'Peer Pressure Is Back': Office Owners Say Renewed RTO Push Is Creating Demand
The days of employees working from home may be numbered as more corporate giants mandate a return to the office. That movement is good news for landlords who say they are seeing a rebound in office space demand in Metro Atlanta.
At the start of the year, one of Atlanta’s largest employers, UPS, demanded its workforce back in the office full-time. By next month, Amazon employees are expected to return to the office five days a week as well.
“Every week you read something about a company saying we’re going to go back more days than we were before,” Selig Enterprises Executive Vice President Chris Ahrenkiel said during Bisnow's Atlanta Office Summit Tuesday at Westside Warehouse. “All CEOs want their employees back in the office.”
In September, KPMG released a survey that showed 83% of U.S. CEOs expect to have their employees back five days a week within the next three years.
The list of major corporations demanding workers back to the office has grown substantially over the past year. Companies like Salesforce, Disney, Barclays, Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase have all called for employees to report to the office most or all of the week.
Lindsay Wilson, president of interior design firm Corgan, said with big companies mandating a return to office, it gives cover for smaller companies to do the same.
“Peer pressure is back and is very real,” she said.
Panelists said that the renewed push to get more employees into the office more often has boosted demand in a market that has been sluggish since the pandemic.
Companies leased more than 2M SF in the third quarter in Metro Atlanta, a nearly 30% increase from Q3 2023, bringing the year-to-date total leasing activity to 7.2M SF, according to Savills.
The back-to-office conviction in the C-suite is already driving leasing decisions, Scotland Wright Associates principal Mike Davis said.
“You can really sense in the way they’re communicating and the clarity they have in their decision-making,” Davis said. “They have a plan. They are going to return to the office.”
Some corporate customers are even demanding that their partners force their employees to come to the office five days a week, Glenfield Capital founder James Cate said. A full-floor tenant whose headquarters is in one of Glenfield’s buildings was exploring the possibility of leasing more space as the CEO expected to enter into a new contract that would force the firm to expand.
“Two of the entities they're competing for, with the business they will take and the people they will dedicate to their accounts, are required to be in the office. That is a requirement of the contract,” Cate said. “This is the third time I've heard something similar to this in the last six months. I think this is going to be more common.”
One problem, though, some companies are encountering a lack of space with their return-to-office endeavors, panelists said during the event.
Many executives have come to the the realization that they cut too much of their office space when they were more willing to embrace remote and hybrid work. Even before the pandemic, square-foot-per-employee ratios were shrinking and open offices and shared desks had become more common.
At the same time, tenants are discovering that the availability of the highest-quality space is dwindling, and it is not being replaced as office construction has essentially stopped. Given the time it takes to entitle, finance and build a tower, some panelists predicted that a new office project might not rise in Metro Atlanta until the next decade.
“We'll have a problem with that quality space and the existing Class-A. It's filling up,” Ahrenkiel said. “The new product is pretty full or will fill up, certainly, within the next two years. Then there's nothing else to come after it to absorb the demand that we're going to see in this market for that high-quality space. It is nearly impossible to finance an office development at this point.”
