Returning to Work… But No Space to Work

Companies trying to cut billions in real-estate costs are struggling to figure how much space a hybrid workforce needs.

The big international firm banned the practice of working at home on successive Fridays and Mondays and mandated that employees be in the office at least three days per week. The moves would provide even and consistent office staffing across the week, the firm said.

Some workers balked. But those who returned were surprised to find that there wasn't enough space at desks or in conference rooms to accommodate everyone. Some complained that they had to get to the office two hours early just to secure a spot.

Two major developments in the business world are colliding: On the one hand, firms are requiring more people to return to work. On the other, they’re trying to cut billions of dollars in office leases. With more people spending a majority of their time in the office, social media is filled with workers’ complaints: that they have to share desks; that they have no space for private work conversations; that there aren’t enough large meeting spaces for team gatherings. Experts worry that the disconnect could—at the very least—demoralize the workforce. “People are saying, ‘Are we coming back for this?’” says Dennis Deans, Korn Ferry’s vice president of global human resources.

On the surface, the lack of office space doesn’t seem plausible. A fall 2023 report estimated that 36% of desks and cubicles in offices around the globe were unoccupied all week. Office occupancy in major US cities is currently at about 53%, only a couple of percentage points higher than a year ago. Real-estate firm Cushman & Wakefield has estimated that about one-fifth of US office space was vacant at the end of last year.

But the issue, experts say, is more complex. During the last few years, numerous companies have rid themselves of costly real-estate commitments and are loath to jump back into them. Indeed, many organizations have signaled that they aren’t even finished culling. When workplace-scheduling provider Robin surveyed more than 500 business owners and facilities managers late last year, 75% said they planned to reduce their office square footage in 2024, nearly 30% more than in 2022.

The prevalence of older office buildings is part of the issue. Many of them lack modern amenities and would require expensive upgrades in order to be attractive rental spaces. “Older real estate is going to suffer more from occupancy issues than newer buildings,” says Anthony LoPinto, global sector leader of Korn Ferry’s Real Estate practice.

To be sure, a minority of workers remains unwilling to return to the office, period. HR officials worry that this insistence on working remotely is being bolstered by the potential lack of desks or conference-room space.

Experts say it makes sense for companies to trim real-estate expenses, since many workforces are not on-site five days a week. But leaders will need to use the remaining office space to encourage team collaboration, innovation, and productivity. This could mean anything from opening up more open spaces to more strictly controlling hybrid cycles. “They have to create an environment that inspires employees,” says Dan Kaplan, a Korn Ferry senior client partner in its Chief Human Resources Officers practice. 


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