Return-to-office gains force
Many offices across the world are buzzing with activity once again. Five years on from the start of the pandemic, we are seeing the return-to-office gaining force, with implications for investment, management and office fit-out decisions.
Economic headwinds coupled with some companies citing concerns about the impact of remote working on productivity, innovation, talent development and team building have prompted an increasing number of businesses to implement policies requiring more time spent in the office. As of the beginning of 2025, 25 Fortune 500 companies have publicly signalled a return to five-days-a-week office working, including many leading names such as JP Morgan, Morgan Stanley, Amazon and Boeing. Many financial institutions have increased their back-to-office requirements in response to new regulation from the Financial Industry Regulatory Authority (FINRA), which reduced the ability of traders for Wall Street banks to work remotely. According to the Flex Index, 28 per cent of US firms now require at least three days a week in the office. However, patterns vary dependent on company size and sector, with tech companies offering the most flexibility compared to other industries, and smaller companies tending to offer more remote flexibility than larger ones.
Agility is key
There is still a diversity of return-to-office approaches, with key differences across geographies, industries and company types. The push and pull dynamic will continue to play out over the coming years, as employers look to balance employee preferences with commercial imperatives.
As these shifts continue, pressure on real estate teams is building, as they work to ensure portfolios are set up to flex to swings in demand. Whether responding to the continuing trend of mid-week peaks in occupancy or preparing workspaces for a full-time return of all staff, careful planning is required.
Many workspaces are now experiencing increasingly squeezed capacity, since many office footprints have not been scaled up in recent years, despite growing headcounts for some businesses. This is prompting a fresh wave of office fit-out activity, to reconfigure, extend and adapt existing spaces, or support the move to new, larger or consolidated premises.
Rising demand for premium offices
Creating amenity-rich and wellbeing-focused office environments, which justify employee commutes, is a continuing priority, particularly in markets where a majority of staff have the space to work comfortably from home.
The need for attractive Grade A space is creating fierce competition in hub markets, driving up leasing rates. This competition also has impacts for office fit-out costs, where skills are in shortage and labour comes at a premium. In major cities like New York, London and Sydney, high-spec office fit-outs average at a sizeable US$5,677, US$5,932 and US$4,756 per m2, respectively. While enhancing the employee experience has become a high priority, commercial pressures have also grown. In many markets, stubborn interest rates, flat economic growth and geopolitical uncertainty have increased corporate focus on streamlining spend and driven a culture of cautious investment. Against this backdrop, some occupiers are opting to stay in current spaces and negotiate a favourable deal with their existing landlord, rather than commit to new leases. This trend is further amplified by shortages of premium office space to move into in many major markets. This has certainly been the case for major occupiers in London, for example, who are looking for Grade A space at large scale. For floorplates of 20,000 m2 or more, there is very limited availability and heightened competition.
A deeper focus on value
Real estate teams are increasingly being pulled in competing directions. They must balance the drive for cost savings with the need to build a future-ready, talent-oriented office portfolio.
Increasingly, business leaders require real estate teams to demonstrate the value that the occupational portfolio is adding to the bottom line. In response, these teams are becoming laser focused on understanding portfolio performance and return on investment, to tangibly demonstrate real estate’s role in driving overall commercial success for the business. This trend is increasing the need for access to high-quality, global data, to fuel intelligent capital planning, robust budgeting and clear demonstrations of value-for-money to business leaders and shareholders.
Right-sized office portfolios
In some sectors, companies are trying to boost capital efficiency through the offshoring of key support functions to lower-cost hubs. Others are strategically focusing investment on headquarters and flagship offices, while reducing spend on satellite spaces, in order to consolidate their overall portfolio.
The balance of these decisions will naturally vary from business to business – as well as between functions within the same organisation. For business units with a heavy emphasis on productivity, such as customer service call centres, investment can be focused on more cost-efficient desk space in cheaper locations. For example, open plan deskspace in Bangalore costs a relatively low average of US$828 per m2. However, for businesses or divisions where innovation is an important driver of commercial success, such as developer teams within tech companies, the pendulum swings the other way. Here, breakout spaces for collaboration are crucial, and these come at a higher price to fit out. In a well-established tech hub like Munich, for example, collaboration space costs a high average of US$2,439 per m2. Prioritising areas for investment and getting the balance right comes down to a close understanding of what is needed from different teams. The relationship between HR and real estate is critical, with real estate teams often harnessing data gathered by HR through employee surveys and other feedback mechanisms. Both teams need to work together when making decisions around office footprints and fit-outs, connecting the business’ ultimate products and services with its talent strategy and portfolio planning.
Harnessing potential in emerging markets
As global businesses work to tightly control spend, some companies are harnessing growing talent pools in emerging markets. While this has often been seen in the form of offshoring models, this trend is now also presenting as distinct strategies around developing and expanding skills and headcount in new regions.
As well as offering cheaper office fit-out costs, emerging markets like India, Malaysia, Mexico, Costa Rica, South Africa and parts of Eastern Europe offer lower overall operating costs. These benefits are fuelling strong office fit-out activity levels in key cities such as Bangalore (average US$930 per m2), Mexico City (average US$2,153) and Kuala Lumpur (average US$1,150), for example. India, in particular, is seeing a surge in office demand. This is being driven by an appetite for global capability centres (GCCs) from international companies, attracted by India’s relative ease of doing business and high-quality talent at competitive rates. The amount of new office space sold or leased in India reached a record 79 million sq. ft. in 2024. Bangalore led the demand, with 28 per cent of the take-up, followed by Hyderabad, Mumbai and Delhi-NCR. Responding to the increasing ESG requirements of global corporates, the Indian office market is now shifting towards sustainable assets. Over 60 percent of the office supply pipeline is expected to be green certified over the next two to three years.
Flexible office fit-out approaches
To reduce cost in the face of rising financial pressures and with the prospect of tariffs disrupting international trade, multinational organisations are making savvy choices around how regional offices are fitted out and the supply chains they engage with.
Where finishes and furniture were once mandated to be not just consistent but identical in all locations worldwide, occupiers are now accepting that loosening the reins on design standards can be a smart move. With more flexibility, occupiers can make better use of locally sourced materials. Not only is this typically more cost-effective, but it is often also more sustainable, reducing transport-related emissions and contributing to organisations’ net-zero ambitions. Sourcing locally also offers the benefit of de-risking schedules for long-lead items. In the current political climate with emerging tariffs, the benefit of sourcing within market or region is set to increase, which may reshape supply chains over the coming years. For clients, being proactive will allow the best opportunity to mitigate cost increases. Robust planning, careful monitoring and working closely with both international and local supply chains can help to moderate any potential impacts. A local sourcing approach does not have to come at the expense of quality across an international portfolio. Instead, it is about setting global standards for the look and feel of regional assets, while at the same time empowering regional teams with the autonomy to reflect local cultures – all while making the most of cost-effective local supply chains. This frees up investment to be targeted on more bespoke aspects such as high-specification AV equipment.
Opening office in a new market: our key recommendations
1.
Establish a robust location selection criterion that assesses, but is not limited to:
- Availability of real estate
- Financial elements such as wages and tax
- Geopolitical risks
- Supply and demand of talent
- Attractiveness to local workforce
- Talent elements such as supply, demand and regulations
2.
Select a delivery partner who can bridge the gap between a local delivery approach and an approach you are familiar with.
3.
Access global benchmark and supply chain data to understand costs, typical procurement routes and other key local market factors.
4.
Embrace local products and standards where appropriate – saving on lead-in times, costs and carbon footprint.
