Most workers are still not back in the office nearly as often as they were before the pandemic began. Various sources suggest that less than half of workers actually come into an office on a given day, at least in major markets. This has led some leading tech firms and investment banks, for example, to issue ultimatums for a return to the office.
It’s still too soon to know if such employer demands will translate to more in-office work as previous requests have had little apparent impact. In the end, it may be hard for employers to put the toothpaste back in the tube, as there appears to be a shift in consumer behavior and most people don’t want to commute to the office more than occasionally.
This sentiment is having an impact on the real estate industry. The insiders we interviewed suggest that somewhere between 10 and 20 percent of the office real estate stock needs to be removed or repurposed. In the remaining office space, landlords will need to do a better job of delivering what tenants want.
As employers and their workers settle on their work preferences, many firms will continue to hold onto their offices either as a precaution in case they need the space in the future or because they could not break their lease. However, more firms are downsizing or not renewing their expiring leases. Therefore vacancy rates are still slowly rising in contrast to every other major property sector. Many tenants have even started subletting their office space until their leases expire.
No one knows for certain the amount of office space that will be needed for workers in the years to come. However, we do not expect a mass departure from office buildings going forward— even under the most pessimistic scenarios.