It's silly to think that we will not need office real estate for the foreseeable future.

In fact, the last time I heard people saying that we don't need a certain type of real estate was back in 2016 with retail real estate. People were saying that $AMZN will conquer retail and everything will be ordered online. Today, Amazon's retail business may be bigger than ever but at the same time, other retailers from $WMT to $WSM to $COST and even $ULTA and $KMX still rely on retail property to operate their business. Retail real estate remains strong even as a crime wave causes billions of dollars in inventory losses for retailers.

Back when the US started deindustrializing after the Cold War, industrial real estate didn't seem as vital as it once did. With the manufacturing jobs being offshored to China, Taiwan, Thailand, Vietnam, the Philippines, India, etc. we didn't think that we needed industrial real estate. Since the e-commerce boom, demand for industrial real estate has surged. And industrial real estate demand continues to grow as companies start restoring their operations to reduce the risks that come with relying on other nations for the production of goods.

I believe that demand for office real estate will come back. Demand for life science real estate, with $ARE being the leader of that office real estate niche, remains strong as the biotech industry continues to grow and life sciences work can only be done in specific environments, not from home. Companies looking to implement virtual reality technology to boost the productivity of their workers will prefer to keep a set of VR equipment in the office and dedicate office space for VR work-related activities. Any technologies that can't be brought home for a variety of reasons (bulky, hazardous, expensive, proprietary, etc.) are going to be installed in office buildings to give workers a reason to commute to the office for work.

Adding on, I see the demand for co-working spaces grow for a variety of reasons. In the present day, demand for co-working space is growing as companies downsize their office locations and employees take advantage of the coworking perks that their employers are offering. As this New York Times article puts it, "[t]he commercial downsizing that has driven employees to co-working spaces has also resulted in a surplus of office space with depreciating values." Moreover, companies will want to enjoy the flexibility of leasing any amount of square footage and reducing the square footage they already have whenever they want. Currently, those that hold a lease in an office building have to go through the hassle of sub-leasing any unused space or cancel the leases altogether and pay large penalties on it. For firms, it's less headache to lease floors from WeWork than to lease the floor directly with the landlord and deal with the logistics of the amenities. It may be costlier but the post-pandemic world has made firms value location flexibility more than managing the floors of the office building yourself.

As for social trends, I see the office becoming the place where people will makes friends. Whether these friends are their coworkers, people that work in another company but in the same building as them, or even people you meet in the city as all the office workers go outside to restaurants and parks to have lunch, the office will help people find and make friends. It's harder to develop relationships virtually and people will want to go to the office just to fulfill the social aspect of their life that they're lacking due to remote work. While majority of corporate workers will have hybrid work arrangements, those working remotely full-time will choose to work in a co-working space and that's where they'll find the human interaction that they desire for the day.

It will take time for demand for office real estate to return back to the pre-pandemic days (or even exceed it). With the belief that companies will retrofit the office real estate buildings to have the expensive and bulky technologies necessary for work, the employers will have an easier time convincing the employees to come to the office. Also, as more companies start relying more on co-working places, we could see a dynamic in the office real estate industry where the co-working giants like WeWork $WE and others will start forming an oligopoly on leasing activity and take on the risks that comes with offering employers flexibility in their leases. Employees working remotely may even become big customers of co-working spaces as they will find work from home to be distracting for them, creating more demand for more local co-working spaces.

To end, I will say that office real estate will play a vital role in accelerating productivity growth in America.