Fewer Adjustments in Size of Office Footprint

Many companies have now adjusted to the appropriate size of their office spaces, leading to a decline in the post-pandemic trend of downsizing. In fact, approximately 40% of offices plan to expand within the next three years, according to a survey by CBRE.

Julie Whelan, Global Head of Occupier Research at CBRE, noted that if the economy remains stable, this anticipated growth in office footprints signals a broader market recovery.

A Turning Point

“For years, we’ve been in a contraction-focused environment,” Whelan stated. “While contraction remains a part of portfolio strategies — just as it was before the pandemic — we are witnessing a turning point. Occupiers are now moving toward either stabilizing their portfolios or gearing up for growth, particularly among smaller firms.” Occupiers appear more confident in transacting within a more stable market environment than in recent years.

According to CBRE’s survey, 80% of respondents — and 92% of large occupiers whose current space meets their needs — are actively exploring or finalizing lease renewals. Many tenants are capitalizing on favorable market conditions to renegotiate their existing leases. A key driver in the current market remains the “Flight to Quality,” with nearly two-thirds of companies relocating to secure office spaces in superior locations, of higher quality, or to enhance the employee experience.

‘Flight to Quality’

Julie Whelan noted, “We may have passed the peak of the office downsizing trend. Even as hybrid work becomes more widespread, companies recognize the continued importance of high-quality office spaces.” Kevin Bender, Executive Managing Director at Jones Lang LaSalle in Los Angeles, echoed this sentiment, adding, “The Flight to Quality isn’t just about moving to trophy assets, but about creating a trophy environment.”

In Albuquerque, we have observed a few tenants opting to downsize. However, as indicated by our historically low vacancy rates, these instances have been less frequent compared to other metropolitan areas nationwide. Tenants in the Albuquerque market continue to face challenges in finding suitable new spaces for relocation, leading many to renew their existing leases.