Since then, the commercial district atmosphere has slowly but steadily begun to return to the office, with average office occupancy rates hitting more than 60%.
However, many offices are still partially or completely empty.
“The contraction in the office market is entering its 20th quarter,” said Peter Miskovich, global head of the future of work at commercial real estate and investment management services firm Jones Lang Lassel IP (JLL). “In some areas, vacancies are showing signs of stabilizing,” he said.
One trend affecting the resupply of corporate offices is the surge in return-to-office (RTO) orders. For example, last month Amazon CEO Andy Jassy ordered companies to return to the office five days a week starting in early 2025. Ericsson also recently strengthened its office commute policy.
Earlier this year, Dell Technologies ordered many employees to return to their desks, and recently ordered its global sales team to work in the office five days a week. And just last week, 3M ordered its high-ranking employees to return to headquarters.
recent a surveyAccording to , most companies are pursuing mandatory RTO by 2025. A ResumeBuilder survey based on data from 764 companies that shifted to a fully remote work model during the pandemic found that nine out of 10 companies will implement an RTO mandate. But there are subtle differences in the data. Of course, not all RTO policies require all employees to come to the office five days a week.
“Overall, only 25% of companies are pursuing a five-day workweek, with the remaining 75% implementing some form of hybrid or hybrid/remote work,” Miskovich said. “I predict that hybrids will continue in the future,” he said.
Resume Builder’s survey results were similar to Miscovici’s results. The majority of companies are operating under a hybrid model, and 30% of companies responded that their employees must work full-time in the office.
Office occupancy fell from 100% in February 2020, when work-from-home orders began due to the pandemic, to 14% in April of the same year. Over the next four years, office occupancy rates gradually rose as companies introduced hybrid work policies. But average occupancy rates have not yet fully recovered, according to Kastle Systems, which provides secure key fob technology to 2,600 buildings in 138 U.S. cities.
Recent data shows that occupancy rates are rising again. According to Castle, the peak occupancy rate for U.S. office buildings in January was about 46%, based on the 10-city average. Currently, more than 61% of buildings are occupied in the same 10 large cities. Cities like Austin and Houston have high occupancy rates of 77% and 71%, respectively. Chicago’s office building occupancy rate reaches 69%.
Peak occupancy is only half the story. ‘Peak’ refers to the busiest days in the office, such as Mondays and Tuesdays. On less popular days, such as Fridays, office occupancy rates fell to 33% in October 2024.
According to the National Bureau of Economic Research (NBER), despite rising occupancy rates, office values are still declining compared to before the pandemic. Office building values have fallen 39% since 2020, and many pre-pandemic leases are expected to come up for renewal in the next few years. This may force some companies to evaluate their office needs more closely.
The COVID-19 pandemic has, through an unintended experiment, revealed the uncomfortable truth that most employees will always prefer to work remotely and that home-based knowledge workers are equally, if not more, productive when working remotely. Phil Kirshner, associate partner in McKinsey’s Real Estate, People and Organizational Performance Practices, has realized that working in an office is fundamentally unrewarding for some people.
For example, not everyone feels the same level of inclusion and equality in an office environment. In an interview with Computerworld, Kirshner said, “Diverse populations in almost every way, including skin color, sexual orientation, and physical disability, are affected by the needs of the office and are more likely to change jobs when looking for a job or when they do not receive an offer. “The desire is higher,” he said.
Recently, newer, more luxurious buildings with more amenities are receiving a better response. This has led to a growing movement to build offices or renovate older offices with the latest amenities and mixed-use spaces (e.g. combining office, shopping and recreational facilities) as well as the latest technology to better support remote and hybrid workers.
However, older properties with fewer amenities may experience difficulties. In particular, Grade B, Grade C, and even lower Grade A buildings are losing the most value in the market. People renting or buying space today want high-end AAA buildings with the latest amenities, technology and locations.
“Certain areas and locations are likely to run out of space,” Miskovich said. Even being in the office three days a week has an impact on demand. “There is a demand for high-quality space, but there is also a surplus of space in aging Class B or Class C buildings that cannot accommodate the workforce of the future.”
The ‘return office’ trend is being driven by law firms, financial services organizations, defense contractors and industrial companies looking to expand their space to meet business needs.
“The tech sector is seeing a recovery where AI talent is in demand and in major urban centers for tech talent,” Miskovich said. The technology sector is very attractive because some companies are office-centric, while others still offer a hybrid approach. “It will be worth watching to see how this field develops over the next few years.”
It is explained that the pandemic was a catalyst and a time machine that moved the American workforce 10 years into the future in just two years. As the digital economy evolves, remote work has become inevitable, and the pandemic has demonstrated the potential of hybrid and distributed work.
Miskovich said moving into a post-pandemic world will require everything to mature: workplace design, leadership, culture, work practices, change management, and hybrid workplace technologies.
“The work of the future will be distributed, diverse and dynamic. Currently, RTO obligations arise from approximately 25% of individual companies. It may increase to 30%, but it is predicted that hybrid work will continue in the long term. “By 2027 or 2030, we will see companies with some employees working five days a week and others working only three days a week or three days a month.”
“Given the dynamics of artificial intelligence, talent, and distributed work, there is unlikely to be a single steady state in the future,” Miskovich said. “With regard to future work strategies, companies will have a mindset of continuous evolution and continuous learning,” he predicted.
editor@itworld.co.kr
Source: www.itworld.co.kr
