Reducing office space? 74% of Fortune 500 CEOs say it's likely

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June 11, 2021

How Fortune 500 CEOs view the post-pandemic business world

In the face of employee pushback, Amazon is pivoting: On Thursday, the e-commerce juggernaut told staffers they're softening their back-to-work policy. Going forward they'll allow corporate employees to work from home two days per week, and up to four weeks per year of remote flex days.

That policy shift by Amazon shows just how cautious employers are being as they bring back staffers. Simply put, they're trying to balance a return to normalcy without upsetting workers. After all, a hot labor market makes it all too easy for workers to walk. To figure out how the big dogs will play their cards, we conducted a poll of Fortune 500 chief executive officers last month.*

Here's what we found.

The numbers to know

53%

74%

53%

10%

50%

47%

61%

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The big picture

A few deeper takeaways

1. The worst is yet to come for commercial office space.

For much of the pandemic central business districts in major cities were ghost towns. One might assume it'd make commercial office space owners insolvent. Not really: They were protected by long leases, often in the 5-year to 10-year ballpark.

But 15 months into this crisis, it's becoming pretty clear that post-pandemic work will require less office space than the pre-pandemic workplace. Among Fortune 500 CEOs, 73.6% say they'll need less office space in the future. Including 51.4% who say a little less space, and 22.2% who say a lot less space. Clearly, companies are eager to start scaling back on their commercial real estate expenses. Industry experts say suburban back-offices—not corporate HQs—are the most likely to be cut.

"As leases lapse over the coming year or two, we need to watch how companies renew their contracts. If we see a push to offload some square footage, as surveys suggest, landlords could feel the pinch. Segments of the office space remain an unknown risk to the economy," Ali Wolf, chief economist at Zonda, tells Fortune.

2. Office space might get cut—but CEOs still view it as critical to success.

Don't expect the company office to wither away: Among CEOs, 72% say office space is important for employee productivity. Only 13% disagree. The pandemic shifted some workplace dogmas about remote work—but it also engrained others. As Fortune Analytics has previously reported, some employees saw their productivity fall during WFH. It wasn't for everyone, and leaders took note. That's why most companies still want to incorporate some form of in-person work.

3. USA is No. 1.

The consensus among economists is that 2021 will be the best year for U.S. economic growth since the early 1980s. So it isn't surprising that 83% of Fortune 500 CEOs, aka the leaders of the 500 largest public U.S. companies by revenue, say the U.S. is the region with the best opportunities for investment. Next was China at 12%.

A big underpinning here is the fact that vaccines by U.S. drug makers Moderna, Pfizer, and Johnson & Johnson put the country much closer to the end of the pandemic. Even as caseloads plummet here, other nations are seeing breakouts.

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Lance Lambert
@NewsLambert

*Methodology: Fortune 500 CEO Poll conducted May 3 and 14. A total of 72 Fortune 500 CEOs responded to the survey. (Our "corporate risk" question was provided by survey sponsor, Zurich North America Insurance).

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