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Covid-19 fallout: cubicles to return in offices

Cubicles are set for a comeback as office layouts are redesigned to meet the new requirements of the world of work as Bermuda emerges from the Covid-19 crisis.

That is the view of Rachael Correia, a commercial real estate specialist and agent at Coldwell Banker Bermuda Realty, who believes open-plan offices will fall out of favour.

“I think working from home will become the new norm for many as this proves to be successful,” Ms Correia said. “Larger companies may consider downsizing and many companies will be forced to make adjustments in their office design.

“The major design trend with having an open-plan layout may reverse with cubicles and space dividers having a comeback.

“Co-working spaces will be challenged with air-conditioning ventilation, common areas and having building amenities currently accessible to everyone. Buildings will require more frequent cleaning and strict policies to be implemented.”

Creativity will play a key role in the market in coming months, she added.

Prices and rents have dropped in recent years in a commercial real estate market that has abundant supply.

Coldwell Banker Bermuda Realty's May newsletter reports that Hamilton has about 500,000 square feet of vacant office space — enough to accommodate about 2,500 new workers, the realtor estimates.

Oversupply has put downward pressure on pricing. The newsletter states that in 2019, nine commercial properties were sold at prices 50 per cent lower than they had been listed within the past four years.

On the rental side, landlords are receiving 30 to 50 per cent less in base rents than they were four years ago.

However, Ms Correia has seen an uptick in demand as a result of the Economic Substance Act, which requires that international companies have “adequate” premises, staff and on-island spending to conduct their core revenue-generating activities. The rules were introduced last year to address European Union concerns about offshore shell companies being used as tax shelters.

“Demand for one or two offices with a shared boardroom is the trend and landlords have been quick to respond to this emerging demand,” she said.

This is adding to the demand for smaller office spaces. Ms Correia said that about 100,000 square feet of vacant, longstanding, large office spaces had been converted into smaller units and successfully leased within the last two years.

About 30 commercial properties are on the market ­— 19 of them in the City of Hamilton — with a combined value of some $54 million, Coldwell Banker Bermuda Realty estimates.

Of these, 11 are situated in the North East Hamilton Economic Empowerment Zone, where the Government is trying to attract entrepreneurs to base small businesses to rejuvenate the area.

Mixed-used commercial and residential developments are an in-demand segment of the market and Ms Correia expects the trend to continue.

She anticipates more buildings being developed or converted for mixed use, given the uncertainties in the market caused by the pandemic. “Mixed-use buildings bring life into a city and they are an efficient use of space,” Ms Correia said. “From a development perspective, commercial and residential schemes assist developers to more effectively manage their development risks, as they can build a variety of inventory with residential, office and retail combined, in order to more readily manage and satisfy the market demand.”

She added: “With an ageing city infrastructure, we need to look at ways to encourage both local and foreign capital to invest in our city.”

The post-crisis shift in office life will require adaptability at least in the near term, Ms Correia said.

“We don't know when we will be back to ‘normal' or if this is the ‘new normal',” she said.

“We have to make smart decisions and have adequate guidelines in place in order adapt and to get business back up and running in the city.”

Changing market: Rachael Correia, commercial real estate specialist at Coldwell Banker Bermuda Realty (Photograph supplied)

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Published May 25, 2020 at 9:00 am (Updated May 25, 2020 at 1:36 pm)

Covid-19 fallout: cubicles to return in offices

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