explore new cultures. Before, blending work and travel was largely inaccessible, and weekend excursions were the closest many workers could get to a working vacation. With remote work, this paradigm is shifting, and every afternoon can be an adventure beyond a commercial living space.

Converting former offices into commercial living is not only beneficial to the travel industry in a country, it also has major benefits for a city as it keeps tourists in non-residential buildings. To illustrate the potential benefits this might have on the commercial real estate sector, a late 2020 report by BNP Paribas laid out the market situation for each country, which helps investors to better decide which succession plans are most likely to succeed in the upcoming post-pandemic market.

To weather these unique challenges, industry players are taking a wide variety of approaches. One main idea many real estate professionals have already begun to implement is diversifying their portfolios with new, crisis resistant asset classes. 

By using a two-pronged approach to convert empty office spaces into usable commercial living spaces, a new asset class has emerged and flourished during a challenging and unforgiving period. This newest asset class combines the stability of a long-term apartment rental with the profitability of a short-stay hotel by using state-of-the-art technology and quality design to transform the travel industry. Together, the mixture of an emerging megatrend within the travel industry along with a digital guest journey due to the contact restrictions has proven a winning formula for this new asset class. 

Commercial living spaces that utilised a tech-based differentiation strategy were able to retain a consistent occupancy of over 90% while lockdowns ravaged the hospitality industry. In the absence of traditional hospitality amenities, apartments in this asset class provide a kitchenette and ample space to accommodate remote working setups. These features allowed properties to tap into the large mid-stay market during the lockdowns. These market gains benefited not only the asset class commercial living but guests as well, as many in this asset class reported a significant  number of repeat bookings across a variety of converted properties.

Commercial living focuses on transforming the travel industry by providing guests with authentic experiences, design inspired by the neighbourhoods and tech-powered innovations to disrupt the travel industry.

The hybrid model of remote work is here to stay, and COSI is well-adapted to the change.