Reducing Office Space? 74% of Fortune 500 CEO`s Say It`s Likely

August 11, 2021

You may have noticed that I’ve spent more time than usual passing along information as it pops up.  My job is to make sure you and our clients are on the cutting edge of where office space is going and how it is changing. Due to the pandemic, there is a lot of confusing data out there, so let’s clear it up with a few stats:

–Flex work is here to stay.  Plan it, work on it, and create a company statement around it.

–74% of Fortune 500 users will lease less space in the future.  See below for more.

–There is a demarcation of 3 days for flex.  This is not settled.  Some companies are saying 3 days flex and some are saying less.  Jury is still out.  Very few leaders are saying they will allow only one day a week in the office.

–While companies will likely shrink, the vast majority are saying their office space is still critical to their operations. 

Read below for more, and stay tuned as we sort out coming back to work.

Craig
602.954.3762

How Fortune 500 CEOs view the post-pandemic business world

By Lance Lambert

June 11, 2021

In the face of employee pushback, Amazon is pivoting: On Thursday, the e-commerce juggernaut told staffers they’re softening their back-to-work policy. Going forward they’ll allow corporate employees to work from home two days per week, and up to four weeks per year of remote flex days.

That policy shift by Amazon shows just how cautious employers are being as they bring back staffers. Simply put, they’re trying to balance a return to normalcy without upsetting workers. After all, a hot labor market makes it all too easy for workers to walk. To figure out how the big dogs will play their cards, we conducted a poll of Fortune 500 chief executive officers last month.*

Here’s what we found.

The numbers to know 

53%

  • … of Fortune 500 CEOs expect their revenues to be significantly stronger this year than what they expected before the pandemic.

74%

  • … of Fortune 500 CEOs say they expect to need less office space in the future.

53%

  • … of Fortune 500 CEOs say two or three days per week in the office is the optimal set-up. 39% say four or five days, while 3% say one day or less. 

10%

  • …of Fortune 500 CEOs say they plan to require vaccinations for staffers returning to the office. 59% won’t require it, while 31% are still considering the policy.

50%

  • … of Fortune 500 CEOs agree that CEOs have recently gotten too involved in commenting on social and political issues. While 50% said CEOs have a responsibility right now to speak out on important social and political issues.

47%

  • … of Fortune 500 CEOs consider themselves political Independents. While 30% consider themselves Republicans, and 12% say Democrats. Another 11% say “other.”

61%

  • … of Fortune 500 CEOs have a favorable view of President Joe Biden’s performance. 39% have an unfavorable view.

The big picture

  • Corporate America is onboard with hybrid work. Over half of Fortune 500 CEOs say two or three days per week in the office is the ideal set-up for “knowledge workers.” But fully remote is unlikely: Only a small percentage (3%) say remote or one day per week in the office is the ideal set-up. 

  • COVID-19 vaccine requirements aren’t catching on. Only 1 in 10 Fortune 500 CEOs say they plan to require proof of vaccination before workers can return. Employee resistance is likely playing a role: In May, a Fortune poll found 53% of U.S. adults are opposed to businesses asking for proof.

A few deeper takeaways

1. The worst is yet to come for commercial office space. 

For much of the pandemic central business districts in major cities were ghost towns. One might assume it’d make commercial office space owners insolvent. Not really: They were protected by long leases, often in the 5-year to 10-year ballpark.

But 15 months into this crisis, it’s becoming pretty clear that post-pandemic work will require less office space than the pre-pandemic workplace. Among Fortune 500 CEOs, 73.6% say they’ll need less office space in the future. Including 51.4% who say a little less space, and 22.2% who say a lot less space. Clearly, companies are eager to start scaling back on their commercial real estate expenses. Industry experts say suburban back-offices—not corporate HQs—are the most likely to be cut.

“As leases lapse over the coming year or two, we need to watch how companies renew their contracts. If we see a push to offload some square footage, as surveys suggest, landlords could feel the pinch. Segments of the office space remain an unknown risk to the economy,” Ali Wolf, chief economist at Zonda, tells Fortune.

2. Office space might get cut—but CEOs still view it as critical to success.

Don’t expect the company office to wither away: Among CEOs, 72% say office space is important for employee productivity. Only 13% disagree. The pandemic shifted some workplace dogmas about remote work—but it also engrained others. As Fortune Analytics has previously reported, some employees saw their productivity fall during WFH. It wasn’t for everyone, and leaders took note. That’s why most companies still want to incorporate some form of in-person work.

3. USA is No. 1.

The consensus among economists is that 2021 will be the best year for U.S. economic growth since the early 1980s. So it isn’t surprising that 83% of Fortune 500 CEOs, aka the leaders of the 500 largest public U.S. companies by revenue, say the U.S. is the region with the best opportunities for investment. Next was China at 12%.

A big underpinning here is the fact that vaccines by U.S. drug makers Moderna, Pfizer, and Johnson & Johnson put the country much closer to the end of the pandemic. Even as caseloads plummet here, other nations are seeing breakouts.

Search

Join The C2 Voice™

Sign up to receive The C2 Voice™. You will receive insightful and concise comments on all things commercial real estate and other interesting topics. Look below to see our archived narratives.

Archives

Join The C2 Voice™

Sign up to receive The C2 Voice™. You will receive insightful and concise comments on all things commercial real estate and other interesting topics. Look below to see our archived narratives.

Join The C2 Voice™

Sign up to receive The C2 Voice™. You will receive insightful and concise comments on all things commercial real estate and other interesting topics. Look below to see our archived narratives.

Scroll to Top
Skip to content