Major firms lose appetite for office downsizing as they plan what happens next

A new report from KPMG suggests that half of major corporations do not expect to see a return to any sort of ‘normality’ until 2022 when half of the general population has been vaccinated. The report also claims that there has been a steep decline in the appetite of the global executives who took part in the survey for office downsizing as the firms reconsider the need for in-person business to resume when countries emerge from the pandemic.

The 2021 KPMG CEO Outlook Pulse Survey claims that 45 percent of executives do not expect to see a return to a ‘normal’ course of business until next year, compared to 31 percent who anticipate this will happen later this year. The changes prompted by the pandemic have resulted in one-quarter (24 percent) of CEOs saying that their business model has been changed forever by the global pandemic.

The study conducted by KPMG in February and March of this year asked 500 global CEOs about their response to the pandemic and the outlook over a 3-year period. A majority (55 percent) of CEOs are concerned about employees’ access to a COVID-19 vaccine, which is influencing their outlook of when employees will return to the workplace. A significant majority (90 percent) of CEOs are considering asking employees to report when they have been vaccinated, which may help organisations consider measures to protect their workforce. However, one-third (34 percent) of global executives are worried about misinformation on COVID-19 vaccine safety and the potential this may have on employees choosing not to have it administered.

“Before any major decisions are made, CEOs want to be confident that their workforce is protected against this virus,” said Bill Thomas, Global Chairman and CEO, KPMG International. “The COVID-19 vaccine rollout is providing leaders with a dose of optimism as they prepare for a new reality. CEOs are scenario planning for difference across certain key markets that could impact their operations, supply chains and people, leading to uneven economic recovery.

“Our research shows that some executives have taken strong measures during the crisis to transform their operating model and ways of working, accelerating the rollout of key transformational projects, some by choice, some out of necessity. The pandemic has also been a catalyst for CEOs to evaluate the role their companies play in society. Many have given voice to issues they may not have previously commented on publicly — from tackling climate change to supporting the diverse communities they operate in — and we need to keep hearing those voices. There is much more to be done.”

Key Findings

Government and vaccination rates driving decision-making
Three-quarters (76 percent) of CEOs see government encouragement for businesses to return to ‘normal’ as the prompt for businesses to ask staff to return to the workplace. In addition, 61 percent of global executives said that they will also need to see a successful (over 50 percent of the population vaccinated) COVID-19 vaccine rollout in key markets before taking any action toward a return to offices. When employees can safely return to workplaces, one-fifth of companies (21 percent) are looking to institute additional precautionary measures by asking clients and other in-person visitors to inform them of their vaccination status.

Global CEOs are less likely to downsize physical footprint compared to 6 months ago
The research finds that only 17 percent of global executives are looking to downsize their office space as a result of the pandemic. In contrast, 69 percent of CEOs surveyed in August 2020 said they planned to reduce their office space over 3 years, which demonstrates that either office downsizing has already taken place or, as the pandemic has drawn on, strategies have changed.

Global executives remain apprehensive about a fully remote workforce
CEOs are considering what the new reality will look like, but post-COVID, only three in 10 (30 percent) of global executives are considering a hybrid model of working for their staff, where most employees work remotely 2–3 days a week. As a result, only one-fifth (21 percent) of businesses are looking to hire talent that works predominantly remotely, which is a significant shift from last year (73 percent in 2020).

Cyber security is now the top concern for CEOs
During lockdown, remote working has become the norm, which poses new data security risks to organizations. As a result, global business leaders identified cyber security as the top concern impacting their growth and operations over a 3-year period. Cyber security was named ahead of regulatory, tax and supply chain concerns.

ESG continues to climb up the corporate agenda
With COP26 taking place this year and the US re-joining the Paris Accord, 49 percent of CEOs plan to put in place more stringent ESG practices. A vast majority (89 percent) of business leaders are focused on locking in the sustainability and climate change gains their companies have made as a result of the pandemic. Nearly all (96 percent) global executives are looking to upweight their focus towards the social component of their ESG programs.