To Understand Office, Follow the Headquarters

Post-Covid office trends have become synonymous with work-from-home, hybrid work, and a flight to quality. Occupancy has gone down, as have property values and transactions.

However, office market dynamics are more and have been going on for longer. CBRE undertook a new analysis of the Fortune 500 and headquarter relocations. Before going into that, it makes sense to first review its December 2023 analysis of headquarter changes.

After reviewing 465 publicly announced HQ relocations between 2018 to 2023, at 24%, the top reason for headquarter relocations was business climate and lower taxes. Second was, at 16%, operations consolidation and portfolio optimization.

The tech industry had the most relocations (135), followed by manufacturing (120) and finance (34). Those three were 62% of all the relocations. Texas attracted 209 of the relocations, the most of any state. Austin got 66; Dallas, 32; and Houston, 25. On the other end, San Francisco and San Jose together lost 79, Los Angeles and Irvine lost 50; and New York saw 21 leave.

What CBRE found among the Fortune 500 in its more recent study was that between 2018 and 2023, 30% “took some major action regarding their physical HQ space.” That could mean a “full geographic location to sizeable reinvestments in their existing space.”

Reinvestments in existing space could be part of periodic maintenance and revitalization. Many changes were responses to hybrid work and a competition for talent. “Seventy firms acquired a new site within their existing MSA, with many downsizing or changing their location to an adjacent submarket,” CBRE wrote. “Twenty-nine firms reinvested into their existing HQ site. Reinvestments included large renovations to modernize space, spending from $25 million to $500 million. Other reinvestments included space expansions of at least 100,000 sq. ft. at their current HQ site.”

There were 35 Fortune 500s that moved their headquarters from the previous metropolitan statistical area. Of those, 28 moved out of state. “Sunbelt states such as Texas, Florida and Georgia received the most net gains in Fortune 500 firms, while California, New York, New Jersey and Illinois had the greatest net losses” they wrote. California along lost eight Fortune 500s, seven of which went to Texas.

And then, “117 Fortune 500 firms made some sizable HQ change within their existing market. Some (70) moved to a new submarket within their existing metro, while others carried out large reinvestments or sale-leasebacks of their existing buildings.”