Last December, months before vaccines became widely available, a Business Insider report revealed WPP was planning to shrink its Manhattan office space by a third. The hefty pullback was part of a broader strategy that will see the world's largest ad holding group try to cut real estate costs by up to 20% by 2025. In the cold winter months, as COVID-19 raged and cubicles and open-seating arrangements remained eerily empty, reassessments of paying for reams of unused space grew common across industries, while others pinned their hopes on inoculations heralding a reopening.
Nearly a year later, the great return to in-person work for agencies hasn't manifested in the expected fashion despite promising momentum in the spring. Publicis Groupe, which was aiming to open things up in a hybrid capacity in the U.S. after Labor Day, reportedly delayed those plans as the highly contagious delta variant spread. Agency networks now are ramping up vaccine and testing mandates to create a greater sense of safety for employees, but the fact remains that these giants are contending with another fall-winter season where they won't be able to wring much utility out of their sizable real estate investments, raising questions over whether a larger culling is in the cards — something that could significantly reconfigure the footprint of an industry long associated with New York City.
"Especially heading into the winter, if delta continues and everybody continues to hold back on sending people into the office, then you've got a big story around these empty towers in Manhattan that agency shareholders are paying for and that aren't really providing any value," said Jay Wilson, vice president analyst at Gartner Marketing.
Many agencies were consolidating their offices in the pre-pandemic world, but the radical shift to hybrid and remote working models, coupled with steeper technology investments, has challenged traditional notions around how agencies best function. It's a step-change that appears to be top-of-mind for clients.
At Gartner's recent Marketing Symposium/Xpo event, several marketers participating in a virtual roundtable discussion said that their relationship with agencies has actually improved over the pandemic, according to Wilson, who was in attendance. That's partially thanks to now-ubiquitous digital communications tools like Zoom that eliminate the need for travel expenses and can pull together meetings on a dime.
"It's anecdotal, but I think it does speak to the bigger observation, which is that all of these previously accepted concepts — that a bricks-and-mortar office for agencies is critical, that people really need to be on-site together to be creative and collaborative and have those watercooler conversations — were kind of blown out of the water," Wilson said.
"There is that kind of personal desire, the personal need to reconnect and get back to the office, but I don't know that you could make a really solid business case for it," he added.
The culture question
The tony Manhattan office has historically been a staple of ad agencies, an association enshrined by media touchstones like "Mad Men." In reality, agencies for years have weighed whether the high price tag of leasing in major cities is manageable in a tough period for growth and new business.
"There is that kind of personal desire, the personal need to reconnect and get back to the office, but I don't know that you could make a really solid business case for it."
Vice president analyst, Gartner Marketing
One of the key arguments in favor of preserving a physical presence is around company culture and collaboration. But as the pandemic stretches on with no clear finish line, some are more skeptical of how necessary an office is to achieving those goals.
"A lot of what agencies sometimes talk about in terms of their culture is a bit of smoke and mirrors," said Wilson. "If we know that agency turnover remains high — and always has been high — then, yes, you can have an established agency culture, but the reality is people come and go from that culture pretty frequently."
Two of the biggest counterpoints against the need to get people back into the office en masse are agency productivity and performance. Most of the major ad holding groups have returned to growth in 2021, with some even beating their pre-COVID-19 earnings. Time will tell whether those tailwinds persist, but real estate costs are a considerable expense that might look less essential as time wears on.
Of course, not every agency is built the same way. Smaller firms do not have to contend with managing global workforces or the sprawling real estate required to accommodate those employees.
"It definitely seems to me as if the small boutique shops have been quicker to return to the office. They've got obviously smaller numbers that they have to worry about," Wilson said. "It's when you start getting into the multi-location offices — WPP is an example to the more extreme of that — that's when you start to see the reevaluation of the real estate investments happening."
WPP is still following the real estate strategy laid out last year, a spokesperson confirmed.
Burnout is another enduring problem — work-life balance gets blurrier when people are stuck in the same place and feel constantly on call — and allowing a more flexible environment intersects with attracting and retaining talent in a competitive job market. LinkedIn in June published internal stats that found searches for remote marketing jobs quintupled since the start of the pandemic. In the first half of 2021, the platform reported a 177% increase in remote marketing job listings, speaking to the clear appetite for keeping at least some operations virtual.
"There are situations or types of work that probably don't necessarily require, but benefit from having kind of a physical location," Wilson said, citing new business pitches as an example. "That being said, the use cases for it — the actual types of activities — I think one could argue could happen in a hybrid or a remote environment."
Clarification: This story was updated following a response from a WPP spokesperson.