Small Businesses Slowly Start Their Real Estate Activity

Office leasing activity is on a rebound, up 9.2% year over year in the last quarter of 2021, according to data from JLL. A good amount of the growth is in large office spaces, but small businesses are important for flex office spaces, filling in square footage not taken by large companies, and because such companies are “at the forefront of economic growth,” according to the US Small Business Administration. 

A new study and analysis by B-to-B ratings company Clutch sees 2022 as a return to normalcy. However, details of the data collection and samples suggest that while the information is potentially useful, it should be taken with some salt, as is so often true of such surveys.

The state of small business interests in real estate is mixed. For example, 40% of those currently without office space plan to obtain some in the “near future,” and yet 59% don’t plan to acquire any.

The smaller the business, the less likely it is to lease space. According to Clutch’s survey data, 36% of companies with ten or fewer employees work fully remotely without office space. Break that number of employees and the figure drops to between 8% and 11%. The rates have so far stayed steady in 2022 with the continued popularity of remote work. As might be expected from these numbers, the smallest companies see pronounced benefits of remote work.

Small businesses in general that have office space leases want to return to normal operations. “In 2022, companies plan on holding onto their leases, expecting at least a partial return to the office in a full-time or hybrid capacity,” the analysis says. “Currently, 70% of small businesses with offices plan on keeping their current space for an in-person workforce in 2022.” Also, 23% of small businesses are planning an upgrade of their offices for more space and amenities. But the companies also want greater flexibility, as many seem to favor a hybrid approach.

Now for the data issues. The report is based on two surveys. The first was of “500 small business owners and managers in the US at the close of 2020 about their 2021 plans,” while the second was of “1,003 small business owners and managers at companies in the US with fewer than 500 employees in December 2021 about their 2022 real estate plans.” The method for recruiting the respondents isn’t mentioned, making it impossible to know if they were statistically representative of small businesses.

Percentage splits among different company sizes, geographic regions, and ages of respondents varied significantly, so year-over-year comparisons are of at least somewhat dissimilar groups. That said, getting accurate and statistically significant data in business is difficult, so while keeping somewhat skeptical of results, also don’t let the perfect be the enemy of the potentially useful.