Another survey captures a growing sense that companies will not be scaling back their office footprints as much as feared.
A couple of days after KPMG's 2021 CEO Outlook Pulse Survey said that only 17% of respondents said they will downsize their company's footprint, the first-quarter AICPA Economic Outlook Survey says most businesses haven't planned for a reduction in their traditional brick-and-mortar office space. The AICPA survey polls CFOs, controllers and other senior-level CPAs and management accountants in business and industry.
While office landlords may applaud this shift in sentiment, it's not happening because companies are having a change of heart about remote work or optimism about the economy. Instead, according to the AICPA survey, the reasons are more likely to be that many companies are locked into long-term leases and lack escape clauses. Also. landlords have become unwilling to make additional concessions.
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Seventy-two percent of respondents to the AICPA survey indicated that their organizations had no plans to shrink their office footprint over the next 12 months, which is a five percentage point decline from Q3 2020. Nine percent of respondents said they were planning to reduce traditional space by 10% to 24% over the next 12 months. In Q3, only 5% of respondents were planning to reduce traditional space by 10% to 24%.
In Q3 2020, 18% of executives said their companies expected some downward revision in office space in the coming year. In Q1 2020, that number increased to 21% of business executives. By comparison, 69% of CEOs said they would reduce their office footprint in KPMG's August 2020 survey before that number recently fell to 17%.
"The lack of action by others reflects to a large degree the reality of long-term leases—many companies that do not own their properties outright lack escape clauses, so they can either try to informally renegotiate or wait for renewal," according to AICPA. "Landlords, battered themselves by the pandemic, are often unwilling to make additional concessions with a more optimistic economic outlook emerging due to the stepped-up pace of vaccinations."
Most executives surveyed by AICPA say they expect their companies to be back to pre-pandemic levels of operation within the year or are at that level already. However, 27% said it would take a year or more to climb back.
The majority of executives told AICPA that their companies currently use a hybrid mix of remote and onsite work. Eight percent said their organizations employ all-virtual operations.
"The nature of office space and how it is utilized will continue to evolve towards a more flexible and hybrid operating model," said Ash Noah, vice president and managing director of management accounting learning, education and development for AICPA, in a prepared statement.
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Leslie Shaver
Les Shaver has been covering commercial and residential real estate for almost 20 years. His work has appeared in Multifamily Executive, Builder, units, Arlington Magazine in addition to GlobeSt.com and Real Estate Forum.
