From Gluttonous to Glut

 

I spent this past weekend recovering from my COVID-19 vaccination, the one and done stick from Johnson & Johnson. With roughly twice the dosage as those offered by Pfizer and Moderna, it came as no surprise the side effects were twice as powerful.

A day or so later, feeling better and spurred on by a 75-degree afternoon I decided to take a walk through town which included a mandatory stop at the local barista for their signature black coffee. During my travels I noticed an inordinate number of signs highlighting office space for rent, including those positioned in front of buildings that I knew were previously filled, with some even having a waitlist.

So, I got to thinking. Now from everything I’ve heard or read ad nauseum I know that the pandemic has forced businesses across the country to rethink their office space requirements and renegotiate their leases. Remote workers became the rule rather than the exception and, in many cases, a critical component for survival.  For those of you who operate CPA firms or run businesses you know that leases are typically signed multi-year. In fact, the larger companies traditionally secure leases for five-to-10 years and in many cases even longer.

It is probably little secret that the glut of available office space runs a lot deeper than my bucolic hamlet. According to the CBRE Group, the mammoth commercial real estate investment firm, there was approximately 137 million square feet of office space available in the U.S, at the end of calendar 2020. That was up 40 percent from the previous year and the highest amount of commercial real estate available since 2003. Typically, during a downturn in the economy, businesses across all sectors examine cost-cutting strategies but it usually rebounds when there is an uptick and that includes adding additional space.

But even when the current pandemic lifts, few expect the commercial real estate to return to normal levels. With more companies becoming flexible about remote workers, less space is required. In fact, two of our larger CPA clients confided to me recently they are looking to downsize their current offices. And I’m quite certain the number of CPA practices reducing space won’t stop there.

Companies used to claim bragging rights as to who had the largest offices.

The demand for high-end commercial space according to global real estate concern Jones Lang LaSalle has fallen roughly 13 percent nationwide and some 17 percent in cities like New York. That will surely prompt landlords across the country to reach for the nearest bottle of Excedrin.

And they will likely rinse and repeat for some time to come.