DUBLIN, May 27 (Reuters) – The idea that an increase in demand for remote working will lead to the demise of the office is wrong, the head of Ireland’s largest stock market-listed office landlord said on Wednesday.
Facebook Inc and Twitter, which are among numerous big technology companies with European headquarters in Ireland, have led a move towards permitting remote work indefinitely in the United States once coronavirus lockdowns have eased.
“There’s been a lot written about the demise of the office, which I think is just wrong,” Hibernia REIT Chief Executive Kevin Nowlan told Reuters.
“That’s how the office has been evolving anyway over the last five or six years, with people having more remote working options. The one feedback we’re getting from tenants is that people are missing people.”
Nowlan, whose company’s tenants include tenants include Twitter and U.S. software company HubSpot Inc, acknowledged that demand has dropped during the pandemic but he believes the bigger issue over office space is how companies operate at limited capacity when workers return.
Staff will favour their own desks to shared spaces in the long term, which could create more demand for office space, he said.
For now demand is down considerably, Nowlan said as Hibernia reported a 3.5% rise in net asset value (NAV) in its financial year to March 31, with the full impact of the coronavirus crisis yet to be felt.
“We’ve seen a significant fall off in active demand by about 20-25% over the last six weeks. If that follows through you’re going to vacancy rates increase and that could put downward pressure on rents,” Nowlan said, adding that he expects 5% of commercial rents to be deferred in the quarter to June 30.
“But compared with where the market was in 2009 and 2010, we’re in much better shape because the vacancy rates in the market are so low, currently running somewhere around 6.5% in Dublin.”
Reporting by Padraic Halpin
Editing by David Goodman