'A World Of Hurt': Call Centers Vacate 30M SF Of Offices As They Embrace Remote Work

Call centers don't anchor new skyscrapers or flashy mixed-use developments, but they have a huge impact on the office market, leasing nearly 150M SF in the United States, filling corporate parks in cities and suburbs across the country. 

But that number is plummeting.

Of the 200M SF of U.S. offices classified as call centers, 60M SF is available, double the 30M SF of availability in the sector before the pandemic, according to JLL data provided to Bisnow. The availability rate of 30% is far ahead of vacancy in the office market overall, which hit a record 20.2% in the first quarter of 2023, per JLL.

“If this is not the most impacted asset class, it’s definitely in the top three,” Savills Vice Chairman David DiPietro said. “We still have a number of years for this to flush out. But I think this asset class is in a world of hurt.”

While some corporate executives have begun to pressure workers back to the office, the opposite is occurring in the call center industry. 

Stanislav Khilobochenko, a vice president at Clario Cybersecurity, which employs 600 call center workers, told Bisnow via email that all of those workers are remote. The company uses software and monitoring tools to track employee productivity, which has allowed it to embrace a work-from-home-forever policy.

“It seems antiquated to think that a call center needs to be in a central location,” Khilobochenko said. “The only logical explanation for this is if management issues have created a false importance around supervision.

“If you have the right tools to ensure security, privacy, and tracking work there are few reasons to have your staff in a single location to be supervised. Good training, [standard operating procedures], scripts and quality control while providing your team the right tools to work effectively from home will be a much wiser investment than paying rent for facilities.”

Unlike in the tech and other office-using sectors, the call center industry isn’t shrinking its footprint to counteract declining revenues or to adjust after mass layoffs. The industry is growing while its real estate needs are shrinking.

The global call center market reached $339.4B in 2020, according to data compiled by ReportLinker. By 2027, that value is expected to reach $496B. Revenue growth also skyrocketed this past year. Annual billing among the more than 200 members of the Association of TeleServices International shot up 11% between 2021 and 2022, association President Jim Reandeau told Bisnow. In previous years, the growth rate ranged between 2% and 3%. 

Overall, call center operations are becoming more expensive, especially the costs associated with newer technology and labor. Call centers typically spend between 5% and 7% of their total operating costs on rent and upward of 80% on labor, said Bob Mohr, the founder of Mohr Capital who owns a Wisconsin call center building with family office money. 

“So if you could immediately take 7% out of total costs, why would you not?” Mohr said.  

Technology has been the massive catalyst for change for call center operators. Equipment today doesn’t need to be in central locations, and many are now using cloud services. This has freed up employees to handle inbound or outbound calls from literally anywhere. Unlike Wall Street banks or technology firms, there has been no mantra that call center workers need to be physically together to foster productivity or innovation, industry insiders said.

All of those trends are adding to a glut of commercial call center space. 

“Ten years ago, the demand was huge,” Newmark Senior Managing Director Susan Arledge said. “There was a big push to locate in secondary and tertiary markets. And now, there is a lot of plug-and-play space on the market that is literally just call centers that companies are not using.”

Mohr experienced this contraction at the 90K SF Wisconsin call center he owns. When he purchased the single-story office property five years ago, mobile telephone provider U.S. Cellular had five years left on its lease for the entire building. Mohr said that at the time it seemed a reasonable bet: Major call center users usually renewed their space. Instead, U.S. Cellular moved out last year.

“Nobody likes talking about their projects that didn’t go great. We bought it at a 10-cap. I thought it was a great return,” he said. “We thought they would stay in half of it, but they ended up moving out.”

The loss of the tenant forced Mohr to convert the building into a flex industrial building, and Mohr has since re-leased half of it, he said. Many landlords are in the same position, having to find other uses for their buildings or simply tear them down to start from scratch. 

“Is it a complete demo and rebuild with a completely different asset class? I’m sure a lot of folks are looking at their lease roll and thinking it through at the moment,” DiPietro said. 

Reandeau, who also is the chief financial officer of call center operator Focus Telecommunications, was an early adopter of the remote work movement, with his 50-person firm going fully remote in 2005. 

The move enabled Focus to reduce its office from 8,500 SF in a commercial building in suburban Maryland to 800 SF in his personal house, with his call center staff handling inbound customer calls for clients like Lincoln Property Co., CBRE and Barken Management Co. from their respective houses as well. 

“I think a lot of the owners have discovered, especially the small business owners, they’re getting better profits and maintaining the same quality with hybrid,” he said. “I don’t think they’ll ever pull everybody back into the office.”

Petra Seals, a senior director with call center consulting firm Northridge Group, said the advent of artificial intelligence tools like ChatGPT will further reduce the need for brick-and-mortar space from call centers.

Automation and self-service have already reduced the need for human interaction with customers for many companies, but they still need human workers to handle more complex and time-consuming situations. But those humans will all be more likely to work from home, she said.

“I only see that footprint … going back down over the next 10 years,” Seals said.

While many U.S. call center jobs have already been outsourced to other countries with cheaper labor, similar shifts are happening there as well, said Vipin Singh, founder of the call center consulting and software firm Vouch Consulting. 

One client of his, a call center operator called VCosmos, at first looked to move employees out of its more expensive New Delhi office and into secondary cities. But the pandemic showed executives that employees were just as effective working from home.

“If someone can do it in Nashville, Tennessee, why can’t they do it in the Philippines?” Singh said. “As long as they have good internet connection and are able to communicate, why do they need to come [into an office]?”