Less Space, More Uncertainty

Over the past year our small team based in San Francisco has not worked on a single assignment in which the client is expanding its leased office space.  In some cases, the leased footprint remains the same, but many clients are decreasing their leased space.  We're doing work all over North America.  Client approaches to the office range from the following:


1. Wait and see:  Not really using their space, mostly work from home and not willing to take a long term position on the market.  In some cases letting the lease expire without solving for a new space.

2. Hybrid:  This is by far the most common approach.  It can be very studied, the result of a thorough workplace strategy; or, it is often an approximation based on a guess of how many employees will choose to work remotely some of the time going forward.

3. Full Remote:  This is a much smaller percentage.

4. Fully In Office:  This is also a smaller percentage.


While there’s a lot of uncertainty, if our comparatively small business reflects the broader trend, it portends a net reduction in office demand over the next several years.  Of course, the big variables influencing this include how well the virus is managed in the future (e.g., efficacy of vaccines against variants) and employer/employee expectations and behavior.  On this latter point, change is inevitable.  The nuance lies in how the employer/employee relationship evolves once the virus is under control and companies look to modify workplace expectations.  Despite the small percentage of companies that are opting to work fully remote, most continue to believe in the importance of having employees come to the office.  But after ~2 years of adjusting to work from anywhere, maybe the employees will have other ideas? 


The only bet that seems certain, in the near term, is that office supply will remain abnormally high in many US Metro markets and urban core retail will suffer due to reduced daily populations.  From the office occupier perspective, this unique market dynamic will create select opportunities to secure longer term cost savings.  But few companies may be in a position to confidently access these opportunities.