We Have Too Much Office Space. Now What?

by | Nov 3, 2021 | Uncategorized | 0 comments

If your business is like most, your executive team realized at some point over the last year that you can get by with a lot less office space for the same amount of staff.  That might be because you’ve embraced some amount of permanent remote work or have indefinitely delayed a long return to work plan.  In either case, unless you are growing rapidly, you are probably paying for underutilized space.  You don’t want to do that long term.

In EY’s 2021 Workplace Index they found:

  • 87% of companies say the pandemic has changed the role of the office for their organization
  • Only 13% of respondents expect to have most of employees back in the office once the pandemic subsides
  • 85% of those surveyed said their current arrangement is just as effective, and

Here’s the clincher:

  • 60% have not yet created a plan for a new workplace design and how to implement it

Unfortunately, commercial leases generally lack flexibility and many companies are frustrated to find themselves stuck in long term leases with no termination rights. It was a system designed by landlords and supported by the commercial real estate firms that represent them.

So there are four ROI-logical options:

  1. Get everyone back into the office full time real soon. (Not likely)
  2. Double headcount rapidly so that your sub-50% utilization rate now fills the space. (Congratulations on explosive growth if applicable).
  3. Lease out or sell the unused portion and/or find a better fit elsewhere and move,
  4. If you lease, downsize to a smaller space if your lease expires within the next 24 months.  (You’ll have many options and good leverage.)

The U.S. has reached an all time high for available office space at more than 30% of the total office inventory and more than 6X the amount of sublease space than was on the market just 5 years ago.  So Option 3 may be challenging although not impossible as long as the space 1) gets proper market exposure, 2) has a clean and functional generic floor plan (or you make it so), and 3) is priced right.

Here’s the question that you should be asking:  How do we redefine the company value proposition to employees in a hybrid environment?

Hint:  The answer has little to do with real estate, and a lot to do with employee satisfaction, productivity, and re-defining your culture to include employee choice of workplace.  More to come….