InterPublic Group CEO Michael Roth said the company will occupy less office space because of COVID-19.
“The footprint of the agency business is going to change,” he said during an earnings call with Wall Street analysts Wednesday. “Period.”
Already, the parent company of McCann, Weber Shandwick and dozens of other media companies has eliminated 500,000 square feet from its global total of about 11 million, Roth said. As advertising has declined during the pandemic, any company connected to it has had to slash expenses.
“We’ve taken a very serious look at what offices are required,” Roth said. “There is no question that the use of offices will change in the future and we’re taking advantage of it. When we talk about positioning IPG for 2021, we’re anticipating a change in the footprint of our organization, significantly.”
IPG on Wednesday reported revenue in the quarter of $1.85 billion and earnings of 23 cents a share. Both figures were down from the same quarter a year ago but exceeded Wall Street analysts’ expectations.
When the coronavirus first entered the picture in early 2020, Roth recalled, “Our initial reaction was, ‘Because of social distancing, we’re going to need more space, right? You’re going to need six feet apart, and so on.’ In fact, it’s the exact opposite. We will stagnate people coming to work. The use of office space and the ability for people to work at home.”
Roth acknowledged touching sensitive ground with his comments and said the reduction in office space was happening globally, not only in New York, the legacy center of the ad business. New York Gov. Andrew Cuomo has expressed concern about occupancy rates in New York City, where only about 10% of office workers have returned despite pandemic restrictions being lifted in June. The New York Times last Sunday featured a front-page story about the unnervingly vacant atmosphere of Midtown Manhattan, whose office towers and street life have long been potent symbols of American vitality.
“These are permanent changes,” Roth said of IPG. “These aren’t coming back. We’re not about to all of a sudden start taking space in the marketplace. I know the real estate people aren’t going to like to hear that. But yes, I think the way we’re going to do business in the future is materially different.”
Asked to offer predictions for the performance of the advertising business for the rest of 2020, Roth declined, citing the high degree of volatility and the reactive nature of many IPG clients during the pandemic.
“The second quarter wasn’t as bad as we thought it was going to be, so that’s a positive,” he said. “In terms of the trend, I’ll give you that the United States and continental Europe were somewhat better in June than in May. Does that indicate that July, therefore, is going to be better? I can’t answer that.”
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