More Companies Are Adding Space Than Removing, But Only a Year Out

If it wasn’t clear before, a new study from proptech firm Visual Lease, which has lease management software, shows that medium-to-large enterprises are changing the way they look at leasing space. One thing that hasn’t changed according to the survey is that companies are poor at tracking leases, terms and conditions, and sometimes even how much they’ve paid.

Wakefield Research conducted the study of 200 senior US corporate real estate executives at organizations with 1,000 or more employees. The survey, run in December 2022, used an email invitation and an online survey. Private, public, and government organizations were all qualified to respond.

Organizations are still leasing space, with 70% of respondents saying that their organizations were looking to add space to their portfolios in 2023. That is roughly the same as a corresponding study last year found. Of those, 52% are adding satellite locations; 40% are relocating spaces.

However, 88% of the ones with organizations adding physical space say they only do so a year or less in advance, a 151% increase over last year.

And then, 59% of organizations are looking to decrease space, either by closing locations (40%) or downsizing existing locations (28%).

That said, organizations are also skittish about taking steps given the uncertainty of macroeconomic conditions, as 71% of respondents said their companies are “extremely likely” to postpone upgrades or moving to new facilities.

Practical interest in hybrid made an appearance, as 46% of respondents said that “shared desks/offices booked as needed created the best office working environment for their companies.”

But that finding does seem to clash with evidence that management teams are again looking to bring people into the office. Even the tech sector, whether in technology companies or IT departments of corporations in other industries, are showing an impact. One example is the share price hit that WeWork took when it announced lower projected revenue for 2023 Q1 than analysts expected, likely due to tech industry layoffs. Walmart has tightened the reins on its IT employees and is closing three of its US technology sites.

A more immediate impact of leasing is that many companies don’t seem to be in full control of their leasing activities (which does include non-CRE leases). About 71% “are not entirely confident they know how much their leases cost their business” and “45% of senior Real Estate Executives share that their companies have overpaid rent or expenses due to inadequate lease controls.”