Office tenants plan growth as hybrid work boosts demand

Listen to this article

By Chuck Slothower
BridgeTower Media Newswires

Office users nationally said they expect to grow or maintain their footprints as in-office attendance continues to improve, according to a CBRE survey.

Office occupants’ expectations are “trending towards growth,” said Julie Whelan, an office occupancy analyst at CBRE.

Forty-three percent of respondents said they expected to expand their office space, while only 33% plan to use less space. The remainder, about one-fourth of respondents, expected their office space to remain the same.

The results from CBRE’s Americas Office Occupier Sentiment Survey, released Monday, suggest the office market is continuing to gradually strengthen as it emerges from the pandemic-era doldrums.

The survey drew responses from 185 executive office occupiers in North America.

“We feel very strongly that this data gives us great sentiment about what our office markets are going to do over the coming years,” Whelan said.

Office analysts continue to see a trend of tenants chasing top-quality space. Many office users are “upgrading but downsizing” as they adjust to hybrid work policies, Whelan said.

The tight supply in the prime segment is only expected to grow scarcer as the construction pipeline is poised to deliver little new office space in the foreseeable future. The U.S. construction pipeline in the second quarter was about 21 million square feet.

“We’re going to end up this year with the lowest amount of office space delivered in a calendar year in the last decade or so,” said Manish Kashyap, CBRE’s global president for leasing.

Few tenants are trading down for more space. Instead, companies seek centrally located offices with excellent transportation options and a strong complement of amenities, and they’re willing to squeeze into smaller spaces as needed, Kashyap said.

“The dichotomy in the market is the scarcity is actually in better located, highly desirable offices,” he said. “That’s where the challenge is.”

Most companies have settled into a hybrid work schedule, with offices bustling midweek but more employees choosing to work from home on Mondays and Fridays, CBRE analysts said.

“A lot of American offices feel awesome on Wednesday at this point, but they do feel pretty pokey or uninspiring on Mondays or Fridays,” said Jamie Hodari, CBRE’s chief executive officer of building operations and experience. “I have found very few companies that have found a way to crack that particular code.”

More companies are tracking office attendance, with 69% of respondents monitoring office use, up from 45% a year ago.

“These increases show that companies have made significant progress on establishing a new baseline for work habits and office attendance after five years of adapting to hybrid work,” Kashyap stated in a news release.

Office attendance averages 2.9 days per week, a figure that continues to lag pre-pandemic levels.

The use of amenities to attract tenants has skyrocketed. Since 2021, CBRE has seen a 56% increase in office space allocated to amenities, said Lenny Beaudoin, the firm’s executive managing director for global workplace, design and occupancy.

Office tenants are looking for strong public transportation, ample parking for motor vehicles, strong food and beverage options, and good indoor air quality, the analysts said.