Tenants that Scaled-Back Post-Pandemic Shift Directions amid the Prioritization of In-Person Work
Although across the U.S. a broad range of tenants are continuing to review their office space needs since the pandemic, an “increasing pool of tenants, many of whom had significantly scaled back as a result of pandemic-induced trends, are now realizing their need for additional space” as the awareness of the power of in-person work to drive collaboration and innovation is becoming a growing priority. The findings of a recently released survey among 225 corporate real estate executives overseeing portfolios across the U.S., Canada, and Latin America indicated that “80% of respondents expect to increase their spatial requirements over the next three years,” representing a sharp increase over the “20% share that planned to increase last year.” The companies most likely to downsize are those with upward of 10,000 employees, “often due to the need for less space due to hybrid work policies, to address inefficient or excess spaces that existed before the pandemic, or simply to reduce extraneous costs.”
Although behavior among tenants remains cautious, there are fewer move-outs; and while “net-new demand” remains low, many are renewing leases for their existing space. Among the recent big block renewals that were cited was Bloomberg LP’s decision to secure an early 11-year extension of it 946,815-square-foot space due to expire in early 2029 at 731 Lexington Avenue – making it the largest single-office lease this year according to online real estate platform Costar. Nationwide, renewal deals among large tenants accounted for “almost half of the 156 office leases spanning 100,000 square feet or more” that were signed since January 2024, collectively totaling 14.1 million square feet; and if the pace continues, will surpass last year’s activity. The more conservative behavior among most organizations is partially fueling the uptick in renewals since it eliminates the added expense of relocating, as well as the realization that there is a decreasing availability of premium space in ideal locations. However, leasing volume remains about 13% below pre-pandemic levels, and the square footage of the deals secured are “about 16% smaller on average than those signed between 2015 and 2019.”