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Recession Proof Your Real Estate

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Recession Proof Your Real Estate

A severe recession is possible, economic experts warn. What does this mean for corporate offices?

The hottest US inflation in four decades has pushed the Federal Reserve to raise interest rates more aggressively this year, and a recession may not be far behind. Signs of a brewing recession aren’t too hard to spot right now. E-commerce site Stitch Fix announced it will let go 15% of its corporate workforce as it deals with a slowdown in sales and increased losses. E-signature software company DocuSign said it would slow the pace of hiring. Electric scooter player Bird announced it would lay off 23% of its workforce as it clamps down on expenses. Netflix and retail trading platform Robinhood have also cut jobs after lackluster first quarters. Meanwhile, cryptocurrency exchange platform Coinbase has frozen new hiring and even rescinded some already-accepted job offers. 

Is the office sector going to disappear due to the growth of remote work?

While the office sector is undoubtedly changing, it is not dying. In terms of positives and long-term sustainability for the office sector, companies are beginning to learn how to live with the pandemic, as people come back to the office more regularly. Heads of Real Estate and Workplace Leaders are however emphasizing less of a need for office space over both the short and long term. They note that there are benefits to remote capabilities that save time and money and improve work-life balance for many of their office users. Many of these organizations are embracing the benefits of a hybrid model, and they don’t anticipate ignoring these benefits for the sake of going back to the way things were. Office demand may be falling on a national level, but there will be pockets of strength. Rents and prices will likely soften over time as supply and demand rebalance and landlords adjust their space to accommodate the changing world.

As real estate is generally the second-largest expense on a company’s budget, it is imperative that C-Suite, Real Estate, and Workplace Teams know exactly what levers they can pull to make cost-saving adjustments in times of economic distress. Through operational benchmarking, a company can analyze, interpret, and operationalize relevant market data to help protect the bottom line in a way that makes sense for them. 

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