It has been more than a year since the coronavirus pandemic hit Europe. Today, some of the region’s biggest cities are still shadows of their former thriving selves. In London, for example, the number of people actually working in offices is roughly at a third of pre-pandemic levels.

How this will play out in terms of the office market, and fund diversification strategies that involve real property, is anyone’s guess.

One thing is for certain is that work practices will be much more flexible in the future – as we are starting to see that remote working or ‘telework’ is effective and becoming accepted. This will change office space requirements and needs, which will, in turn, reflect landlord future returns.

Most likely, changes will be based on localized conditions. In cities where the commute is relatively short, pleasant and environmentally friendly (like Zurich or Frankfurt) people may continue using offices. In major cities like London or Paris, where the commute can be long, employers may have to take into account employee views in order to attract and retain talent. Here, one should expect less employee densities with more collaborative space and temporary use areas.

Additionally, structural changes are expected whereby employees will engage in rotation with people working from home 1 or 2 days a week. Employers will take the opportunity to reimagine the workplace with office space being treated as a precious commodity reserved for an employer’s own definition of an essential worker.

For example, in a marketing company, creative designers could work in the office because they need to be where they have access to all the material they need for the creative process, including live human discussion. Administrative staff, conversely, could work from home. Space allocation can thus be optimized and this will effect rental costs and landlord profits.

As employers start to re-conceptualize the workplace, this will all open up interesting opportunities for fund investment strategies and capital commitments.