While the sweeping effects of the pandemic have gradually faded into the backdrop of the national office market, companies are still tweaking their real estate holdings in response to shifts that have become permanently embedded into their day-to-day realities.
Data analytics giant LexisNexis is the latest to respond to evolving dynamics brought about by hybrid and flexible work policies with a decision to slash the company's Raleigh, North Carolina, hub by about half compared to its earlier footprint in the city. The New York-based data provider signed a deal to relocate its office to a roughly 65,000-square-foot space in the Venture III building within the sprawling Centennial Campus as part of a move that, once realized, will leave its footprint dramatically smaller compared to its longtime address just around the corner.
LexisNexis has been leasing the entirety of the nearly 121,800-square-foot building at 1801 Varsity Drive — also within the 1,105-acre research park — for more than a decade.
Yet as with other companies adjusting their real estate footprints in response to evolving workforces, the pandemic's impact on how and where LexisNexis employees work ultimately meant the firm didn't need as much space as it had prior to the global crisis. That's especially notable given that the company's regional workforce has ballooned from the fewer than 250 employees it had about a decade ago to more than 700 now.
“As we were thinking about our future footprint, we wanted to double down and remain on Centennial Campus,” said Jeff Pfeifer, the company's chief product officer and site leader for LexisNexis' Raleigh hub. The new lease at 900 Main Campus Drive also meant the company has "a nice opportunity to refresh our offices and to think about ways of working, particularly in a hybrid-work environment.”
The company's flexible policy means employees are assigned designated in-office days, a strategy intended to avoid crowding on some parts of the week or entirely empty offices on others — a challenge that has plagued other companies such as Amazon that have upped their attendance policies only to realize they didn't have enough real estate to accommodate everyone at once.
Taking the shrunken path
LexisNexis' downsizing move echoes those 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 pandemic that prompted nationwide shutdowns half a decade ago.
While the global crisis has been relegated to the rearview mirror, ongoing downsizing moves reflect 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 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 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.
Yet LexisNexis' recent relocate-and-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.
“Hybrid actually works very well for us and it’s quite attractive to talent in the region,” Pfeifer said. “We made a decision to commit to a hybrid plan moving forward.”
