A new survey from CoreNet Global, a networking association for real estate professionals, found that more than 50 percent of corporate tenants are consolidating their office locations as a result of high inflation. Sixty-two percent of respondents of the survey, which was taken between June and September of this year and represents 175 responses from companies in North American, Europe, Asia, and the Middle East, said inflation is impacting their real estate decisions. While 54 percent are consolidating their locations, 42 percent said they are cutting down the size of their office leases, 41 percent are looking for less expensive space in more cost-effective buildings, and 37 percent are signing less leases.
Respondents were not optimistic about economic conditions going forward, with 75 percent expecting the U.S. economy to enter a recession by the end of 2023. The current US inflation rate is around 8.5 percent as of July, a decrease from a year prior when the rate hit 9.1 percent, but still historically high. However, many economists believe US inflation has peaked, and with the Federal Reserve expected to raise interest rates once again at its next meeting Sep. 21, the rate could soon be falling.
The survey results aren’t entirely surprising. Large companies with major office footprints have been cutting back on space or shuttering offices altogether in the last several months, including big tech firms like Amazon, Facebook, and Twitter, as the popularity of remote work and hybrid schedules have continued to play a role in companies’ office space decisions. At the same time, many occupiers are also looking more at adding flex space to their footprints. With the worst of the pandemic now in the rearview mirror, employers and employees will have to sort out what that means for back-to-office plans going forward.