By: Jerry Fennelly, SIOR – President, Fennelly Associates
With more companies utilizing the hybrid work model, C-Suite executives are being forced to reevaluate their real estate needs and better align them with their businesses’ operations. Locally, the Greater Princeton area is continuing to see a strong movement towards remote and hybrid work models, pushing office demand down approximately 30% since pre-COVID. Tenants in professional service industries like accounting, finance, law and information technology are driving this trend and increasingly looking for opportunities to rightsize their office footprint.
As leases come to term, decision-makers are faced with straightforward, but important questions: What size office is right for our company? Where should our office be centralized (or decentralized from)? What kinds of amenities are best for our next office?
Businesses’ needs vary based on the industry they operate in, but, in general, it is crucial that executives consider the following factors when pursuing their next office lease:
Location (Location, Location)
One of the oldest adages in the real estate industry still holds true: location is key – especially in the office market. Many employees don’t want their commute to work to be more than 45 minutes long – even if it’s just two or three days a week. Therefore, it’s important companies identify a centralized location that is geographically suited for their employee base. In addition, offices in suburban locations tend to have lower rents, so a move to a space that is equal in size or smaller can come with significant cost savings. With companies finding less of a need for larger office spaces, and employees’ resistance to arduous commutes into a major city, relocation to a suburban office is increasingly making sense for many companies.
Flexibility
Although moving to a suburban office space can be the right move for many businesses, New Jersey’s overbuilt stock of suburban office space is not created equal. Since employers are forced to compete with the flexibility and comfort of employees’ homes in the post-COVID environment, companies need to carefully consider the design and function of their office space. Many executives in professional services industries have found that a more collaborative, open, and in some cases, home-like space is ideal within a hybrid model. However, another key consideration is a building’s amenities. Competition remains high for well-amenitized buildings located near a wide range of dining and mass transit options.
Companies that don’t need as much space can also focus on finding a smaller office space with more flexibility and better amenities under the same operating budget. For instance, a company that is paying $29 per square-foot can lease 30% less space at $36 per square-foot in an amenity-rich office park without increasing their rent cost.
Work Hospitality
In the post-COVID world, companies and employees are also looking for the office to become more like the home. Cultural amenities such as dog cares, day cares, cafes, gyms, pickleball courts, and other hotel-like features bring coworkers together in a more social type of environment and cultivate a friendlier work environment. As many employees grew more comfortable working from home during the pandemic, offices that provide innovative cultural amenities geared towards the evolving work environment tend to attract employees back to the office.
Conclusion
Ultimately, the increased work/life balance experienced by employees during the COVID-19 pandemic has driven the rightsizing trend in the office market, particularly, in Princeton and the surrounding areas. The shift towards a hybrid work model has caused a need for corporate leaders to reconsider the type of space that works best for their organization. As this trend will likely continue into 2024 and beyond, executives faced with such an important real estate decision should look to leverage the expertise of those who know the market best – local experts like Fennelly Associates. If you are ready to begin your journey towards rightsizing your office space, click here to connect with Jerry and the Fennelly Associates team and get your custom commercial real estate solutions.
