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Key Office Trends

December 2022

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Who we are

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Alidade enables occupiers and owners to realign space demand and supply for today’s work-from-anywhere reality.

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With our patent pending Composition technology, we provide space planning recommendations for the best mix of traditional leasing and flex office based on team level occupancy demand.

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The Alidade Team

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Brandon Medeiros

CEO

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WeWork

Time Equities

Davide Schaumann

Chief Product Officer

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Technion Ph.D.

Spacemate

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Kevin Selig

Head of Client Services

& Partnerships

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WeWork

JLL

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Adam Winski

Workplace & Customer Experience

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Convene

Jump Associates

Garry Yeung

Workplace �& Product

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WeWork

Cresa

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James Bingham

Managing Director APAC

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WeWork

NBC Universal

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TABLE OF CONTENTS

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1. Key Trends
1. Hybrid & Return to Office (RTO)
2. Macro Office Market
3. Design & Operations

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• Where the Industry is Heading

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Source: Alidade Data

Key Trends - Hybrid Work & RTO

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1. Paid WFH days are plateauing at ~2 days/week. Employers plans are converging at this same level. �
2. WFH surveys are the basis for many current workplace decisions and are a poor predictor for actual behavior.�
3. Averages are now meaningless. Each company now has a unique office demand profile based on geography, industry, company stage and the job mix of a given site.

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Paid work from home days are plateauing at ~2 days/week. Employers plans are converging at this same level.

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Sources: WFHresearch.org

WFH surveys are the basis for many current workplace decisions and are a poor predictor for actual behavior.

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Source: Alidade Data

Averages are now meaningless. Each company now has a unique office demand profile based on geography, industry, company stage and the job mix of a given site.

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Source: WFHresearch.org

Source: McKinsey

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Key Trends - Macro Office Market

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• Macro signs indicate the old commercial office leasing model is broken.

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• The NER and net absorption delta between newer and older buildings continues to grow as pre-2009 buildings become increasingly obsolete (as evidenced by rising investment in office to residential conversions).

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• Flight to quality…for now until large tenants start reducing space (which is happening now)

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Macro signs indicate the old commercial office leasing model is broken. Office leasing volume has dropped precipitously in both major and non-major markets.

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Source: JLL Research

Source: Work from Home and the Office Real Estate Apocalypse

And Subleases have climbed to the highest level in history.

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The NER and net absorption delta between newer and older buildings continues to grow as pre-2009 buildings become increasingly obsolete.

Source: Work from Home and the Office Real Estate Apocalypse

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More and more of these pre-1990 office buildings are being targeted for residential conversion.

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Meta, Salesforce and many other tech firms are reversing course on gobbling up of office space. Professional services and financial firms are filling this void but only partially.

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Source: CoStar, October 26, 2022

Source: WSJ, November 15, 2022

Source: Quartz, November 11, 2022

Source: Quartz, November 11, 2022

Key Trends - Design & Operations

1. Companies are getting increasingly smart about measuring Utilization, not just Occupancy. What they are finding isn’t pretty.

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• The Data Conundrum: Real estate is increasingly focused on people rather than transactions AND increasingly data centric to understand how people are likely to use space (i.e. the change from 70’s Madison Avenue Marketing to Digital)

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• Succeeding in commercial office today requires adding capabilities and experience as primary value drivers.

• Consumerization of office and rise of DTC office leasing platforms reduces the information asymmetry of traditional real estate transactions.

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Companies are getting increasingly smart about measuring Utilization, not just Occupancy. What they are finding isn’t pretty.

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Source: Relogix Benchmark Utilization Study

Source: 2022-2023 CBRE Global Workplace & Occupancy Insights

Real estate is increasingly focused on people rather than transactions AND increasingly data centric to understand how people are using space. �(i.e. the change from 70’s Madison Avenue Marketing to Digital)

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Succeeding in commercial office today requires adding capabilities and experience as primary value drivers.

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Consumerization of office and rise of DTC office leasing platforms reduces the information asymmetry of traditional real estate transactions.

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Source: Citybiz

Source: Connected RE

Source: Washington Business Journal

Where the Industry is Heading

• WFH will have a larger and more lasting impact on Commercial Office than a recession or inflation.

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• The shape of demand has changed, supply must conform as 900M SF of office leases nationwide are set to expire by 2025

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• Space will be consumed in a new mix of conventional, flex, and on-demand (A, B, C, D). Supply and Demand relationships will be dynamic, increasing the necessity of technology and the consolidation of data.�
• Companies are beginning to figure this out and saving millions on space while create destinations to win talent.

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WFH will have a larger and more lasting impact on Commercial Office than a recession or inflation.

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Normal Market

WFH/Hybrid Work

# of days

# of days

% of supply

% of supply

Source: Alidade Simulations

Work from Home or Hybrid Work has fundamentally altered our relationship with the office. The data has started to show us that we have dramatically increased our underutilization without necessarily reducing our peak or highly utilized days. This change to the demand curve is a challenge that has not been seen before.

The shape of demand has changed, supply must conform as 900M SF of office leases nationwide are set to expire by 2025

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Hybrid Market

Hybrid Market Normalized

# of days

# of days

% of supply

% of supply

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This newly shaped demand curve presents a challenge to the status quo. Using only conventional procurement methods (i.e. long term leases), procuring to meet our peak demand results in massive underutilization (line 1). However, procuring a long term lease to meet utilization targets (line 2) creates unmet demand for space that needs to be served outside of the premises.

Space will be consumed in a new mix of conventional, flex, and on-demand (A, B, C, D). Supply and Demand relationships will be dynamic, increasing the necessity of technology and the consolidation of data.

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Hybrid Future

• With Up to 35% reduction in cost and the equivalent potential Revenue increase for Owners, there are massive value capture opportunities, but also immense challenges to the status quo.
• This would require the marketplace to leverage data and automation in ways they previously have not.
• The result would be less waste, more efficiency, higher occupancy and improved returns for investors.

% of supply

Source: Alidade Simulations

NYC headquarters, 900 Employees.

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Companies are beginning to figure this out and saving millions on space while create destinations to win talent.

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Past

Conventional

Flex

Today

Tomorrow

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Current Spend:

$6.6M in annual spend

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Hybrid Scenario 1:

$2.7M conventional

$1.6M flex

$2.3M in annual savings

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Hybrid Scenario 2:

$3.5M conventional

$2.0M flex

$1.1M in annual savings

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34.8% expected savings

THANK YOU

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Brandon Medeiros

brandon@alidadeflex.com

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