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Hybrid work plans are starting to become set in stone across more of corporate America, and as more companies finalize their policies, how much office space they are going to cut from their footprints is becoming clearer.
More than 71% of corporate real estate professionals say they expect hybrid work to result in space demand reductions of at least 20%, according to a survey from Colliers and CoreNet Global. Almost 19% expect that demand to shrink by 40% or more, while just 7% believe that the move to hybrid work will either not impact office demand or lead to a need for more space.
Office leasing has been a laggard in major metropolitan areas like New York City, Chicago and Los Angeles in recent months, as companies uncertain about their future physical spaces sign shorter-term agreements or cut down on their square footage.
The reduction in office space demand presents occupiers with new opportunities, said Scott Nelson, CEO of global occupier services at Colliers. One potential benefit is savings, but the other is employee experience.
“This could also present the opportunity to shift spend to the experience the employee gets in the office, or help fund cost increases coming elsewhere, such as industrial real estate for some businesses, or people costs to name a few," he said in a statement.
Flex leasing, a gap in the market that startups have raised millions in an attempt to fill this year, is likely to become a bigger part of the office’s future, execs said.
Just over 59% of survey respondents said that more than 20% of office leases will transition from traditional leases to flex leases within the next five years. More than a quarter voiced beliefs that between 10% and 20% of traditional leases will become flex leases, while approximately 13% said that less than 10% of office leases would change to more flexible arrangements.
More than three-quarters of corporate real estate professionals surveyed said that successful utilization of office space would mean between 45% and 79% occupancy Tuesdays through Thursdays. Only 17% said more than 80% occupancy was necessary.
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