No one can forget the global pandemic’s impact rocked the world’s economic and commercial landscape. According to Yelp, 60% of businesses faced complete closure in the office and terminated operations while the pandemic lasted. Other companies took advantage of remote and hybrid work strategies and maintained operations while upholding compliance with COVID protocols.
Top companies like Spotify, Salesforce, Twitter, and Microsoft announced they would adopt long-term remote working policies for some of their workforces.
Employees working remotely love the new arrangement, as they can spend more time with their family members and enjoy the company of their home environment while performing their duties.
With the pandemic over, business executives are currently reviewing their operations and wondering if they will still be maintaining or needing more office spaces.
The consensus is not consistent across the board. Tech giant Facebook has shrunk about 300,000 square feet of office space in New York City from its 3 million square feet already occupied. However, Google recently spent $2.1 billion on a Manhattan office building to expand its campus, which would employ over 12,000 employees.
Here at Expense To Profit, we look at how businesses can lower their expenses while increasing revenue and profits. We also provide business executives insider strategies to stay ahead of the curve. So, what is the future of office renting in a world greatly influenced by remote work?
Offices Spaces Will Be Smaller
According to the 2022 Office Space Report, companies that own or lease office spaces are making less use of them. The report surveyed 247 business owners, managers of rental office spaces, and facilities managers to know how they were going to deal with their office space after the wake of the pandemic.
From the report, 46% of companies are using only half of their available office space, with 59% of executives planning to reduce their offices by half or more in 2023. Also, the report reveals that 83% of businesses operate with a hybrid work model to save operating costs. In comparison, 73% would adopt hybrid work instead of laying off some workers.
That is all the indication you need to know that large office spaces are less relevant in 2023, as remote and hybrid work models have come to stay.
Changing Demographic of Workforce Less Interested in Traditional Workspaces
The ongoing shift in each company’s workforce demographic will also shape the future of office renting and work. According to a report, millennials make up 35% of the US workforce, and while Gen Z currently makes up 5% of the workforce, the figure will hit 33% before the end of the decade.
This data is critical to renting office spaces in the near future. Millennials workers have been introduced to traditional and digital strategies while performing their duties. On the other hand, Gen Z has been brought up in the era of digital technologies and is comfortable working remotely.
These two generations are increasingly entering the workforce and may be less interested in the typical office spaces. They would instead opt for flexible and agile working arrangements. We have extensively covered employee benefits in a ‘work from anywhere’ environment. You should check it out.
Cost of Rent May Trigger Relocation
Currently, the US is facing a different kind of pandemic: inflation. While the consumer price index has increased to 6.9% over the last 12 months, rent has increased by 14%. The cost of living and working in major cities in the US has become more expensive.
Thus, we may see some businesses move away from expensive city centers to relatively lower cost locations or move from a larger office space to a smaller one to save costs.
On the flip side, this action may benefit employees who want to move to such areas to take advantage of lower costs and sufficient care for their families.
Coworking Spaces Are Increasingly Popular
Another trend we may see in the coming months is the adoption of coworking spaces, drastically lowering the need for traditional office space. While remote working sounds fun to employees, it poses a lot of distractions.
Coworking spaces are neutral environments where people from different companies assemble to work independently on their various projects. According to a report, coworking spaces are now the fastest-growing segment in commercial real estate.
They are budget-friendly and flexible, even for startups and new ventures. They also offer a sense of collaboration and community and are loaded with amenities to boost productivity.
It is essential to note that the future of work is not a direct choice between remote and in-person work. For instance, some companies are most likely to adopt a hybrid model, allowing workers to work remotely and in person. These companies may require space but only a little of it.
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Published by Marc Freedman
Marc currently serves as our Chief Cost Evaluator, expertly advising our client management team on how to help you successfully achieve your business and financial growth goals. A respected mentor to all he consults with, he is an avid collaborator and contributor to the spend consultant community, guiding thought leaders to formulate, design, and install the best operational solutions available to their clients.