Axa Investment Managers, the French fund house, is not too worried about predictions that the post-pandemic world will see more people working from home and office real estates shrinking. Going contrary to these predictions, it is investing nearly €800m (£692m) on a revival in demand for office working after the pandemic subsides, according to a report.
Axa IM Alts has raised €799m to invest in office spaces all over Europe, including in the UK, German and French cities.
The company wants to develop “high quality, flexible office space aligned with future working habits”. It believes that green offices with zero to no carbon footprints are the future of the world. Its plan definitely sees the revolution in working habits as a passing phase and does not believe big office spaces will become redundant.
“To launch this kind of development strategy you have to believe there’s a future for offices,” Ian Chappell, head of development and value-added funds at Axa IM Alts, told the FT.
Axa’s plans are announced amid many companies announcing hybrid work plans for the future where workers will be working part-time in offices and the rest from home.
“Occupiers are far more concerned about how buildings of the future will meet ESG [environmental, social and governance] requirements . . . those will be the building that investors will want to buy first,” said Chappell.
Many companies have declared that work from home will be the new norm now. Citigroup, PwC and the big tech companies are all open to remote work cum working from an office when needs.
Nationwide Building Society has said that its 13,000 workers can operate from anywhere they like. HSBC is shifting 70% of UK call center staff to permanent home working.
Chappell said the market for offices would be divided between falling rents at older, less desirable buildings and solid demand for newer workspaces that meet the changing requirements of corporate tenants.
Generally, city-centered high-end offices are in demand by investors during economic crisis times as they are a steady source of income, and rich and capital flush clients represent a steady income. Mat Oakley, head of European commercial property research at real estate company Savills, said: “I haven’t had a discussion with any real estate investor this year that hasn’t touched on whether offices are quite as core now [as a result of coronavirus]”.
All recent research figures show that more employers are ready to adopt home working as a viable move. “This whole 12 month has really put obsolescence in the spotlight . . . Inevitably there will be more pressure to repurpose offices,” said Chappell.
Experts believe that office rents will fall in low-end places but will remain high in newer developments. According to global real estate company CBRE, as much as £45bn of global capital is targeting the London office market — the largest volume since the company stared tracking investment in 2012.
The UK has performed better in the vaccine rollout. “Take Brexit out of the equation and the emergence from lockdown is pretty much the only factor driving investors at the moment,” Oakley said.
In a report last month about the post-COVID-19 office market in London, BDO wrote: “We would advise all stakeholders to take another look at their office portfolios. The aim must be to understand which offices are, or could become, the desirable, high-quality offices of the future and, to formulate a plan for dealing with those other office buildings that might be left behind.”
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