Around half of the largest companies in the world plan to reduce their office space within the next few year as they adapt to the new hybrid working era.
Knight Frank, a property agent, surveyed 350 executives from 350 companies. While most of the smaller businesses expected to expand their offices, those with more than 50,000 employees worldwide were divided. Knight Frank reported that most large groups who hoped to reduce their space by 2026 were looking to do so between 10% and 20%.
Knight Frank’s global director of occupier research Lee Elliott said that the trend for the largest businesses is to take less space, but in a better location. Cushman & Wakefield data showed that more London companies will move offices in 2022 than they did in the past, and on average, take less space.
Elliott stated that “[there is] a strong movement towards better-quality amenity-rich spaces, which are sustainably accredited and better aligned with current work styles, and support broader corporate ESG (environmental, Social and Governance] strategies.”
“In essence, corporations are responding to an intricate mix of physical and function obsolescence. They adjust their portfolios to suit the new era of hybrid working.”
Agents have been talking about the “flight to Quality” for the last couple of years. Greener, modern offices are not only attractive to businesses trying to meet their sustainability goals but also to staff.
Bosses now use their buildings as showrooms to attract new employees and to entice staff to return to the office in a highly competitive job market. Recruiters report that candidates no longer focus solely on money but also consider other factors such as a company’s commitment to sustainability and flexibility.
In a survey of 3,400 workers conducted by Brookfield Properties and Foster + Partners (the architecture firm), 93 percent said that sustainable office spaces made them happier at work. Eight out of ten people said it was important that their company was run “climate-forward”, and a third were willing to quit if they felt their firm was not committed to the environment. The survey revealed that a pleasant and efficient office is more important to employees than an annual bonus.
Grant Kanik is the deputy head of Foster + Partners’ workplace consultancy.
Workers, especially younger workers, are interested in the quality of air filtration and the rate at which fresh air is returned. They want to know if their lighting system is energy efficient and healthy.
Older buildings struggle to compete with the latest clean, green office designs
Rents for the best-in class space are increasing as companies push their employees and achieve ambitious sustainability goals. British Land, the largest office landlord in the UK, recently reported that tenants who moved into their buildings last year paid almost a fifth higher rent than previous occupants. The company was able increase their prices due to the “continued need for sustainable buildings of the highest quality”.
The “flight towards quality” has polarised the office market. While the better buildings are doing well, the so-called secondaries are suffering. Analysts predict that the most recent decline in the commercial real estate market will be felt in older buildings located in less popular locations. This is due to the rapid increase in interest rates.
Knight Frank data shows that despite some landlords insisting that the pandemic had not changed much and that working practices would soon be back to pre-covid norms. More than half of the companies have adopted hybrid working, and 12% are now only allowing staff to work remotely or wherever they choose.