Middle East's office market set to transform as companies adopt hybrid work models

A re-evaluation of workspace could vary depending on the industry, according to a Deloitte survey

Members work inside the Barclays Plc Rise office space in New York, U.S., on Friday, Sept. 30, 2016. Across Wall Street, banks are pushing into technology, either by directly investing in startups or by boosting their in-house technology expertise. Photographer: Christopher Goodney/Bloomberg
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Companies in the Middle East could adopt hybrid working models – a combination of remote and onsite methods – after the pandemic eases, leading to an increased requirement for on-demand flexible offices, according to a Deloitte survey.

Offices will be reconfigured to facilitate team discussions while independent activities will largely be carried out online, according to the consultancy's Middle East Real Estate Predictions.

"It is possible that companies may gravitate towards a hybrid model combining the core leased/owned space and additional on-demand flexible offices, while incorporating a higher ratio of work from home policies than pre Covid-19," the company's annual property market forecast said.

The extent to which offices are remodelled will vary depending on the industry and the amount of space a company currently holds, it added.

"The extent of reconfiguration or changes in office space will depend on a combination of factors including technology readiness, company culture and expected benefits of real estate savings."

Existing data indicates that there might not be an immediately fall-off in demand for office space.

More than 70 per cent of firms polled said they do not expect a change in their office space requirement as current leases expire, according to a survey conducted by Deloitte in October.

The coronavirus pandemic, which shuttered borders, disrupted global trade and halted global travel last year, has led to major shifts in working trends, including in the Middle East, despite a gradual reopening of economies over the last few months.

About 38 per cent of Middle East professionals in the region now want to work from home permanently, and a further 32 per cent would prefer a hybrid model, according to a recent survey by recruitment firm Robert Walters.

Deloitte's forecast also said the pandemic boosted demand for industrial warehouses across the region as shopping habits transform. A fast-growing online grocery segment has also led to an uptick in demand for cold storage spaces, the report said.

In Dubai, a 920,000 square metre EZ Dubai logistics zone and the 195,000 square metre Commercity at Dubai Airport Free Zone have both launched in the last two years to cater to rising demand.

EZ Dubai is reported to have achieved an operating rate of 20 per cent within its first phase as of September 2020.

By contrast, the shift to online retail is placing pressure on traditional stores, with the Economist Intelligence Unit estimating total UAE retail sales volumes for 2020 fell 10.3 per cent as the pandemic meant fewer visits to physical stores.

"The impact of Covid-19 on retailer revenues has led to many tenants seeking turnover-linked rents in their contracts. Meanwhile, certain mall owners have provided temporary incentives in the form of rent relief launched soon after Covid-19 lockdown measures in March 2020 and in certain cases extended until the end of 2020," the Deloitte report said.

Similarly, the hospitality market suffered a tough 12 months as movement restrictions disrupted the flow of tourists into the Dubai, but a brighter year ahead is expected.

“The Dubai hotel market has experienced a major shock and has had to adapt during a very difficult period. With the vaccine currently being rolled out, Expo rescheduled to start on 1 October 2021 and Dubai’s 50th year since nationalisation, it is hoped that a rebound will occur and performance matrices return to much healthier levels towards the end of this year,” Robin Williamson, head of real estate at Deloitte Middle East, said.