Media companies that continue to offer the flexibility of remote work are reconsidering office spaces that are going unused in expensive locations like New York City, where many media companies are based.
Given the move to hybrid work and the current unstable economic conditions, publishers are choosing real estate as a place to trim the fat. For example, Warner Media and BuzzFeed, Inc. are subleasing hundreds of thousands of square feet of office space, and Vox Media is working on a plan for unused space. And as companies like The New York Times begin to put pressure on employees to return to the office, the landscape of media company real estate will likely continue to shift into the fall.
Warner Media, now part of Warner Bros. Discovery, put over 450,000 square feet of office space at 30 Hudson Yards in Midtown Manhattan on the market for sublease last quarter, said Marisha Clinton, senior director of Northeast regional research at real estate company Savills.
Meanwhile, Dotdash Meredith put over 300,000 square-feet of office space in the Financial District on the market in the first quarter, according to a Savills report on the Manhattan subleasing market that was shared with Digiday. A Dotdash Meredith spokesperson said the space has been on the market for sublease since 2020, but the company has not yet secured a subtenant and was re-listed as a result of a merger last year.
Warner Bros. Discovery did not respond to a request for comment by publishing time.
BuzzFeed was paying for two New York City headquarters after buying Complex Networks in December, until the company subleased its 18th Street headquarters in Manhattan to work management software company Monday.com last month (Savills represented Monday.com in that deal). BuzzFeed moved its headquarters to Complex’s offices on 43rd Street, effectively halving the company’s New York office space. Its 18th Street location had 110,000 square feet, compared to about 107,000 square feet in the Midtown location.
Vox Media is looking at reorganizing its office space in the next few months. The company — which has three offices in New York City, two in Los Angeles, and one each in Washington, D.C., and San Francisco — began subleasing the 11th floor of its D.C. office in January.
“We expect to have a better understanding of our space demands this fall and plan to reprogram underused spaces,” a spokesperson said. The spokesperson declined to share more information on what that plan will entail.
Why some media companies are shrinking their real estate footprint
Rental agreements can account for an average of up to 5% of a large company’s total operating budget, such as in the case of Fortune 500 companies, Clinton said.
“It’s a line-item expense that a company can work to mitigate,” said Nicholas Farmakis, executive managing director at Savills North America. He said he believes many companies’ hybrid workforces could be an excuse for a suffering business to offload real estate space and cut costs.
Hybrid work “provides for a little bit of cover around [protecting] against their reputation, but saying, ‘Hey look at us. We’re employee-friendly, and we’re novel too.’ It’s the best sort of PR that a company could have,” Farmakis said.
Real estate was one of the most likely business areas to face budget cuts in the next 12 months as of July, according to a study by research firm Gartner. And 59% of workplace leaders said they plan to reduce their current office space by half or more in 2023, according to a report published last month by workspace software provider Robin. Forty-six percent of companies are currently utilizing half of their available office space or less, the report found.
Office availability in Manhattan has hovered around 17% this year, according to reports by real estate firm Colliers. However, leasing deals closed in Manhattan in August increased by 7.8% since July and 39.5% year over year — marking the area’s strongest monthly leasing total since January 2020, Colliers’ August report found.
Through the first half of 2022, media companies have closed deals to lease more than 410,000 square feet of office space, compared to more than 130,000 square feet in the first half of 2021, Clinton said.
Employees welcome reducing office space as a method of cost-cutting
In the before-times, being asked to change your commute from Union Square to Midtown would make some New Yorkers groan. But BuzzFeed remains a hybrid workplace, meaning employees aren’t required to work from the New York office. One BuzzFeed editor, who asked to remain anonymous, said BuzzFeed’s HQ move “doesn’t really impact my feelings on coming into the office [because] I’m still planning to keep mostly working remotely either way.”
The editor is glad that the move will allow BuzzFeed to make money from its old offices. Monday.com will pay BuzzFeed $757,000 in monthly rent. However, the company declined to answer questions on how this money will help reduce costs and how it plans to reinvest the money.
“If losing the old office means being more financially stable, I’m all for it,” the editor said.
Vox Media is also still a hybrid workplace. Employees who self-selected to work from the office have an assigned desk at a specific location based on the teams they work with, while other employees can work at “hotel desks” from any Vox Media office, the company spokesperson said.
When asked what they think about Vox Media’s plans to evaluate its unused office space, a Vox Media journalist, who spoke on the condition of anonymity, said they “wouldn’t be surprised” if the company is looking to shed some more office space. “If a lot fewer people are going to be in the office on any given day I can’t imagine they’d want to keep spending money on a huge office space,” the journalist said.
Savills’ Clinton and Farmakis said they believe the health of the media real estate landscape will become more clear after the Labor Day holiday, when more companies start to move into the next phase of their return-to-office plans. For instance, management at The New York Times reportedly told staff in July that they are expected to return to the office on Sept. 12.
“A lot of those policies will drive much of the real estate decisions,” Clinton said.