A new wave of office downsizing could hit this year
A new wave of office downsizing could hit this year
Office vacancy rates reached an all-time high last year according to a new report from Moody’s Analytics, and the firm projects the bleeding could continue through 2024. Because even as workers are finally returning to office after all those starts and stops, there just aren’t as many of them in one place at one time at many workplaces, making it hard for companies to justify the real estate expense.
While a trend toward smaller office footprints has been underway since the pandemic began, the commercial real estate market can be a slow ship to turn due to how long commercial leases typically run.
All that means right now is a great time to score a deal on some lightly used office furniture. Online classifieds are so saturated with the stuff you can barely give it away for free.
“It used to be that you could donate furniture to lots of places,” said Tamara Robb, the head of Robb Digital marketing agency in Middlesex, New Jersey. “Salvation Army, Big Brothers Big Sisters, Vietnam Vets, Goodwill — no one wants it.”
Robb recently vacated the 2,000-square-foot office she used to lease for her team of about 10.
“I had a lot of ego tied up in that space, and making it beautiful,” she said, but the shiny glass desks, custom conference chairs and company branded cornhole boards had begun to feel like overkill in a hybrid world. So on Jan. 1 she let the space and furnishings go, along with a selection of partially burned Yankee candles in scents like “Sun and Sand,” which Robb described as smelling like classic 1970s and 80s Coppertone sunscreen, which proved to be surprisingly popular secondhand.
“I made people’s day with those burned candles!” said Robb. Which was not the case for those custom conference chairs.
“The seating color was like one of the more unusual colors in our logo — it’s the bright green,” said Robb. “So nobody wanted them.”
Those she donated to the non-profit organization that took over her 2019 lease. Commercial leases are typically at least three to five years, so many businesses that signed before the pandemic could just now be making exit plans, said Micah Remley, the CEO of Robin, a software platform for flexible work.
“Some of these things were set in motion a year and a half, two years ago when companies abandoned space, but their lease wasn’t actually due yet,” he said. “Now their leases are coming up — they’re not renewing them.”
A recent Robin survey of 500 businesses found three-quarters of them plan to shrink their offices this year after the return-to-office trend plateaued, according to a Stanford analysis of census data measuring days worked from home.
That conspicuously empty office space has weighed on many employers said Cali Williams Yost, a business advisor who heads Flex+ Strategy Group.
“You see this unused space and in your mind, you think, ‘OK, here’s a great way to save some money,'” said Yost.
But it’s not all about money, said Yost. In this tenuous back to the office detante, employee feelings still matter. And slashing square footage, private offices and dedicated desks can alienate staff.
“If they want to use that space to collaborate, but it’s not available, or when they come in, there’s no place for them to sit they’re not going to tolerate that for very long,” said Yost.
The key is to let workplace form follow function, said Ann Hoffman, director of workplace strategies at Philadelphia design firm FCA.
“What can you give me in that space that I can’t get at home?” said Hoffman. “And I can tell you, it’s not a ping pong table.”
Hoffman has helped downsize several offices, including her own, reducing its footprint by about 40%. The company now has 24 desks for about 65 employees, and highly customizable focus rooms.
“I’m sitting in a room with a desk, a table lamp, a chair and a floor lamp. I can adjust 1-2-3-4-5 things in this room to my own liking,” said Hoffman. “And we have a lot more upholstery and softness everywhere.”
She said the firm used fabric panels to divide the space, “so if I’m in the office, and there’s only four or five people in because it’s a Friday afternoon, we can sit together in one area and not feel like the place is empty.”
Back in New Jersey, Tamara Robb and her digital marketing agency are also getting used to a cozier setup: some remote, some hybrid with three people working in a space a quarter of the old digs on the third floor of her house.
“It’s homey because it’s my home,” said Robb.
It’s got everything they need — including, a sink and a pour over coffee setup — and nothing they don’t, like custom bright green chairs.
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