Kruze Consulting, a leading CPA and finance consulting company for VC-backed startups, has released new data on the percentage of startups renting office space. In January of 2020, about 65% of startups were renting office space. That declined to 36% in the beginning of 2021, but has rebounded over the last year with 59% of startups renting office space as of December 2022.

However, the cost of rent as an overall expense has continued to decline over that same period. In early 2020 rent as a percentage of total expenses was around 7%. Throughout the pandemic that number has consistently declined and as of December of 2022 rent only represented about 3% of startup expenses overall. The decline in the real estate market certainly has affected this, but it's also clear that many startups are not going 100% in-office, and instead are adopting hybrid/partly-remote models that require a much smaller office footprint. All the data and analysis can be found on the Kruze Consulting blog.

"We've seen startups beginning to rent office space gradually since January of last year and over the last 12 months the number of startups paying rent has nearly returned to the levels we observed before the pandemic," said Healy Jones, VP at Kruze Consulting. "What's interesting is that the amount they are paying for rent has continued to decline steadily over the last 2 years, which confirms the anecdotal evidence I've been seeing - that startups don't need as much office space as they did before."

As startups grapple with how to transition from entirely remote work to hybrid models, it's clear that the office is here to stay. The way people engage with their office space is certainly changing though and it appears that startups will continue to rent office space even if their footprint is much smaller than before.