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Business Observer Friday, Nov. 11, 2022 2 weeks ago

$1.5 billion firm’s new HQ is 80% smaller than its old space

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Kforce, embracing and leading the way on the hybrid work, opens new Tampa HQ “empowered by trust and technology." It turns out that requires a lot less space
by: Louis Llovio Commercial Real Estate Editor

Kforce Inc. opened its new corporate headquarters in Tampa on Nov. 1 and in the process both enhanced its new hybrid work model and, inadvertently, contributed to the ever-growing vacancy problem facing the city’s office buildings.

The publicly traded technology staffing company’s new 22,232-square-foot office in the Midtown Tampa development is a state-of-the-art hybrid workspace that allows employees to come and go as they see fit. It replaces the company’s previous 130,000-square-foot campus several miles away in Ybor City. That's an 82% decrease in headquarters office space.

Despite its prominent address, Kforce’s new headquarters is a far cry from what a corporation of its size and stature would have taken in years gone by.

What Kforce has done instead is embraced what is likely to become the workforce model of the future, where employees split their times between the office and wherever they chose to work elsewhere. In doing so, Kforce, and others that adopt the model, help contribute to a growing problem for office building owners watching vacancies rise as companies need less space than ever before.

Kforce president and CEO Joe Liberatore says it looked at “100 different locations” before settling in on the Midtown development, choosing it in large parts for its amenities and the opportunities it gives employees when they are in the office.

The 22-acre, $500 million Midtown Tampa development is made up of offices, apartments, hotels, restaurants and retailers REI and Whole Foods. The list of tenants runs from the nationally known, Shake Shack, to the locally known, Belleair Bluffs-based William Dean Chocolates, and runs the gamut in between.

But Kforce, a company that employs 2,000 people nationwide, 600 of those in Tampa, and reported $1.57 billion in revenue in 2021, only took a single floor in the development. That's what a mid-to-top-tier law firm or real estate broker would have taken in the past.

“We’ve really created that environment where our people aren’t required to come in,” Liberatore says. “But yet the space is here, when it makes sense for collaboration, team building, working on projects. So, everything just fell in place.”

 

Kforce opened its new Tampa headquarters Nov. 1 with a focus on hybrid work “empowered by trust and technology.” (Courtesy photo)

Fight for tenants

For Kforce, being located in Midtown Tampa allows for flexibility, giving both employees stopping by and visiting clients places to eat, drink, meet and spend the night without really having to leave the property.

It also means the company doesn’t need the extra amenities to attract talent and entertain that require space, upkeep and money. Rather than a café, it can get by with a cafeteria with vending machines.

The company was able to capitalize on this, and avoid taking a massive space somewhere else in the city or staying in its Ybor City headquarters, in large part because it adopted the hybrid office model. The new space has room for about 100 people to work at one time.

Kforce, like much of the world, switched to remote work in March 2020 because of the pandemic. In April 2021, the company announced it had sold the Ybor City campus it occupied since 2001 in an effort to find a smaller headquarters. Even before COVID-19, it had only been utilizing about 50% of its space. It announced the Midtown Tampa move in September 2021. 

 “I sat in on a webinar early into the pandemic, and they predicted where things were going to be going was more into this mixed-use office space,” Liberatore says. “It’s a place where people can come and they can take care of everything. And I think Midtown really encapsulates that.”

Other developments, particularly in Water Street Tampa, are embracing the same concepts, meaning more traditional office buildings are left to fight for tenants already considering cutting back on office space post-pandemic and preparing for an economic slowdown.

Already there are anecdotal reports of leasing traffic being steady but terms and the amount of space being leased dropping. Data backs up those rumblings.

According to Colliers' third quarter office market report for the Tampa Bay market, the vacancy rate in the area is 14.4%, a 1.7% increase from a year ago and up 440 basis points since the third quarter of 2020. 

The report states the increased vacancy rate is on par with the rest of Florida, where the vacancy rate has stayed over 10% since the beginning of the pandemic. Notbaly, sublease space accounts for nearly 22.7% of the overall availability in the market, up from 11.6% before the pandemic, the report adds. 

Interestingly, downtown Tampa, which has the built-in perks similar to developments like Midtown or Water Street, saw vacancy rates fall to 10.5% from 12.9% in the third quarter last year and 12% two years ago. This as rental rates rose 9.8% over the previous three years downtown.

Despite rising vacancy rates in the area as a whole, the report’s authors remain upbeat of the future, citing population and job growth through the end of the year “offering a positive outlook for regional office building owners and investors.”

Mayor Jane Castor also sounded an optimistic tone despite rising vacancy rates in the area. “Our occupancy rate is pretty high compared to other cities that I’m in contact with,” she says. “Now, clearly, with the hybrid model, that will reduce the square footage that some companies may need more than likely.”

 

From the front

And that’s the rub. Studies have found that more and more companies are switching to a hybrid work model.

Technology company Cisco released a report earlier this year saying many employees were initially “challenged by the sudden shift to hybrid and remote working arrangements.” But its study of 28,000 workers in 27 markets found that two years in “as businesses have pivoted to survive, hybrid work has yielded many positive and lasting benefits for both employers and employees.”

“In fact, this mode of working has become the norm and is set to stay.”

Kforce’s space, on the fifth floor of the Midtown West tower. fits exactly that trend. 

“We led from the front to figure out how the internet was going to impact our business. Now we’re leading from the front on how these changes we all experienced throughout the pandemic are going to change where and how work is performed,” Liberatore told employees and guests at the Nov. 1 ribbon cutting for the company’s new headquarters.

As companies embrace the hybrid work, the models vary with some companies setting mandatory office days and others requiring employees to spend a set number of hours in the office. Others have told employees to come in only when they have to or want to.  

Kforce’soffice is modern workplace a modern workplace where rows of desks, shared spaces, quiet rooms, a cafe and executive offices combine to give a sense of normalcy without quite living up to the impression. You see, while all the accouterments of daily office living are there, including the warm color palates and amenities, this is not the kind of workspace most people of have grown up with.

The biggest difference is the space, despite the look, is not for regular daily office use. It is for employees to drop by for meetings, for training, to meet clients and to get a little bit of work done before going back to their regular workspace, be it a kitchen table, converted master bedroom closet, coffee shop or Minnesota.

The idea is all based on the company’s hybrid work model, progressive even when compared with what other businesses embracing the model do. There are no mandatory office days and employees are not required to spend time in the office. All the work an employee must do can be done remotely.

“Cubicles and 9-5 work schedules were replaced with collaboration and team zones, hotel desks, state-of-the-art technology and schedules that prioritize flexibility and excellence,” the company says. Employees can come in to work for as long or as little as they like, moving from zone to zone depending on their needs and requirements.

None of the company’s 2,000 employees are required to come into the office.

A major part of the decision was embracing the hybrid work model to, as Liberatore said at the time, build “a culture of flexibility and choice empowered by trust and technology.”

“It just made sense because we knew that we could operate in less space,” Liberatore says now. “And then we were also hearing from our people that they really wanted complete flexibility. They didn’t want to be forced back in.”

 

 

Louis Llovio is the commercial real estate editor at the Business Observer. Before going to work at the Observer, the longtime business writer worked at the Richmond Times-Dispatch, Maryland Daily Record and for the Baltimore Sun Media Group. He lives in Tampa.

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