Peak Office Downsizing: Tenants Demand Enhanced Amenities and Services Amid Changing Workplace Dynamics

The downsizing of office space has reached its peak, according to a report released by Cushman & Wakefield in conjunction with CoreNet Global on Friday. Despite uncertainty in the broader economy, return-to-office strategies are accelerating demand for space.

After years of footprint rationalization, pent-up demand for office space is now evident, with about one-eighth of occupiers planning to expand their footprint. Average lease sizes have grown by 13% in the past two years, the firm said in a release.

Cost continues to drive commercial real estate decisions, with pressure to reduce and control spending "remaining as strong as ever," according to the report. Only 32% of the 235 commercial real estate leaders surveyed in the first half of 2025 said their companies plan to further trim their real estate footprints, as office utilization rates stabilize at between 51% and 60% globally.

Utilization rates are still below pre-pandemic norms but are rising steadily globally as more organizations implement structured return-to-office policies. However, these impacts are more subdued in the Americas, where just 20% of organizations reported utilization of about 50%, compared with over 40% of businesses headquartered in Europe, the Middle East and Africa and the Asia-Pacific.

Although financial metrics remain the cornerstone of real estate decision-making, multiple factors—political and economic instability, shifting workplace behaviors, and difficulties in forecasting and measuring return on investment—are creating uncertainty and lack of clarity that have left many organizations "hesitant to act boldly," Cushman & Wakefield said.

Remote work has altered office dynamics, leading to evolving space needs and tenant expectations. As more employees work from home, organizations are subleasing surplus space or downsizing, while others switch to flexible office arrangements that span small satellite locations, co-working spaces, and rented meeting rooms. This has led to office landlords encountering new challenges and having to adapt to prevent vacant offices and potential cash flow problems, such as by reducing rental prices and offering higher-quality spaces prioritizing outdoor areas, greenery, and natural light.

Tenants are demanding more from their landlords, with 85% of occupiers now expecting landlords to provide "enhanced amenities, services, and workplace experiences." Just under half, or 46%, are willing to pay a premium for these upgrades, leading to a near-10% rental premium for top-tier office space, per the report.

The report notes that some CapEx decisions are being delayed by a quarter or two due to current economic and geopolitical uncertainties, but this will only delay decision-making temporarily—it won't derail occupiers from their long-term glide path.

In conclusion, the downsizing of office space has peaked, and while cost remains a driving factor in commercial real estate decisions, tenants are demanding more from their landlords in terms of amenities and services. As organizations adapt to the new realities of remote work and flexible office arrangements, landlords must also adapt to prevent vacant offices and potential cash flow problems.