The effects of hybrid and flexible work policies on the national office market are extending far beyond the pandemic as companies continue to adjust their real estate footprints in response to their evolving workforces.
Market researcher Forrester is the latest to respond to the shifting dynamic by renegotiating the terms for its corporate headquarters and offloading about half of its previous footprint in the process. While it will retain a portion of its space in Cambridge, Massachusetts, the company has shrunk its presence in the building at 60 Acorn Park Drive from its entirety of about 236,600 square feet down to less than 118,290 square feet.
"As part of our routine review of office space, we’ve decided to maintain our global headquarters in Cambridge," Shweta Agarwal, Forrester's vice president of corporate communications, said in a statement to CoStar News. "Our new lease is right sized to align with our hybrid work model."
Beyond saying its employees are able to work remotely from some days and commute to an office for others, the company declined to detail what that model entails or how much time its workforce is required to operate on an in-person basis.
Forrester's decision to restructure its office space means it will free up the bottom three floors of the Cambridge Discovery Park building and hold onto its space on the top three levels. The terms of the renegotiated deal will kick off at the start of 2026, according to information filed with the Securities & Exchange Commission, and will extend through the end of June 2039.
The company will also have the option to extend the revised lease for two additional 10-year terms.
In addition to its Cambridge headquarters, the research and advisory firm also leases office space in New York; Norwalk, Connecticut; London, Sydney; Singapore; and elsewhere around the world. A majority of its 1,600-person workforce is concentrated around the Boston area, however, where the company has been based since its founding in the early 1980s.
Forrester took over the entire Acorn Park Drive building once developer The Bulfinch Co. completed construction about a decade and a half ago. The Boston-based real estate firm then sold the property as part of a roughly $123.5 million portfolio deal in 2014 before acquiring it back at a significant premium in August 2019, attributing Forrester's long-term tenancy as a driving force behind wanting to once again own the property.
Lasting impact
Yet Forrester is echoing moves made by other large office tenants across the United States that are aggressively shrinking their real estate footprints in response to changes still rippling out from the COVID-19 pandemic that began prompting nationwide shutdowns half a decade ago.
While the global crisis has been relegated to the rear-view mirror, ongoing downsizing moves reflects how these tenants are adapting to a range of challenges — from the effects of flexible work policies to economic pressures such as tariffs and mounting uncertainty — by taking a close look at how much real estate they truly need and where.
Whether it is through renegotiated terms, sublease listings or deciding not to renew existing spaces, companies are economizing their real estate portfolios by signing smaller leases or getting rid of their space altogether.
Tenants collectively handed back upward of 65 million square feet last year, boosting the total to more than 180 million square feet of move-outs since the start of 2020, according to CoStar data. What's more, the leases that are being signed these days have shrunk considerably, averaging about 20% smaller than their pre-pandemic averages.
The shift toward a more prudent approach to real estate growth has loaded up the national real estate market with millions of square feet of available office space, driving up the average vacancy rate to a record high of about 14%, according to the data.
Escalated return-to-office mandates among Fortune 500 heavyweights such as Amazon, Starbucks and Walmart have helped bolster optimism among landlords that the worst of the pandemic-induced woes have largely passed, clearing the runway for a widespread national office market recovery.
Forrester's recent renew-but-shrink move shows that companies are not yet done with evaluating their real estate holdings, especially as they relate to work models that have become permanently ingrained in their corporate culture.
"Our research shows hybrid employees have the highest levels of satisfaction and trust in their organization," CEO George Colony previously said of the company's work model. "For us, hybrid is the best of both worlds. One, it gives employees flexibility, and two, being together in the office drives creativity, collaboration and culture."