Throughout the pandemic, much attention has been given to the anticipated return to office and how the new realities of hybrid work will impact office demand in the future. Headlines revolve around how major public companies are planning for this return, as major executives make big statements around their support or distaste for giving employees more flexibility to conduct work, well … outside of work.
While the sentiment of big business is important, we should not ignore the sentiment of small businesses, or those with fewer than 500 employees. After all, 65 percent of new job creation from 2010-2019 was attributed to small businesses, and they make up 47 percent of private sector employment today. Small companies are often more centralized entities that rely on speed, innovation and efficiency to compete against their larger peers. As a result, the reliance on using office space to support this dynamic is at times greater than that of large companies. Commercial office owners should not discount this tranche of office demand as the recovery unfolds.
CBRE analyzed the strategies of companies of different sizes in its Spring 2021 U.S. Occupier Survey, which includes the feedback of 185 U.S. companies regarding their plans related to planning for the future of office. The responses uncovered some interesting trends, particularly where smaller companies diverged from large companies in their approaches.
Smaller companies are back in the office to a greater extent
Seventy-one percent of smaller companies said more than half of their employees have access to their office space, with 44 percent indicating all of their employees have access. In contrast, only 33 percent of large companies have half of their employees back to the office, with 9 percent indicating all are welcome back. Although the emergence of the COVID-19 delta variant has caused some companies to rethink their return-to-the-office timelines, smaller companies still appear to be ahead of the curve.
These percentages underscore that the workforces of smaller companies are more likely to rely on the office for their normal course of business. Additionally, smaller businesses have less complexity around getting employees back to the office. Most smaller companies in the survey reported that social distancing, personal protective equipment and health-screening protocols are still in use. These measures are likely less complex to administer with smaller groups of people in a more centralized environment.
Hybrid work is less likely to drive lasting change in smaller companies
Forty-five percent of small companies anticipate their workforce will remain “office based,” meaning they’ll primarily work from the office. In comparison, only 7 percent of large companies anticipate using this office-centric approach. Instead, most large companies are moving towards a hybrid model in which employees work some days in the office and some remotely. These large companies are increasingly making formal policy changes to support this new style of working. building
The reality is that small companies may have flexibility built into their DNA already, so this change is not so impactful or overtly recognized. Small businesses typically need to be flexible and nimble to compete for customers and for talent. That muscle needed to be flexed even more during the pandemic. It’s likely that small businesses aren’t embracing more hybrid work because they already transitioned to hybrid work in recent years, without coining it, as a natural part of their course of business.
Most smaller companies are not embracing workplace transformation
Smaller companies are less likely than large companies to embrace shared seating, make workplace-design changes or even install new technologies to support the built environment. This is likely a result of smaller companies having less time, resources and budgets to dedicate to their real estate strategy than they must dedicate to competing—and growing—in the market.
- Sixty-four percent of small companies anticipate dedicated seating in their portfolio versus no large companies.
- Twelve percent of small companies are enhancing collaboration space versus 60 percent of large companies.
- Forty percent of small companies anticipate no change to workplace strategy versus 10 percent of large companies.
Small companies are more likely to anticipate growth, thus influencing their real estate strategy
An intriguing finding: The largest contingent of small companies—40 percent—said they anticipate their offices will expand within the next three years whereas most large companies (81 percent) foresee their offices contracting in that time frame. The simple explanation is that smaller companies anticipate doing more hiring and thus needing more space. Meanwhile, larger companies might have excess office space that they can trim with more efficient use of their floorplans in combination with remote work.
Thirty-six percent of small companies report using flexible office space today as a part of their strategy versus only 17 percent of large companies. Use of flexible office space is increasing across all sizes of companies, including small companies who may be best served in this type of space. Flexible office providers may be better able to serve uncertain headcount demand for smaller companies in a growth mode. They may also be able to offer, in some cases, a better workplace experience to occupants, alleviating the overhead pressure for small companies to manage it.
The main takeaway here is that while large employers are leading the adoption of new work models, their strategies aren’t necessarily reflective of all—or even most—U.S. workplaces. Small businesses have separate and distinct needs from those of large companies. All participants in commercial real estate—from service providers to landlords to flexible office providers—should view this important constituency with their unique needs in mind.
Julie Whelan is global head of occupier research at CBRE, the global commercial real estate services company.