Economic Pressures Continue To Shrink Offices

• The data doesn’t lie: businesses are downsizing office space, with 80% having already done so and 75% planning further reductions, reflecting a continuous adaptation to hybrid work models and efforts to optimize real estate usage in line with evolving work patterns.
• There’s a division in company expectations — 42% hope for pre-pandemic activity levels, yet a majority deems it unlikely.
• Companies are increasingly utilizing data to inform office size requirements, with a shift towards flexible work arrangements and investments in space-efficient solutions like hot desking technologies.

The traditional office is shrinking. Companies are yielding to the inexorable forces of remote work trends and economic pragmatism, and attempting to make strategic decisions about office space. 

To hypothesize whether a further reduction in office space usage is expected in 2024 (and why), we need to consider trends in current office space usage patterns, the evolution of remote working practices, business strategies, and broader economic conditions that could influence office space demand.

The data behind workspace reductions

We know there is a clear trend toward a reduction in office space usage, and the data supports it. This pattern is shaped by both reactive and proactive strategic decisions by companies pertaining to their workplace arrangements, largely influenced by the forced adaptations brought about by the pandemic and the subsequent shifts in work culture.

Approximately 88% of companies require employees to work a certain number of days in the office, and yet 80% have downsized office space since the onset of the pandemic (which is a 20% increase year over year). This showcases the major transformation in the conventional understanding of office requirements. 

This juxtaposition suggests a shift toward maximizing the utilization of the space that companies do maintain, while rethinking the total amount necessary to sustain business operations and workplace culture.

The increased downsizing trend is corroborated by the 75% of businesses planning to further reduce office square footage this year.

Such a consistent move toward reduction across multiple sectors indicates an anticipation of sustainable or permanent change in the working model, where a smaller physical office footprint aligns with the hybrid work paradigm.

Whether or not to maintain their current office space is a rising concern among 82% of companies.

Whether or not to maintain their current office space is a rising concern among 82% of companies. This anxiety supports the notion that reductions in office space are being contemplated not just as a cost-saving measure but also as a hedge against future economic uncertainties.

Balancing office presence and remote work expectations

The shift in sentiment among businesses toward physical office presence is nuanced, with a significant 42% of surveyed organizations expressing hope for a return to pre-pandemic office activity levels, while a majority of 58% consider that scenario unlikely. 

This divide suggests that while many companies are preparing for a continued reduction in office space, there remains some optimism that could influence office space usage if unforeseen changes in work culture or economic conditions were to occur.

The path toward fewer square feet: Data is driving space optimization

The significance of data in measuring and understanding space utilization cannot be overstated. This increased focus on data implies that companies are looking for ways to optimize their use of space and are willing to adjust their real estate requirements based on these insights. 

The significance of data in measuring and understanding space utilization cannot be overstated.

If data shows under-utilization of office space, companies are likely to respond by reducing excess space to match their actual needs. 

Reshaping the work week will impact space needs

The report also indicates that office spaces will continue to contract, as the traditional five days a week in-office is unlikely to return for most industries. This contraction is directly tied to the ongoing adjustments in work patterns, primarily driven by the shift toward remote and hybrid work models. 

The expected reduction in national average costs for corporate real estate further indicates that the market anticipates this contraction.

Flexible work environments are on the rise 

The growing trend toward flexible work arrangements supports the expectation of reduced office space usage. As companies recognize cost-saving potential and the value employees place on flexibility, it is logical to infer a downsizing of physical office spaces, adapting to less frequent in-person attendance.

Investments are being made into modern workplace solutions

Businesses are putting money into things like hot desking and booking systems to make it easier to share space when you do come into the office. These tools help make the most of smaller office areas and might even encourage companies to shrink their offices further.

Are attendance incentives effective? 

Lastly, although incentives for office attendance may become more popular, the report’s data shows that a significant proportion of employees do not feel their companies are handling incentives well. 

This may suggest that while incentives can help to some extent, they are unlikely to lead to a full return to pre-pandemic office usage levels, especially if roughly 30% of employers receive a failing grade from employees on this front.

In light of these trends, it is reasonable to expect a reduction in office space usage to continue well into the future as companies adapt their real estate to suit the evolving demands of hybrid work, employee preferences, and the economic imperatives to optimize costs.