Companies Plan to Pick Up Offices in 2023 But Stay Flexible With Leasing

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Most firms still plan to grow their real estate footprints in 2023 despite the looming threat of an economic recession, according to a report from lease software provider Visual Lease this week. 

About 70 percent of the companies polled plan to expand their offices this year — the same amount as last year — and are making snappier decisions about it, according to the survey of 200 people in charge of leasing at companies with more than 1,000 employees. 

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The vast majority of those surveyed, 88 percent, are planning out their real estate footprints less than a year in advance, a huge increase from the 35 percent who were deciding their space needs so quickly in 2022.

Real estate executives pointed to the ability to sublease space and flexible termination agreements as reasons behind some of their desires for new deals, coupled with the ability to act fast as they look to save money ahead of a potential economic recession, according to the report.  

“In today’s macro-economic environment, business leaders have to be even more strategic with resource allocation,” Robert Michlewicz, Visual Lease’s CEO, said in a statement. “Once a widely overlooked area of the business, lease portfolios are now helping companies remain agile by providing opportunities for significant hard- and soft-dollar savings.” 

That macroeconomic environment could also keep firms from ditching their existing space. About 71 percent of executives reported that their companies were likely to delay relocating or making upgrades to their facilities due to the state of the economy, according to the report.

Roughly 59 percent of those executives said they plan on shedding some of their footprint, but that figure also includes those looking to relocate their offices to support hybrid work and save money, the report notes. 

And it wasn’t just the cost savings of being one office lighter that was on their minds. About 99 percent of those surveyed said it was important for future leases to help decrease their firm’s carbon footprint, though most executives, 55 percent, had little to no involvement in environmental, social and governance (ESG) reporting within their own companies, according to the report.

“ESG priorities are having large implications on how companies evaluate and enter new lease agreements,” the report reads. “However, these executives are facing challenges in being successful as they are not thoroughly integrated into the ESG reporting process.”

Celia Young can be reached at cyoung@commercialobserver.com.