Is the office about to be the comeback kid of the corporate world?

COMMENT Last week, the Federal Reserve’s decision to cut its benchmark interest rate by a significant half-point dominated global headlines. Yet what could be a more profound long-term development for businesses, particularly the commercial real estate sector, came with Amazon’s decision to mandate a five-day office return for employees, closely followed by Starbucks’ new chief executive stressing the critical importance of the office. At first glance, these events might seem unrelated, but they speak to a broader narrative about where we are headed. The Fed’s move was a shot in the arm for the economy, but Amazon’s announcement is a reminder that the heart of many businesses still beats within the walls of an office. For years, many have questioned whether the office as we once knew it was truly necessary. And the rise of hybrid and remote work created doubt about the future demand for the spaces, especially for secondary locations and outdated properties which no longer meet the needs of today’s employees. Yet, Amazon’s decision is a strong signal that the office remains essential for companies focused on building culture, fostering creativity and driving innovation. Flexibility has its place Starbucks’ new chief executive, Brian Niccol, echoed a similar view, emphasising the importance of being physically present at work. In his first address to employees this month, he spoke about the benefits of having everyone in the office while also acknowledging the need for flexibility in where and when people get their tasks done. His point was clear: while flexibility has its place, the energy and collaboration that come from working together in person are essential for driving success. Amid the negative sentiment surrounding the office sector, positive stories for premium assets have often been overlooked. Best-in-class spaces – those that go beyond simply offering desks and meeting rooms – have not only weathered the pandemic but often thrived, especially in prime locations within leading global cities. In fact, competitive rents for these high-quality spaces are expected to persist, and as we have seen in our own portfolio, they may even climb higher. While the Fed’s rate cut offers some relief for those seeking capital, the true value for these premier properties lies in their continued ability to meet the evolving demands of world-class businesses. The office market is now undergoing a clear bifurcation, with the gap between premium, experience-driven spaces and those that fall behind continuing to widen. Secondary offices, long overshadowed by prime locations, will have to work harder than ever to reinvent themselves. This may involve transitioning to serve other sectors such as alternative residential, data centres or industrial and logistics. And while it is clear that only the best-in-class offices will flourish in the future, there remains a window of opportunity for those prepared to invest in upgrading and repositioning their spaces to meet the changing expectations of the workforce. But as expressed by Niccol, the benefits of flexible work are hard to ignore. Providing employees with the freedom to manage their work-life balance is crucial for building trust, encouraging autonomy and fostering a healthier work environment. The office is not dead – it is evolving AllBright, the women’s networking business in which we are a significant investor, highlights this in its Future of Work report, revealing that only 25% of C-level women plan to stay in their roles for more than two years, with many citing a lack of flexibility and the challenges of balancing family responsibilities as key factors. At Cain, we have always believed that the physical office is more than just a workspace; it’s where teams unite, ideas flourish and businesses grow. The office is not dead; it is evolving – and as companies such as Amazon and Starbucks lead the charge, it’s clear the right kind of office space is still invaluable. With the Fed’s rate cut fuelling optimism, the mandates from leading businesses add something even more critical: confidence. And it is that confidence that will ultimately drive the next phase of growth for the sector. Jonathan Goldstein is chief executive at Cain International Image from PR