Office Evolution: Tracking the New Normal in Corporate Real Estate

The global pandemic fundamentally reshaped the workplace. During a period of uncertainty, remote work arrangements became the norm, with another wave of transformations following in the aftermath. And while return-to-office mandates have made headlines over the last couple of years, many organizations have decidedly embraced a hybrid schedule for the long term, driving them to rethink their physical real estate assets.

Accounting, tax, and consulting firm ORBA is one of those organizations. The firm had about four years remaining on its lease of prominent space in the NBC Tower in Chicago when COVID-19 emerged in March 2020. Like most other professional services firms at the time, ORBA sent its employees home with the expectation that they’d be back in the office within a few weeks.

“When two weeks became six-plus months, we started to survey our workforce to gauge a preference on how it wanted to work,” says Joseph A. Odzer, CPA, MST, managing director at ORBA. “Those surveys made it very clear that our accountants preferred the flexibility of working from home.”

Of course, once the pandemic eased, employees also wanted to be able to visit clients in person and then spend the balance of their days working from home, and some (about 33%) wanted to explore the idea of coming back into the office on a hybrid basis. This left ORBA with a problem: The company had multiple floors in the NBC Tower but no need for all the space.

About eight months ago, the company decided to eliminate one floor, effectively reducing its total leased space from 40,000 square feet to 17,000 square feet. Much of the new space was dedicated to hoteling, which would help accommodate its hybrid workforce via a program known as ORBA Flexibility and Choice. Through that www.icpas.org/insight | Fall 20247 program, employees can work from home and/or the office, while also maintaining in-person meetings with clients.

As part of this workplace transition, ORBA also opened a 9,000 square foot office in a western suburb of Chicago—a move that was also based on employee feedback. Today, roughly 10 people go into its new suburban office on a daily basis, while 25-30 people go into its downtown location every day.

Odzer says the shifts have yielded largely positive results, and the firm uses weekly production reports and billable hours to keep tabs on productivity. “Employee turnover is lower, and people seem to be generally happier with the flexible arrangements,” he says. “They can work from home, take their children to school, walk their dogs, but also continue earning a living from home.”

MEETING WORKERS WHERE THEY’RE AT

From her vantage point, Edith Gonzalez, managing director of JLL Work Dynamics, a JLL division that optimizes workplaces and real estate portfolios with employee experience and business performance in mind, says she’s seeing a high percentage of firms adopt hybrid work programs. She notes that even before the pandemic you’d be hard-pressed to find accounting and consulting professionals going to an office five days a week.

Gonzalez stresses that flexible arrangements are important in the accounting profession, where “people are your capital.” These days, in order to grow and attract top talent, professional services firms have to meet their people where they’re at, and this means providing the accommodations and amenities they both want and need.

For example, Gonzalez says she’s seeing more companies taking ORBA’s approach of opening satellite offices that are located closer to the residential hubs of their employees and sticking to around three days of in-office work per week: “That’s across the board right now, and the number of in-office days is steadily increasing—from 3.1 a few months ago to a current 3.3 average in-office days per week.”

Additionally, Gonzalez is seeing more firms—and their landlords—incorporating more environmental, social, and governance initiatives into their real estate portfolios, such as alternative energy, lighting programs, and green roof space. Others are incorporating more amenities like gyms, pop-up lunch services, and elevated in-house dining options.

LEASING STRATEGIES FOR FIRMS

For firms looking to reduce their physical footprints or renegotiate existing leases, Odzer advises getting a good, experienced real estate broker in your corner: “Find one that has deep experience working in the market and knows your building. If you’re looking for new space, research the financial strength of the company that owns the property—you don’t want a landlord that has a high mortgage payment and may foreclose on the property.”

Subletting is another option for firms that need to shed some space but can’t easily renegotiate their leases. In fact, Odzer suggests that firms look at their own client base for potential tenants: “Maybe you have a client that’s looking for space—we’ve used this strategy in the past and it worked out well.”

Gonzalez says property owners are also offering more flexible lease terms, knowing that the idea of signing a 20-year lease is a bit far-fetched for any accounting firm these days.

“We don’t know what the world is going to look like in six months, let alone 20 years,” Gonzalez points out. “Knowing this, landlords have become much more willing to be flexible with terms and allow subletting, which can help a company generate some revenue by letting someone else make use of that unused space.”

REAPING THE REWARDS

Overall, cutting unnecessary real estate expenses has its benefits. For example, ORBA has been able to use its cost savings to invest in technology to effectively support their hybrid workforce and recruit more staff members from outside of its geographical region. In fact, the firm has grown its out-of-state employee base from 17 people to 41 people. “We took this as an opportunity to hire high-end talent from out of state,” Odzer says.

Additionally, some of ORBA’s cost savings have been allocated to team-building activities. For example, Odzer says the firm hosts several events a year close to home in addition to an annual two-day trip for all employees to get together, team build, and have fun: “We fly everyone to the event, with ORBA paying for all the expenses.”

To other accounting firms that may be in a similar situation and needing to make the tough decision to relinquish or renegotiate real estate assets, Odzer says the best approach is to listen to your employees.

“Accounting is a people business—you can’t just ‘force’ your employees to come to an office,” he says. “If your employees like working from home, and if production isn’t suffering, then rewards like lower turnover and happier employees will be well worth the effort of accommodating them.”

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