These Three Factors Are Driving Office Tenants’ Decisions

A new international survey of office occupiers released by Cushman & Wakefield with industry non-profit CoreNet Global shows some “key shifts” in approaches to real estate and workplace strategies and decisions.

The survey responses came from more than a dozen countries and represent 9.6 million employees globally and 741 million square feet of real estate.

“Our survey, in cooperation with CoreNet Global, provides a detailed look at what is driving workplace, location and portfolio decisions by tenants around the world – and the findings demonstrate movement in thinking and approach in the aftermath of the pandemic,” Dimitris Vlachopoulos, Cushman partner and head of total portfolio and location strategy, says in prepared remarks. “Moreover, our special topic in this edition is on how occupiers are reacting to the rising importance of business objectives associated with Environment, Social & Corporate Governance (ESG), as climate change continues to affect our lives & businesses. In sum, our findings show that real estate goes flex, to win on cost, talent and ESG.”

The basic key drivers of office decisions are talent — the most often cited answer in the Americas — and then cost and operational excellence.

The importance of cost has risen as companies continue to struggle with work-from-home, hybrid models, and interest in maintaining only as much office space as they need, except few know that with certainty.

Tenants are also treating environment, social, and governance (ESG), especially the first component, with greater importance. The reasons differ by region. In the Americas, the main focus is on reputation, while in EMEA the concern is climate change. Whatever the impetus, though, owners and operators will need to consider how to meet expectations, which ultimately will likely require technology to monitor conditions and generate reports.

In terms of space layout, there has been a significant shift. Pre-pandemic, companies required communal space was typically 20% to 30% of the total. Now the expectation is that 40% to 50% of the space will be communal.

Also, the distribution of space across geographies is changing. About 57% of occupiers prefer headquarters in central business districts, with 12% looking at “emerging creative urban areas.” And 80% of firms in CBDs haven’t considered moving out of them. But most companies recruit from beyond city boundaries and 26% will look for talent anywhere in the world.

The result is low occupancy, with most occupiers seeing occupancy levels below 45%. A 63% majority of companies plan to reduce their real estate footprints.