Greater office occupancy signals switch from remote work
Published on: August 10, 2021 03:15 (EAT)
Vacant office blocks have registered increased absorption rates across the first half of 2021 signalling a switch from remote working arrangements. According to a new report by real estate consultancy Knight Frank, the absorption of grade A and grade B office space has increased by 64 per cent over the first six months of the year. “This dramatic increase was mainly attributed to the roll-out of vaccinations, which has enabled employees to physically return to their offices,” noted the report. Further office occupancy has benefited from a reduced supply of new office developments while landlords have been flexible in reducing rental terms. On the flip-side, tenants have leveraged prevailing low rental rates to upgrade from older commercial buildings. Despite the tide of remote and work from home arrangements, employers continue to view working in physical office spaces as integral to the output of firms. For instance, a study by Knight Frank, published in April shows 90 per cent of survey respondents regarded the office as a strategic device for their business operations. “This indicates that despite the pandemic having more employees working remotely and forming a new working environment, physical offices will still be important for organisations post pandemic,” noted Knight Frank. Nevertheless, average occupancy rates for all offices stand at 73 per cent, the same range as in 2020. However, Knight Frank says it has recorded enquirers of up to 500,000 square feet (sq. ft) from potential occupants which it terms as a positive indication that the prime office market is slowly recovering. Nevertheless, commercial office rents are yet to recover having fallen further in the six months to Ksh.119.70/sq. ft per month. The decline has been tied to the current economic slowdown, continued oversupply of commercial space in major commercial nodes and the re-introduction of containment measures in the second quarter.