Putting on Skinny Jeans Before Thanksgiving

Corporate leaders have rightly been taking a hard look at the amount of office space they lease. It’s expensive and until recently, the empty desks bugged CFOs to no end.?

Now real estate deals to lease office space are happening again. Over and over I hear the same story: “We went from a full to half a floor!” or “We got rid of a third of our space!”?

It seems en-mass that corporates are giving back 20% to even 60% of their space just now.?

They are trying to get very skinny.

You might think that trend would put this office broker in a bad mood. But I have a big smile on my face.?

That’s because I know companies are taking way too little space for the coming growth cycle.?My business will be booming more than ever as we come out of the current economic funk and I work to correct the current over-correction in the size of office leases.

I’m no economist, but I’m very sure that this down business cycle will not last forever. We can debate if the return to happier times is in 2024 or 2025…but it IS coming. And when it does, office space will continue to be a key component of conducting business.?

The result? A corporate Thanksgiving is on its way.?

Here are three reasons taking too little space in 2023 this is going to be a problem shortly:

1. More people will be hired when the good times return in 2024/2025 - therefore more folks will need a place to meet and work.?
2. The new way of using space requires us to use more per person. Health reasons now cause us to spread out. Also, the new office space design trend - I call it the “clubhouse” feel - is less dense. In the clubhouse environment, you don’t have just one place for each worker, you have instead multiple locations where they can “touch-down.”
3. More people will be coming back to the office than even before Covid. As many are learning the hard way now (with layoffs), facetime with the boss is a way to prevent CLM’s - “career-limiting moves.”

All this means more office space is needed. And full-time work from home is now widely seen as a bridge over troubled (Covid) waters but not a long-term corporate real estate strategy for most. That culture won’t build itself over Zoom.?

What’s a corporate real estate director to do? The CFO is the boss and she wants less office space now!

1. Work your options strategy. Work with your tenant rep to negotiate options to expand and even early terminate.
2. If you can see growth coming in your company, then create “must-take” expansion at today’s great rates. The must-take will allow you to delay commencement for months and sometimes even years. Plus you can lock in today’s deals with great rates and huge improvement allowances.
3. Make sure your sublease provision is market, so you can get out if you need to. You should have “positive leverage” in many cases because today’s office leasing rates in many buildings are as low as they are going to be for, maybe ever. When and if you need to sublease, you may have a rate that is well below the future market.?

Better days are ahead. You can only suck your gut in for so long. Give yourself some breathing room now before Thanksgiving comes!

I never liked skinny jeans anyway.