At-risk real estate professions
Real estate agents, architects, brokers, movers, etc., are dealing with half-filled schedules and order books. The real estate crisis hasn't just caused a decline in new home sales. The downfall of Evergrande, once China's top real estate company, highlighted the ripple effects on other sectors. Builders, along with all the trades connected to construction and renovation, notaries, property developers, real estate experts, and land developers – all professions tied to housing – have been affected by the downturn.
Even commercial real estate consultants and agents aren't exempt. They claim to have been influenced by new corporate decisions arising from lockdowns and the surge in telecommuting. Although many employees have returned to the office, others continue to work remotely.
Commercial real estate and coworking spaces
In the United States, the fall of WeWork, a former coworking star, is a case in point. Founded in 2010, the startup has enjoyed dazzling success worldwide. Boosted by massive investment from Japanese giant SoftBank, WeWork was valued at $47 billion in 2019. The company has opened hundreds of sites in other countries (France, Belgium, Australia, Argentina, Canada, Vietnam, UK, Colombia, India, Indonesia, etc.).
However, in that same year, one of its founders, Adam Neumann, was ousted. In November 2023, the financially troubled WeWork filed for Chapter 11 bankruptcy protection to facilitate substantial debt reduction. The staggering debt, assessed at $18.6 billion, was further compounded by $100 million in "unpaid rent and lease termination fees."
In November 2023, WeWork filed for bankruptcy only for its locations in the USA and Canada. The offices in Paris remain unaffected and are confident about sustaining their operations despite the group's bankruptcy. On the flip side, some are less optimistic, worrying that WeWork's downfall could exacerbate the challenges faced by the office-sharing sector, already strained by changes in work organization post-Covid.
How remote working has emptied offices
Is traditional corporate work still relevant today? Corporate real estate consultants are observing a growing trend driven primarily by the rise of telecommuting. In the United States, approximately 20% of commercial spaces are currently vacant, a situation unseen in the past 40 years. In major cities, office rental prices are dropping by 50% or more in an effort to attract companies. Despite companies urging their employees to return to the office at least a few days a week, the health crisis's lasting impact is evident in how work is being organized. Both locals and expatriates who have embraced remote work see numerous advantages, such as time savings (no more commuting hours), increased productivity, and cost savings.
Other countries are experiencing commercial real estate crises. In France, the sector collapsed to 67% of transactions in the second quarter of 2023. Rising interest rates are cooling the appetites of investors, who prefer to put things on hold. However, an upturn is expected this year, driven in particular by the stabilization and even reduction of interest rates. After ten years of growth in Germany, the commercial real estate market looks gloomy. In 2023, transaction volumes dropped by 76% (according to BNP Paribas Real Estate figures). This is attributed to the economic slowdown, the general real estate crisis, and falling demand for office space. As in the United States, remote work has reorganized work away from the traditional corporate office. This is especially true for large companies, where remote working is more widespread.
Entrepreneurs, however, express skepticism regarding the widespread adoption of remote work. Is it already a new norm, or will its popularity fade over time? While some business leaders are adamant about bringing their employees back to the office, others are embracing telecommuting as a strategy to attract local and international talent.
Persistent labor shortages
Despite the challenges posed by the real estate crisis, certain sectors still grapple with persistent labor shortages, as seen in the construction industry. On the one hand, prudent investors are delaying their purchases, and on the other, the economic downturn and inflation are contributing to an increase in the cost of raw materials.
On the other hand, construction companies are facing a shortage of skilled workers, leading to a slowdown or halt in new housing construction projects. This shortage is impacting individuals involved at various stages of construction sites, including masons, roofers, electricians, painters, landscapers, and others.
The negative effects are not confined to real estate brokers and agents; they extend to entire geographical areas. The real estate crisis is impacting not only regions with housing shortages but also areas with deteriorating or vacant dwellings. Shopping districts are losing their allure, and both businesses and residents are increasingly hesitant to set up there. Locals and foreigners alike are grappling with housing challenges due to insufficient supply and limited borrowing options. Just as there are medical deserts, there are now "urban deserts," prompting governments to swiftly implement measures to stimulate growth.
Recruitment in the construction industry: considering foreign workers
According to a study by builder and distributor Stanley Black & Decker, the USA had a shortage of 650,000 skilled construction workers in 2022. In Canada, over 80,000 positions are expected to remain vacant, with certain provinces like New Brunswick and Quebec facing more critical situations. The New Brunswick government anticipates a shortage of 10,000 skilled workers by 2032 and is looking to other provinces for solutions. For instance, Nova Scotia is concentrating on apprenticeships. In October 2023, the government unveiled a plan involving CA$ 100 million and 5,000 additional spots to address the labor shortage. To attract candidates, Nova Scotia is also turning to immigration. Duncan Williams, President of the Construction Association of Nova Scotia, emphasizes that the province also needs immigration, especially skilled workers.
Quebec is also banking on immigration, aiming to train 60,000 workers in the extensive construction and civil engineering sector. The plan explicitly focuses on attracting French workers. In November 2023, the Journées Québec, a government program designed to recruit foreign workers, took place in France. The upcoming Journées Québec will be held in Morocco in February.
