Global auditing and consulting firm KPMG is slashing its New York offices by more than 40%, becoming the latest major firm to cut real estate spending as it embraces hybrid working.
KPMG said Aug. 23 it signed a 456,000-square-foot, 12-story lease in an office tower rising on Manhattan’s West Side in the new Hudson Yards neighborhood.
The company plans to vacate the roughly 800,000 square feet it currently occupies in three Midtown Manhattan office buildings that were built between the 1960s and 1980s. It plans to move in 2025 to Two Manhattan West, a high-rise sky under construction developed by Brookfield Properties.
It will serve as KPMG’s new US headquarters and represents one of the largest office lease signings in New York this year.
KPMG’s move is the latest sign that while more and more workers are gradually returning to the office, hybrid and remote working looks like it’s here to stay. Apple and Alphabet’s Google have also said in recent months that they are recalling employees to the workplace, but will continue to allow some form of hybrid working.
The agreement with KPMG also highlights the harsh new reality of the office sector. Businesses are always ready to spend big on modern offices with more amenities, outdoor space and energy efficiency. But they often want much less. This leaves homeowners with bigger and bigger holes to fill, especially in older buildings.
LILY The equivalent of 60 Gherkins lie idle as empty offices in central London hit their highest level in 15 years
KPMG did not plan to significantly reduce its space when it began looking for a new office in Manhattan in 2018, said US chief executive Paul Knopp. The pandemic has changed that.
After allowing employees to work remotely for nearly two years, the company is now pursuing a hybrid work strategy. Employees are supposed to congregate on certain days at company or customer offices, but are otherwise free to work from home, Knopp said. This means KPMG needs significantly less office space in New York even as it plans to increase its workforce while saving money on its New York real estate costs.
The spread of hybrid work has helped push office vacancy rates in the United States to the highest level in decades. About 19% of office space in the United States was vacant in the second quarter, according to brokerage firm JLL.
In Manhattan, new leases have not kept pace with the amount of freed up space. Since the first quarter of 2020, New York businesses have reduced their office space by 30 million net square feet, according to data from the CoStar Group. That’s roughly equivalent to 11 Empire State Buildings.
Brokers say many new modern high-rises have fared better than older buildings because businesses are still willing to pay high rents for high-end space near transportation hubs and other desirable locations. . In June, Brookfield said law firm Clifford Chance signed a 144,000 square foot lease in Two Manhattan West. The 58-story tower, part of Brookfield and the Qatar Investment Authority’s Manhattan West mega-development near Pennsylvania Station, is expected to be completed next year.
Knopp said KPMG’s new office will feature more collaborative spaces and rooms equipped with technology that will make it easier to call meetings. There will be fewer assigned offices and private offices.
Before committing to Two Manhattan West, KPMG investigated the commuting habits of its employees and decided to stay in midtown Manhattan near transportation hubs to reduce commuting, said Yesenia Scheker Izquierdo, managing partner from the New York office. The company never seriously considered leaving the New York area, where it employs nearly 9,000 people.
“It’s our biggest market, to say the least,” she said. “We have extremely important customers here, great talent here, and it really is a great city to work and live in.”
Write to Konrad Putzier at [email protected]
This article was published by Dow Jones Newswires, another brand of the Dow Jones Group