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Inflation may be real estate’s worst nightmare according to a new survey from CoreNet Global.
According to the report, the rise in costs is impacting 62% of respondents within real estate decision-making positions, leaving 42% to dwindle their lease takeup and 41% to seek more cost-effective solutions.
Although 60% of respondents were bullish about their company’s growth trajectory, three-quarters agreed that the U.S. economy is expected to slip into a recession by the end of 2022.
Plus, the report supports the notion that mounting frustrations are having a direct impact on real estate footprint, with 44% stating they have decreased their corporate footprint. By 2025, 42% of respondents predict a further decrease.
As a result, tenants are looking for alternative solutions to mitigate their real estate costs, without being restricted by long-term leases.
“Companies are also looking at cost-saving initiatives, which include their real estate portfolio,” said Petra Durnin, head of market analytics at Raise Commercial Real Estate.
“Aside from the limited discounted subleases on the market, there are a few low-priced options. To offset higher face rents, landlords are offering concession packages that could include free rent and tenant improvement dollars to help reduce the overall costs for the tenant.”
However, some argue that these changes aren’t just a result of inflation — the post-pandemic workplace has a whole new set of expectations.
“Beyond economic conditions, employees are pushing for flexibility and autonomy, which employers are also taking into consideration,” said Edie Weintraub, managing director at terra alma.
