commercial cleaning vs. recent trends in remote work and office vacancy

July 10, 2023

by a searcher from University of Pennsylvania - The Wharton School in New York, NY, USA

For those operating commercial cleaning companies, have you seen headwinds from vacant offices / remote work trends?

For those searching and evaluating these companies, has it come up in diligence?

Steady drumbeat of headlines in the news about office vacancies, just curious if that has had downstream consequences on commercial vendors, and how that story might be varying by region.

Distress in Office Market Spreads to High-End Buildings > https://www.wsj.com/articles/distress-in-office-market-spreads-to-high-end-buildings-c1adad48?st=uekwelso8dk19gp&reflink=desktopwebshare_permalink

"Office buildings are only about 50% as full as before Covid-19 across 10 major metro areas, according to keycard tracking by Kastle Systems, a building-security company. Federal transit data show public-transportation ridership at less than 70% of pre-Covid levels in major metro areas." > https://www.wsj.com/articles/cities-real-estate-bonds-taxes-c6736f8b?st=sufyts47popk02c&reflink=desktopwebshare_permalink

"Pain from the anemic return to the office is spilling over into architecture, construction, cleaning, brokerage, furniture and other industries that depend on thriving downtowns." .... "While the office sector may be down, there’s a lot of growth elsewhere that’s offsetting it." > https://www.wsj.com/articles/woe-in-office-market-from-remote-work-spreads-to-multibillion-dollar-ecosystem-d195809e?st=hjin9ryyqwai3gm&reflink=desktopwebshare_permalink

Above links to WSJ are gift links so no paywall for those interested in reading a sample - thanks all!

Last post on this topic was from Jan 2022: https://www.searchfunder.com/post/commercial-cleaning-and-janitorial-companies

Reply by an investor
from Columbia University in Seattle, WA, USA

Hi, I've looked at couple commercial cleaning/janitorial businesses and had extensive conversations with sellers. The short answer is that the office trend is definitely a headwind, but also depends largely on whether the target company specializes in office space cleaning or not. What I learned is that many commercial cleaning companies, especially those who are relatively smaller in size (<$1M EBITDA), actually tend to focus on non-office clients that are less impacted by the pandemic. The ones I looked at serve clients like schools, hospitals/healthcare facilities, churches, warehouses, apartment complexes, etc. So make sure the business you're looking at doesn't have disproportionate exposure to office clients. I found the ones that specialize in apartment complexes to be particularly attractive as they also do many move in/out cleaning services that have much higher margin. Construction clean up can also be lucrative, but obviously cyclical. Hope that helps.

Reply by a searcher
from United States Merchant Marine Academy in Nashville, TN, USA

Following here as well, lots of implications on office vacancies and what the remote work future looks like.

+3 more replies.

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