NEW YORK–While many of the nation’s largest employers have begun bringing workers back to their offices as the COVID-19 vaccine rolls out across the country, they are also announcing plans to unload big blocks of office space, indicating the workforce changes of the last year may be long lasting.
The moves are also putting new stresses on commercial real estate, especially in New York. Among the companies announcing they are vacating space have been JPMorgan Chase, Salesforce, and Pricewaterhouse Coopers.
“Large companies typically sign office leases for a decade or longer, giving them few options for reducing their footprint beyond trying to sublease floors to other tenants,” reported the Wall Street Journal. “At the end of 2020, 137 million square feet of office space was available for sublease across the U.S., according to CBRE Group Inc. That is up 40% from a year earlier and the highest figure since 2003.”
Change Could Be Permanent
Firms typically add office space when the economy picks up again, the Journal’s analysis continued, but noted, “This time many of the companies ditching real estate are doing well financially; they say they need less space because they plan for more employees to work at least part time from home even after the pandemic is over.”
All of that raises the prospect the demand for office space could be permanently lower at some companies, much like the rise of e-commerce has been driving down demand and rents for street-level retail, the Journal added.
The Journal reported office rents for more expensive space have fallen 17% over the past year in New York and 13% in San Francisco. Many subleases are coming with an additional 25% discount, the report added.
The Journal said JPMorgan started marketing 700,000 square feet of office space in lower Manhattan earlier this year, with PricewaterhouseCoopers, Yelp, Salesforce, Uber, Wells Fargo and others also listing space available.