(Seems like this should be a no-brainer for our leadership, who preaches the priorities of cost-cutting. Let’s show some consistency between what we say and what we do.)
Companies expect to reap millions of dollars in savings in the years ahead as they scale back on office space after the coronavirus pandemic emptied workplaces around the country.
Finance chiefs have spent months weighing the costs and benefits associated with getting rid of unused office space as businesses consider whether to return to the office. While companies such as Facebook Inc. are allowing some employees to work from home permanently, others, including Alphabet Inc., are asking most of them to spend a few days a week in the office. A third group of businesses—among them Goldman Sachs Group Inc. —is asking employees to come back to the office full time.
San Francisco-based Affirm recently announced its employees would be given a choice between working from home indefinitely and returning to the office. “Covid changed everything, and we became a remote-first company,” said Michael Linford, the company’s chief financial officer. The company decided to sublease one of its two offices in San Francisco to recover some of its rent, as it doesn’t expect all employees to come back.
As with Affirm, San Francisco-based Yelp earlier this year told its employees that they could continue working from home permanently or come into the office. “We’ve found that our employees are generally even more effective when they can choose where they want to live and work,” CFO David Schwarzbach said.
Over the past two months, Yelp has signed sublease agreements for some of its office space in New York and San Francisco. Over time, Yelp expects to save an estimated $10 million to $12 million a year through 2024.
Meanwhile, McKesson in May said it plans to adopt a hybrid work model. The Irving, Texas-based company, which has about 76,000 employees around the world, is shrinking its real-estate footprint. The reductions in office space, once fully implemented, are expected to save McKesson between $60 million and $80 million a year,
“The fact that the pandemic lasted so long made people appreciate what they are missing when they are not in the office,” said David O’Reilly, chief executive at Howard Hughes Corp. , which owns, builds and operates commercial, mixed-use and residential real estate.
Prominent tech companies are embracing remote work amid an exodus of skilled labor from Silicon Valley.
Occupancy rates vary widely between cities. Only about 20% of offices in New York and San Francisco were being used during the week ended June 23, while cities in Texas had occupancy rates of around 50%, Kastle Systems said. Technology companies such as HP Inc. and Oracle Corp. said they plan to move their headquarters from high-cost cities in California to Texas.
San Francisco-based Salesforce Inc. is another company that’s currently evaluating how much real estate it will need in the months and years ahead—and whether it can save money by scaling back. The software provider has surveyed its employees over the past year and is offering the choice to either work from home or in the office, CFO Amy Weaver said.
“The number one thing we heard from employees is that flexibility is important to them,” Ms. Weaver said. Salesforce employed 56,606 people at the end of January.