Irish Examiner View: Underlying threat to commercial property 

The increasing popularity of hybrid working is likely to have unpredictable consequences, and some of them will certainly be financial

The retrenchment of major companies involving staff and cost reductions when allied to a drive towards home working raises tricky questions.

Much debate about the future of employment has focussed on the popularity and desirability of working from home. This scores well on the metrics of life balance, time management, and environmental concerns but has its critics when it comes to enterprises which rely on the creative synergy of people working together and thrashing out solutions which the marketplace needs.

What is underappreciated, for now, are the implications for the commercial property markets in major cities in Ireland and overseas. And the reason that this might be of more general interest to many people is because pension funds have, for years, viewed investment in this sector as a one-way bet to reliable and satisfactory returns. If that falters, then lower yields could affect retirement pots everywhere.

In Dublin, London, and elsewhere the booming demand for office space, particularly from tech and financial companies, was testament to the belief that expansion was inevitable and unstoppable. The last two years have taught us otherwise.

The retrenchment of major companies involving staff and cost reductions when allied to a drive towards home working raises tricky questions. Who is going to rent expensive city offices in the future when their requirement for floor space is reduced, probably permanently? And what will this mean for owners, agents, developers, and lenders in the teeth of higher interest rates and the end of cheap money?

Cheaper rents may be good news for some, and bring a sharper focus on whether we will need so much office space in the next decade. It may also stimulate debate as to whether new build is preferred to the inevitable demands for office upgrades to meet more exacting environmental standards.

Occupancy rates in London are at 50% of the pre-pandemic level and they are also markedly sluggish in the US. Initial confidence that there would be a return to normality has been badly dented. The elephant in the room is hybrid working. Its increasing popularity is likely to have unpredictable consequences, and some of them will certainly be financial.