The great corporate real estate downsizing has begun.
The Japanese information technology provider Fujitsu this week became one of the first—if not the first—large global company to announce definitive plans to reduce office space and accommodate a more permanent remote workforce. As part of its plan, Fujitsu says it will reduce its real estate footprint in Japan by 50% within the next two years by shifting roughly 80,000 employees to primarily remote work. Junichi Takinami, a senior client partner and country managing director for Korn Ferry Japan, says that given Fujitsu’s status as one of Japan’s largest employers and a leader in remote work—it introduced remote work company-wide in 2017—the move may well reverberate throughout the country’s corporate world. “This may be a precursor,” he says.
Michael Distefano, Korn Ferry’s Asia Pacific region president, agrees, citing the growing productivity firms have seen in some stay-at-home workers as well as the reduced expenses. “I think you will start to see a lot of companies give full-time working-from-home a run for the money,” he says.
To be sure, while many leaders have publicly commented about the need for less office space in the future because of the seamless shift to remote work arising from the pandemic, few organizations have put concrete plans into action. Twitter, for instance, said employees can work from home permanently but added that it has no plans to leave its San Francisco headquarters. Similarly, Morgan Stanley’s CEO said the bank could have much less real estate in the future, but the firm has yet to articulate any actions regarding its footprint.
Cameron Scott, a principal in Korn Ferry’s Global Real Estate practice, says the hesitancy stems from the fact that real estate is one of the only physical ways a company can display its culture. “We still haven’t seen the effects of COVID-19 on a company’s ability to maintain its culture,” says Scott.
Fujitsu’s plan aligns with a recent report by the commercial real estate services firm Cushman & Wakefield, which says the office will no longer be the focal point of work. Instead, the office will comprise one leg of a workplace ecosystem that will also include the home, coworking spaces, and even cafés, libraries, and public spaces. For its part, Fujitsu says employees can “freely choose the place they want to work, including from home, hub, or satellite offices, depending on the type of work they do.” Moreover, by employing flexible work schedules and shared workspaces, the company can reduce its office space as it continues to grow its workforce.
Scott says one likely outcome of the new workplace ecosystem will be more leasing rather than the outright ownership of real estate. “This will give companies more flexibility in terms of locations to better align real estate with talent needs,” she says.
More globally, many firms have seen workers becoming more productive at home, while cutting down their commute costs and improving their work-life balance. Combined with reduced real estate expenses, it’s a formula for many companies to dramatically reduce their physical footprint, says Distefano.