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When the COVID War was launched back in 2020, we had forecast the work-at-home trend would be a permanent part of the new world order… and it has.
With costs rising and a recession looming, U.S. companies are cutting costs by axing office space they no longer need and never will again.
The permanent shift to remote work has not only liberated workers from hours long miserable commutes, but also has freed companies from keeping a desk and other infrastructure for as many employees as before.
Now that companies have a better idea of just how many workers will return to central offices and how often, 52 percent of companies plan to have less office space three years from now than they do today, compared to 44 percent a year ago, according to a CBRE survey of 185 companies with offices in the U.S.
Roughly 39 percent of those surveyed expect to need more office space over the period.
On 30 June, about 17.5 percent of U.S. office space was open for lease or sublease, compared to 16.5 percent a year earlier, brokerage Cushman & Wakefield reported.
The number of workers using space that remains under lease is only about 44 percent, card-swipe data gathered by Kastle Systems shows.
Last month, online review site Yelp announced that it will vacate its offices in Chicago, New York, and Washington and cut back its Phoenix footprint as it embraces remote work for most employees.
That takes 420,000 square feet out of the company’s future plans, leaving it with 180,000 square feet, compared to 876,000 square feet at the end of 2019.
The company will use the savings to enrich employees’ benefits, it said.
“When you’re coming into economic headwinds, that puts even more pressure on figuring out where you can cut expenses, so any resource you’re not fully utilizing is a target,” Kastle chairman Mark Ein told The Wall Street Journal.
Consulting firm Korn Ferry is saving more than $10 million a year by abandoning 230,000 square feet of space over the past two years, the company said.
At the same time, the firm has grown its staff by 32 percent.
“There’s probably more space we can wring out of the system,” CFO Robert Rozek said to the WSJ. “I want to see how many folks are actually coming back into the office, then I’ll form a view of our next steps.”
Also wondering about next steps: office landlords, as we report in Financial Squeeze Tightens on Office Landlords in this issue.
TREND FORECAST: Companies honoring employees’ desire to work remotely at least some of the time will gain a competitive advantage in recruiting and retaining top talent.
Corporate structures will evolve to ensure that all workers, not just those whom the boss sees every day, receive equal consideration for raises and promotions.
Businesses also will take advantage of the metaverse and other virtual realms to create places where employees can hang out and chat, often a fertile ground for new ideas.