Elon Musk is known as an innovator and a lightning rod. Still, his recent actions at Twitter Inc. are not that different from any other corporate owner or CEO dealing with a declining workforce.
Musk, Twitter’s new owner, stopped paying rent on the company’s San Francisco headquarters as part of a strategy to get a better lease deal. According to The New York Times, Musk is trying to get his building’s owners to rework the company’s long-term leases, which house a drastically reduced workforce.
While the Twitter owner’s strategy is not unique, his shrinking office space resulted in firing a number of his employees. It is much different from the issues other companies are dealing with in trying to renegotiate their leases. The significant difference is that those companies’ employees didn’t return to the office after the pandemic. And according to some recent studies, those remote workers aren’t coming back anytime soon, if at all.
Professional services giant Ernst & Young Global Ltd.’s Future Workplace Index survey reported that more than 70% of employees work from home at least two to three days a week. And according to data from building-access swipe-card company Kastle Systems, swipes at offices in the 10 largest cities have averaged 47% to 48% of prepandemic levels in the past month.
In spring 2021, commercial real estate and investment firm CBRE Group Inc. reported that 26% of companies surveyed expected their office space needs to remain the same over the long term. But a year later, that number dropped to 9%.
In CBRE’s office occupier sentiment survey, only 19% of companies expected to be fully office-based in the future, with 73% expected to have a hybrid system combining remote and in-office work.
As a result, some companies, like Twitter, are not paying their rent as a strategy to renegotiate leases, and some are just cash-strapped. Boston-based Alignable Inc., which represents 7 million small businesses, found that 37% of its small-business members, employing half of all Americans working in the private sector, could not pay their rent in full in October. Nearly one-third were at risk of closing.
One pedestrian tactic some companies may be using to cut expenses might align with Musk’s strategy. According to global auction and asset advisory firm Heritage Global Partners Inc., Musk is auctioning the contents of Twitter’s offices. The online auction, slated for Jan. 17, will offer furniture, appliances and memorabilia, including a large Twitter bird statue, a giant "@" sculpture and espresso machines and chairs.
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