Like many financial executives puzzling over how to save money as offices sat largely empty in the pandemic, Axogen CFO Pete Mariani briefly toyed with subleasing some office space to cut the company’s real estate costs.
In September 2020 the biotech company moved into two of three leased floors totaling about 75,000 square feet in a new Tampa, Florida, campus. In the wake of layoffs and slower-than expected growth, only two floors were needed and he potentially could have rented out the remaining space to another firm.
But Mariani weighed the opportunity cost and decided it didn’t make sense to go down that road. Most companies want to sublease offices for more than a year, which would mean he wouldn’t be able to accommodate his workers as the company gets back to hiring.
“As we see the company coming out of the pandemic, we expect to get back to high growth mode again. We would not want to make any decisions that might benefit the cost line over the next 12 to 18 months but limit our ability to grow,” Mariani said in an interview. The company has over 400 full-time employees, he said.
As a result, the biotech firm kept its two-campus Florida headquarters and this week its employees will start coming to work on the same days as part of a new three-day-a-week hybrid schedule. Previously, workers came in on Mondays, Tuesdays and Fridays every other week.
“We value being together and we’re better together. So let’s get back to having face-to-face meetings and working on challenges and opportunities together," Mariani said, adding that workers are only expected to be in the office from 9 a.m. to 3 p.m., giving them a choice over how to use the remainder of their work day. "We’ve got flexibility that helps both manage their personal time and their work time."
A time coming
The real estate calculations that Mariani has made is a process that many CFOs are going through as the virus counts ease and companies look forward to the pandemic transitioning to an endemic. Many companies are seizing on March to reopen offices, The Wall Street Journal reported.
Axogen, which has commercial products that help surgeons prevent the loss of feeling, or restore functionality, in patients who’ve suffered nerve damage, is also doubling down on its real estate footprint near Dayton, Ohio, where it processes tissue for use in its nerve graft product in a leased facility.
The company is investing about $55 million in the processing center, located on seven acres, which will include offices, labs and production areas. Production at the new site is expected to begin next year and Mariani believes the more efficient site will enable the company to speed up production and lower the cost per unit. That will either increase gross margins or help offset increased supply and labor costs, he said.
Mariani acknowledges he’s been solving for growth and leverage in his real estate decisions while some other companies are looking at the trend toward hybrid work as a cost-cutting opportunity. In a recent Deloitte survey, 41% of respondents said they expected to shrink their real estate footprint this year while 88% said they would use a hybrid work model.
Still, he believes companies who are taking a hard reduction in costs may ultimately rethink their approach. “There’s a time coming where people are going to realize they’re missing something by having employees remote,” Mariani said. “Whether that happens over the next year or over the three or four years I think that has to be one of the consequences of this migration to more remote work.”