Xymax Real Estate Institute

TOPIC REPORTWill Office Space Shrink Due to Hybrid Work?
Workplace strategy should consider the main office and telework
integrally

September 9, 2022

Introduction
Following the outbreak of the COVID-19 pandemic, the rapid spread of telework and a reduction in large
companies’ office space have been reported by the media symbolically, giving rise to expectations that
office demand will shrink in the future. According to a company survey carried out in April 2022 by Xymax
Real Estate Institute (hereinafter, Xymax REI),*1 companies’ intended, post-pandemic coming-to-office ratio,i.e., the percentage of employees coming to the office to work, was 68.3% on average (coming to the office
for about three days out of five days a week and teleworking for the rest of the days), with many companies
intending to embrace hybrid work, which combines coming to the office and teleworking. As this result
indicates, it would be fair to think that the necessary office space will decrease if the coming-to-office ratio
remains less than 100%.
In the same survey, however, the percentage of companies that “want to expand” their office space inthe future (12.0%) exceeded that of companies that “want to downsize” (10.7%) for the first time in three
years. Although the coming-to-office ratio will be lower than before the pandemic, the trend of office space
is not downsizing across the board but includes not a small percentage of companies that intend to expand
their office.
If office demand will not decline that much despite a drop in the coming-to-office ratio, what otherfactors are affecting the increase or decrease in office space? Previously, the number of office users andcompanies’ business sentiment would have had a large impact. However, now that the number of
employees coming to the office has become volatile due to the spread of telework, there may be otherfactors that impact the change in office size.
To examine this question, we looked at the characteristics of companies in the 23 wards of Tokyo, whichhave an especially high introduction rate of telework, that want to expand the space of their main office*2and the characteristics of the companies that want to reduce it in Chapter 1 of this report, and used alogistic regression analysis to explore the factors that affect companies’ intentions to increase or reduce
office space in Chapter 2. We hope this report would provide food for thought in forecasting office demand
after the pandemic, when hybrid work may become the mainstream.
*1 Metropolitan Areas Office Demand Survey Spring 2022 – (1) Demand Trends, released on June 15, 2022
https://www.xymax.co.jp/english/research/images/pdf/20220615_1.pdf
Metropolitan Areas Office Demand Survey Spring 2022 – (2) Work Styles and the Workplace, released on June 15, 2022
https://www.xymax.co.jp/english/research/images/pdf/20220615_2.pdf*2 To distinguish from satellite offices, which are places for telework, we refer to the conventional office where employees
congregate as the “main office,” and the floor area of the main office as “office space” in this report.

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

1

TOPIC REPORT｜Xymax Real Estate Institute

Summary

The most popular range of companies’ intended increase or reduction in office space fromthe current level was “30–40% reduction” (7.9%), followed by “30–40% increase” (5.1%).



As for companies’ intentions on office space by the number of employees, large companies
with 1,000 employees or more showed a relatively large percentage of “Want to downsize”(28.7%), while by sector, the information & communications sector and the manufacturingsector showed relatively large percentages of wanting to downsize, at 26.7% and 24.6%,
respectively. However, company attributes do not seem to have a large impact oncompanies’ intentions to expand or downsize their office.

The percentage of companies that “want to increase the share of flexible desks” in theiroffice layout going forward was 58.8% among companies that want to downsize their officeand 39.4% among those that want to expand. Both percentages were larger than thepercentage among companies that will not change their office size (22.5%).



As for the location of the workplace, companies that want to downsize their office weremore oriented toward hybrid work, with companies intending to “keep HQ functions in thecity center and disperse workplaces in the suburbs (including work-from-home)” accountingfor 57.8%. Companies that want to expand their office had relatively strong intentions to“consolidate workplaces in the city center” (28.4%).

An analysis of the impact of new installations of office layouts on companies’ intentions on
office space suggests that intentions to newly install “hot-desking,” “booth or private room
for remote meetings,” “open meeting space” and “booth or private room dedicated tomaking phone calls” raise the probability of companies wanting to expand or downsize theiroffice.



Similarly, the analysis suggests that intentions to “newly establish a satellite office provided
by a dedicated operator” raise the probability of companies wanting to expand their officespace as well as the probability of companies wanting to downsize.

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

2

TOPIC REPORT｜Xymax Real Estate InstituteCharacteristics of Companies by Intentions on Office SpaceIn this chapter, we examine the characteristics of companies that want to expand their office space andthose of companies that want to downsize. To capture the characteristics accurately by obtaining as many
samples as possible, we aggregated the data of the Spring 2021 and Spring 2022 surveys, adopting thedata of the Spring 2022 survey if a respondent answered in both surveys, and examined the 974 samples
that had no missing answers used in the analysis. The breakdown of the intentions on office space is 155
samples (15.9%) for “Want to expand,” 632 samples (64.9%) for “Will not change” and 187 samples (19.2%)
for “Want to downsize.”
Figure 1 shows the distribution of the percentage of an increase or reduction in office space companies
that want to either expand or downsize their office actually want compared to their current office space.
The most popular range of companies’ intended increase or reduction in office space was “30–40%
reduction” (7.9%), followed by “30–40% increase” (5.1%).
Figure 1: Distribution of Intention to Increase or Reduce Office Space from Current Level

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

3

TOPIC REPORT｜Xymax Real Estate InstituteWe will then examine the basic company attributes in Figure 2. In terms of the number of employees,
large companies with 1,000 employees or more showed a relatively large percentage of “Want todownsize” (28.7%), but the difference between different company sizes was not significant.
In terms of sector, although “Want to downsize” was relatively strong in the information &communications sector (26.7%) and the manufacturing sector (24.6%) and “Want to expand” was relatively
strong in the wholesale & retail trade sector (19.9%), the difference between sectors was again, not huge.
Company attributes do not seem to have a large impact on companies’ intentions to increase or
reduce their office space.
Figure 2: Intention on Office Space – By Number of Employees and Sector

Next, we compare companies’ use of the office. In terms of the share of fixed desks and flexible desks inthe main office, the percentage of companies that “want to increase the share of flexible desks” was 39.4%
among companies that want to expand their office space and 58.8% among companies that want todownsize. Both percentages were larger than the percentage among companies that will not change
their office size (22.5%) (Figure 3). This suggests that companies intending to change their office size
is trying to use their space more efficiently, irrespective of whether they want to expand or downsize.
Figure 3: Share of Fixed Desks and Flexible Desks (Intention) – By Intention on Office Space

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

4

TOPIC REPORT｜Xymax Real Estate InstituteHowever, there are different characteristics in the direction of office strategies between companies thatwant to expand their office and companies that want to downsize. For example, when we look at companies’
views toward the location of the workplace, companies that want to downsize are more oriented towardhybrid work, which involves keeping HQ functions in the city center and dispersing workplaces to thesuburbs (including work-from-home) (57.8%). On the other hand, companies that want to expand
their office have relatively strong intentions to “consolidate workplaces in the city center” (28.4%)(Figure 4).
Figure 4: Views on Location of Workplace – By Intention on Office Space

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

5

TOPIC REPORT｜Xymax Real Estate Institute
Although only based on the Spring 2022 survey and thus for reference only, Figure 5 shows thatcompanies that want to expand their office tend to require elements related to well-being in the buildingof their main office more than other companies.
Figure 5: Requirements in the Building for the Main Office – By Intention on Office Space(Spring 2022 Survey Only)

To sum up the tendencies by intentions on office space, companies that want to downsize seem to havegreater awareness toward enhancing flexibility, reducing redundancies and improving space efficiency inoffice strategies, with around 60% replying that they “want to increase the share of flexible desks” going
forward (Figure 3) and with the lowest intended future desk sufficiency rate*3 (an average of 70%) among
the three groups of companies (Reference 1 at the end of the report). On the other hand, companies thatwant to expand their office seem to have greater awareness toward value-added factors such as the wellbeing of employees and comfort.
*3 The percentage of the number of desks to one worker occupying the office. A desk sufficiency rate of 70%
means there are 0.7 desks to one worker.

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

6

TOPIC REPORT｜Xymax Real Estate InstituteFactors that Impact Intentions on Office SpaceIn Chapter 2, we conducted a logistic regression analysis with the explained variable being the intention
on office space and the explanatory variables being company attributes and workplace-related measures,in order to explore the factors that impact companies’ intentions to expand or downsize their office otherthan the number of users and companies’ business sentiment (see Reference 2 at the end of the reportfor details of the analysis).
Figure 6 shows the results of the analysis. In order to confirm the impact of, in particular, workplacerelated measures on companies’ intentions on office space, we extracted companies’ “intention to newly
install various office layouts (intention to introduce in the future though currently unintroduced)” and“intention to newly establish a satellite office provided by a dedicated operator (same as above)” from theexplanatory variables (see Reference 3 for details of the results). The figures represent odds ratios: thelarger the figure is than 1 (and with an asterisk), the more likely companies will want to increase or reduce
their office space due to intentions to newly install or establish the workplace measure. On the contrary,
the less the figure is than 1, the less likely.
Figure 6: Impact of Intention to Newly Install Office Layout or Establish Satellite Office Provided by a
Dedicated Operator on Intention to Expand or Downsize

Figure 6 indicates that, with regard to office layouts, the probability of intending to expand and theprobability of intending to downsize both rise significantly if the company has an intention to newly install“hot-desking.” Therefore, new installment of hot-desking seems to be the basic strategy when revamping
the main office. Apart from this, we have found that intentions to newly install a “booth or private room
for remote meetings” or a “canteen or café space” have a positive effect on intentions to expand the office,and intentions to newly install “open meeting space” or a “booth or private room dedicated to making
phone calls” positively affect companies’ intentions to downsize their office. These results suggest apossibility that intentions to newly install flexible office layouts raise the likelihood of companies wanting
to increase or reduce their office space.

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

7

TOPIC REPORT｜Xymax Real Estate InstituteWe also want to pay attention to the point that companies’ “intention to newly establish a satellite officeprovided by a dedicated operator” has a positive impact on their intentions to both expand and todownsize. This implies the possibility that the introduction of a satellite office, which is a measure outside
the main office, affects changes in office size. It is also implied that the introduction of a satellite office,which is usually expected to take place in tandem with a downsizing of the main office, may actually raise
the possibility of not only wanting to downsize but also to expand the office.
A logistic regression analysis can assess the impact of each explanatory variable on the explained variable
if the other explanatory variables are fixed. In our analysis, we added companies’ business sentiment,
number of employees, sector, and changes in the future number of office occupants to the explanatory
variable. Therefore, the impact of new office layouts and satellite offices has been estimated inconsideration of the impact of these company attributes. Apart from the explanatory variables presented
in Figure 6, an increase in the number of office occupants had a significant positive impact on intentions
to expand the office, while weak business sentiment, being a large company, and being in the information& communications sector had the same impact on intentions to downsize.

Summary
Our analysis indicates that companies with an intention to take some kind of action toward improving
the workplace have stronger intentions to either increase or reduce their office space compared tocompanies that do not intend to take such actions. Since we have found that the new establishment ofsatellite offices, in particular, tends to lead not only to downsizing the main office but also to expanding it,
our analysis suggests that the improvement of the workplace not only involves the main office, but may
also involve places for telework, such as satellite offices. We believe that satellite offices have become ameans for advancing workplace strategies integrally as they increase workplace options for hybrid work.
Following the outbreak of the COVID-19 pandemic, Tokyo’s office market has entered a declining phase
where vacancy rates rise and rents drop, and telework has been viewed as a factor for suppressing officedemand. A major impact on the market is had from the developments at large companies, who rent large
office space. Indeed, large companies with 1,000 employees or more show a relatively large percentage ofwanting to downsize their office (Figure 2). However, large companies also have a high introduction rateof satellite offices: according to our Spring 2022 survey,*4 more than 40% have introduced a satellite office.
In other words, demand for floor space seems to shrink if we only looked at conventional demandindicators that are based on companies’ main offices, but space suited for work will also be required fortelework, which leads us to believe that there is a possibility that the total demand for offices, including
alternative workplaces such as satellite offices, will increase instead.
The Flexible Office Market Survey,*5 which Xymax REI has been releasing regularly since 2020, also showsthat flexible offices are on a steady rise in both number and total area. To understand the true postpandemic workplace demand, we will need to look at the full picture of the diverse range of workplaces
that not just includes rental office buildings in city centers. Xymax REI will continue to provide data to thatend.
*4 Metropolitan Areas Office Demand Survey Spring 2022 – (2) Work Styles and the Workplace, released on June 15, 2022
https://www.xymax.co.jp/english/research/images/pdf/20220615_2.pdf*5 Flexible Office Market Survey 2022, released on February 25, 2022
https://www.xymax.co.jp/english/research/images/pdf/20220225.pdf

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

8

TOPIC REPORT｜Xymax Real Estate Institute
Survey Overview
Metropolitan Areas Office Demand Survey Spring 2022
Survey title

https://www.xymax.co.jp/english/research/images/pdf/20220615_1.pdf
https://www.xymax.co.jp/english/research/images/pdf/20220615_2.pdf

Survey period

April 12–24, 2022
44,324 companies in total that include the following:

Targetrespondents

・Tenant companies in office buildings managed by the Xymax Group・Companies subscribing to ZXY, a satellite office service for corporations
・Client companies of XYMAX INFONISTA Corporation

Number ofvalid answers

1,537; response rate: 3.5%

Geographicalcoverage

Nationwide (Tokyo, Osaka, Aichi, Fukuoka, Kanagawa, Saitama, Chiba prefectures and others)

SurveymethodEmailSurvey title

Survey period

Metropolitan Areas Office Demand Survey Spring 2021
https://www.xymax.co.jp/english/research/images/pdf/20210609.pdf
April 13–25, 2021
42,616 companies in total that include the following:

Targetrespondents

・Tenant companies in office buildings managed by the Xymax Group・Companies subscribing to ZXY, a satellite office service for corporations
・Client companies of XYMAX INFONISTA Corporation

Number ofvalid answers

1,648; response rate: 3.9%

Geographicalcoverage

Nationwide (Tokyo, Osaka, Aichi, Fukuoka, Kanagawa, Saitama, Chiba prefectures and others)

SurveymethodEmail

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

9

TOPIC REPORT｜Xymax Real Estate Institute

Reference Materials
Reference 1: Office space per office occupant, office space per worker coming to the office, desk
sufficiency rate (actual and intention), coming-to-office ratio (actual and intention)

These indicators also suggest that companies with an intention to change their office size, whether toexpand or to downsize, are trying to use their space efficiently according to the fluctuation in the numberof workers coming to the office due to telework.
(1 tsubo = approx. 3.33 sqm)

*6 Office space per office occupant (worker who occupies the relevant office)*7 Office space per worker coming to the office (one out of the average number of workers who have come tothe office at the time of the survey)

Reference 2: Variables of the logistic regression analysis conducted in Figure 6

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

10

TOPIC REPORT｜Xymax Real Estate Institute
Reference 3: Details of the analysis results of Figure 6 (figures represent odds ratios)

The percentage mix in the charts contained in this report are rounded to the first decimal place and therefore may not add up to 100%.

For further inquiries please contact below:
Xymax Real Estate Institutehttps://soken.xymax.co.jp | E-MAIL: info-rei@xymax.co.jp

TOPIC REPORT: Will Office Space Shrink Due to Hybrid Work?
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Real Estate Institute Corporation. All rights reserved.

11