Fewer Companies Anticipate Trimming Office Footprints

The post-pandemic focus on office space reduction is waning, according to CBRE.

The percentage of companies that anticipate growing the office space they occupy in the next three years rose to 38% compared to 20% a year earlier, CBRE said in its annual 2024 Occupier Sentiment Survey. The percentage of companies that anticipate reducing their office footprints fell to 37% from 53% in 2023.

“Assuming the economy stays on stable footing, [this] does signal… that there is a recovery under way,” Julie Whelan, global head of occupier research at CBRE told GlobeSt. “That does not mean we are at peak vacancy or that we are at the trough of rents. We believe those [negative data points] are likely to follow us this year and next before we reach that peak and trough. There does seem to be a recovery of occupier sentiment. Occupiers are feeling they are in a better place than they have been previously to transact in a more stable fashion.”

CBRE’s survey polled corporate real estate executives overseeing office portfolios representing 225 companies with offices in the U.S., Canada and Latin America.

Of those companies surveyed, 40 percent told CBRE having enough space is a challenge in some of their offices.

“Some companies that may have trimmed too much space in recent years or have added staff now find their offices cannot accommodate employees on high-attendance days,” CBRE said in a statement accompanying the survey.

“For years, we’ve been in a heavily contraction-oriented mode,” Whelan said. “Contraction is still an element of portfolio strategies, and it was before the pandemic as well. However, we do see a turning point this year, where occupiers are starting to trend more toward either a stabilized portfolio, or [one geared towards] growth, especially smaller occupiers.”

HIGH COST OF MOVING

To be sure, the high cost of moving and of building out new space is motivating others to stay in place, CBRE noted.

Some 80 percent of respondents, and 92% of large occupiers, whose current space fits their needs, said they are exploring or executing renewals.

Those who stay are leveraging current market conditions, which are favoring tenants, to renegotiate their existing leases.

“Large occupiers tend to be more successful in these negotiations because landlords are motivated to retain them rather than deal with a sizable vacancy,” CBRE said.

BETTER LOCATIONS, BETTER QUALITY, BETTER EXPERIENCES

The often-touted flight-to-quality trend remains relevant.

“What constitutes ‘prime’ is often subjective and continually evolves based on occupiers’ needs and the changing purpose of office spaces,” CBRE researchers said in the survey. “Both the building and surrounding neighborhood amenities play a crucial role in creating an exceptional employee experience that remote work cannot replicate.”

The survey found that nearly two-thirds of companies that are relocating, are doing so to secure office space in better locations, of better quality, or to provide improved employee experience.

“It’s possible we’re past the peak of the office-downsizing trend,” Whelan said. “Even as companies embrace hybrid work, they see a need for high-quality office space.”

ENERGY, WATER, AND WASTE DATA

CBRE’s survey found “green lease clauses” are of growing importance to office occupiers. These leases feature sharing data on energy, water and waste between parties; reporting and disclosure of carbon footprint by the landlord; and requiring the landlord to implement comprehensive recycling systems.

A quarter of participants surveyed said that the presence or absence of green lease clauses would impact their real estate decision.