This is happening: Employees around the world are starting to cut back on their jobs to save on travel and food costs, and that’s putting real estate companies in a huge bind as millions of square feet of offices everywhere are starting to empty out. You have the multinational Lego that just in 2022 moved their America headquarters from Connecticut to Boston, or also Meta (owner of Facebook) that stopped paying rent in one of its main buildings in San Francisco untimely. What in the world is going on?!
These companies are among a growing number of firms that are reevaluating their real estate holdings, and what’s next in a world where teleworking is a new reality, and is here to stay. Approximately 87% of corporate real estate leaders express that optimizing their company’s property portfolio is their top priority, surpassing even plans for a return to the office, as per a survey conducted by commercial real estate firm CBRE.
Teleworking Is a One-Way Trip for Employees – Real Estate Markets Should Adapt
CBRE estimates that the enigmatic and fluctuating realm of fixed logistics costs encompasses a gigantic range of expenses. Of course, with real estate being a significant component, constituting a perplexing range of 3-6% of a company’s total logistics costs.
However, the task of reducing these commercial real estate expenses is a labyrinthine challenge, vastly more complicated than other items on the balance sheet. The labyrinthine maze of leases, with their extensive time frames and legally binding nature, coupled with the perplexing decline in the value of office space, has created a buyer’s market that defies profitable sales of large office spaces. God, I can see how these companies perform a macabre dance between panic, frustration, and the need to do something really fast.
I mean, a commercial tenant can’t stop paying rent overnight (yes Meta, you messed up in a big legal trouble), and the crux of the matter lies therein. It is that commercial leases are difficult to break due to their lengthy nature, and businesses are desperately seeking to terminate them precisely because, as long-term liabilities, they are prime candidates for cost restructuring.
But, back to the teleworking thing, that’s right: millions of employees around the world tasted the honeys of working from home in their pajamas and eating freshly made lunch. There is no going back, world bosses, Deal With it. You have to adapt to that, and there’s no other way. One of the solutions that are being proposed these days is that large companies that have to get sublets to cover the rental expenses of spaces that have been empty for at least two years (in the worst cases). Since the high point of the pandemic took over, millions never came back, and the world just kept spinning.
Are Offices Still Needed for the Companies to Keep Working?
Having said all the above, it means that a big part of the offices in the world are not needed anymore. Say what? Yes. As I said: the real estate market should urgently start looking for business opportunities in some other places like Airbnb or Vrbo, or long-term rental platforms like Agoda Homes.
According to industry experts, it’s becoming increasingly common for companies to abandon their lease agreements or sell their properties and move to newer, more contemporary office spaces. Employees prefer to stay home? Well, give them an office that looks like a home, not a cold, heartless liminal space. These spaces often feature a host of upscale amenities, such as state-of-the-art kitchens, employee lounges, on-site laundry facilities, and child care services. For executives who still place value on in-person interaction, the thinking goes. They really need to incentivize our workers to come into the office. So, you remember how modern employees opt to stay at home? Ok: Give them an office that looks and feels like a home.