Curb Recession Layoffs With Smart CRE Moves

Worried about an incoming recession? You wouldn’t be alone. With two-thirds of CFOs predicting an incoming economic crisis, professionals are scrambling to make moves that will protect their EBIDTA, and this means cutbacks. 

When the word “cutbacks” is thrown around, it generally strikes fear into the hearts of those working in corporate America. However, with the market in favor of the jobseeker, personnel layoffs are only sure to worsen a company’s future ability to recruit great talent while worsening the current wasted space problem.   

Instead, companies can stay afloat throughout an incoming recession by instead making cuts (and smarter moves) to their commercial real estate. While layoffs may be an inevitable part of a recession, commercial real estate is typically your top cost behind payroll. So smart CRE moves can save millions and in the process, possibly limit layoffs. Learn how (and why). 

Recession Fears Hit Corporate America

Save Big by Adapting Your CRE

Safeguard Your CRE During  the Recession

Avoid Recession Layoffs with Smart CRE Moves

Recession Fears Hit Corporate America 

Want some disturbing news? Most of our country’s CFOs are bracing for a financial crash. Only 39% of CFOs said they have an overall optimistic outlook on the U.S. economy over the next six months, “According to CFO Magazine. What’s worse is that this figure dropped significantly- 30 points down from what it was in September 2021.  

However, even though fear of the recession looms for corporate America, people still don’t want to return to the office fully. Why? Well, they don’t have to.

There is a robust employment market, and job seekers can afford to be pickier. And since hybrid/remote-friendly schedules appear to be the preferred means of working for most Americans, jobs that don’t provide that level of flexibility remain open. 

Despite this, recession chatter is pushing decision-makers to make cuts. A survey from Grant Thorton found that one-third of CFOs are considering layoffs.  

At the same time, these layoffs are being considered amid a corporate spatial utilization crisis. Since so many people are working from home, businesses are paying millions for space that used to fit their company’s spatial requirements.  

So, these plotted cutdowns may be misdirected. The issue with layoffs is that they will only worsen the wasted space issue. If you already have an underutilized office, cutting your workforce will leave you with more wasted space. 

“Instead of resorting to layoffs, CFOs should be focusing their efforts on ways to optimize costs like benefits and engage the people they are worried about losing,” Tim Glowa, principal of human capital services for Grant Thorton.

Save Big by Adapting Your CRE 

Commercial real estate is typically an organization’s second highest cost, so savings here go a long way. Businesses should take advantage of the opportunity they’re presented with. Workplace flexibility isn’t going anywhere. In fact, it’s becoming more ingrained.  

According to Marcus & Millichap’s John Chang, “The next recession likely won’t be severe enough to change the prevalent hybrid model… The employment market is simply too tight for companies to bring employees back to the office full-time. And that impacts all types of commercial real estate.”  

Fears of recession layoffs aren’t scaring people back into the office. Instead, those threatened by layoffs are simply looking elsewhere because “right now there are about 5 million more job openings than there are people looking for work,” Chang continued. 

In this talent war, people are looking for corporate environments where they feel comfortable. So rather than cut down the size of your team, analyze how you can get more efficient with your CRE $. Creating modern offices that accommodate flexibility is a savvy way to optimize your current space without losing any more of your strongest asset, your people.  

This is especially true since layoffs appear to be a transitory fix. In fact, it will further complicate recruiting abilities in the future. According to CFO Magazine, “companies that choose layoffs will put themselves in steep hiring competitions to refill their workforce post-recession — a competition that’s already impacting organizations across the board now.” 

Businesses should instead realize (and quickly) that job seekers are not only seeking loyalty but comfort. Honoring your team members through a corporate environment that accommodates their working preferences is no longer an option; it is a must. To recruit and maintain great talent, offices must ensure:  

• Workplace Flexibility  
• Safety and Comfort  
• Sustainability  
• A Sense of Home at Work 

 
Safeguard Your CRE During the Recession 

Any organization can benefit from making their CRE a more efficient expense, especially now. With skyrocketing inflation, wasted money adds up…. Fast. So rather than cut your numbers, analyze where there is inefficiency in your portfolio and capitalize on it. 

To do so, look at the headcount of people who typically occupy the office daily. The chances are it has changed in recent years. Since 58% of Americans have the option to work hybrid, it's more likely than not that your offices are less populated.  

And if you’re not approaching an expiration, option to renew, or your landlord won’t concede to slash your space, you better hope you have a good sublease clause. The sublease market is booming right now. With mainstream organizations like Lyft making headlines with the decision to sublease underutilized space, it is a solid option to regain some lost CRE funds following the shift to remote work. 

Also, optimizing your real estate doesn’t only mean slashing space. It means staying on trend with CRE opportunities as they present themselves, which requires paying attention to your location. Your current space was the best option for your needs when you signed your lease. Is it still? 

For example, workplace flexibility is driving people out of metropolitan areas. High crime, expensive cost of living, and complicated commutes don’t seem to stack up against the option to work from home. Instead, businesses are finding that Americans are more willing to work in suburban marketplaces. As a result, there has been a migration to the suburbs for people and companies alike. 

According to GlobeSt,“Suburban office outperformed Central Business District (CBD) markets over the past two years, serving as a “middle ground’” between working from home and commuting to an urban core. Suburban office absorption hit 2.2 million square feet in the first quarter, while CBD office markets posted negative 2.6 million square feet of absorption during the same period.”  

Avoid Recession Layoffs with Smart CRE Moves 

According to CFO Magazine, “It may be a natural impulse to consider workforce cuts in the face of a steep economic downturn, but for many organizations, layoffs can be avoided by pulling the right levers before a downturn starts to impact growth."

Layoffs are not enough to safeguard your corporate performance. While they may initially save you in payroll, they will worsen the divide of unused space- this means more millions spent on wasted square footage.  

Instead, businesses should be looking to cut their footprints or get more efficient about the space they have. Doing so will kill two birds with one stone: You’ll be empowered to offer hybrid-friendly work environments while cutting your CRE costs to a fraction of what they were.  

If you want to maintain your physical presence, think harder about where they’re located. You may find more affordable real estate, better terms, and more freedom in Suburban markets. So check out this article if you want to learn more about the pros and cons of relocating your business to the suburbs.  

If you’re ready to protect your company against the recession by making smart real estate moves, it’s time to talk to a Tenant Rep. At iOptimize Realty®, we are Tenant Reps with 30+ years of experience solely protecting the interests of our corporate clients. It is our fiduciary to stay on top of the latest CRE trends to save our corporate clients money and time. We are prepared to optimize individual leases or entire portfolios in the recession and beyond. So don’t wait any longer. Take advantage of this financial crisis now and talk to a Tenant Rep.