Another Labor Day Came And Went Without A Spike In Office Occupancy

For the fourth year in a row, the days after Labor Day were touted as a moment when a critical mass of workers would return to the office in far greater numbers.

This year, with millions of workers under new attendance mandates and more companies aggressively enforcing them, office buildings were expected to be repopulated to their most significant degree since March 2020. But once again, available data shows that the expected Labor Day bump was little more than a blip.

Office occupancy was at 47% of pre-pandemic levels for the week after Labor Day, according to Kastle Systems’ Back to Work Barometer, which measures the number of security badge swipes in its buildings across the 10 biggest U.S. cities. That was slightly down from the week before Labor Day, when the 10 biggest cities averaged 47.3% occupancy.

The figures are higher than after Labor Day 2022, when the 10-city average was at 43.4%, per Kastle data. While Kastle doesn't have access to all office buildings across the country, it tracks thousands of properties and has become the industry's go-to source for relative office occupancy.

"I expect those numbers to go higher," Kastle Systems CEO Haniel Lynn said. "There is an increasing employer push to bring people back in for collaboration reasons, for cultural reasons, for engagement reasons, generally."

The San Jose, California, metro had the lowest occupancy last week at 37.3%, closely followed by Philadelphia at 38%. The market with the highest occupancy was Houston at 59.7%. New York City saw the biggest week-over-week increase, jumping 4.3%, but only to 42.5%.

Kastle reportedly doesn’t track buildings owned or managed by some of New York City's biggest Class-A office owners, like SL Green, Vornado, Tishman Speyer, Rudin Management, Silverstein Properties, Brookfield, Boston Properties, Related and Rockefeller Group.

BXP President Doug Linde said on the company’s most recent earnings call that its internal data, which measures how many desks in a building have workers at them, showed weekly usage of its buildings at 80% in New York, 75% in Boston and 70% in San Francisco.

Rudin Management CEO Bill Rudin told Bisnow Wednesday that his firm's portfolio, which spans millions of square feet in Manhattan, has seen a significant increase in usage. Specifically, he said 345 Park Ave. was 70% occupied on Tuesday, and two of his buildings reached 94% occupancy.

“Last week was a transition week,” he said in an interview. “We were hoping, and we are seeing the trends go up.”

If last year was the summer of revenge travel, summer 2023 has been the summer of mandates. In March, JPMorgan Chase said managing directors would be required to be in the office five days a week and told staff in a memo some people aren't coming into the office as much as required.

In May, Amazon announced its three-day-a-week requirement, and the following month Meta, Facebook’s parent company, followed suit, saying that from Sept. 5 this year, workers would be required to be in three days a week.

Google said it would be tracking employee badges and covering adherence to the three-day hybrid schedule in performance reviews. Goldman Sachs “reminded” employees in August of its office policy, which is five days a week of in-person work.

“We're giving people time over the spring and summer to get there … but we know that people that are coming to the office, they're loving being here,” Amazon Vice President of Global Real Estate and Facilities John Schoettler told Bisnow at the unveiling of its new office in the former Lord & Taylor Building on Fifth Avenue this week.

He declined to give occupancy data for Amazon's offices but said it has been climbing since the guidance was announced in May.

Kastle’s Lynn said that while the weekly uptick wasn't significant, year-over-year usage has gone up meaningfully, showing a steady return to the office. He said he expects averages to remain muted because employees often avoid the office on Fridays as a matter of course.

“I think you're going to see a heightened Tuesday and Wednesday across a number of weeks as we get into the fall, is my expectation,” he said. “Fridays are always depressed, so your averages don't jump as much because Fridays are always pulling them back down.”

But Kastle data shows that even on the most occupied days of the week, offices didn't see a big spike in usage. 

In the top 10 cities, Wednesday, Sept. 6, was the most occupied day of the week, averaging 56.8% of pre-pandemic usage. New York offices were 58.9% occupied, while Houston offices were 67.4% occupied and San Jose offices were 46.6% occupied compared to the pre-Covid-19 baseline, according to Kastle data.

Marx Realty CEO Craig Deitelzweig said Mondays through Thursdays are back to 2019 levels at his firm's buildings, which are in New York, Atlanta and Washington, D.C., although Fridays remain low. The first four days of the week range between 83% and 100% of pre-pandemic occupancy, he said.

“People think, ‘This is enough. I am ready to get back to work,’” Deitelzweig said.

Office occupancy is a different story around the world. CBRE’s 2023 Office Occupier Sentiment Survey found Asia Pacific has the highest attendance of any region, with 45% of respondents there saying that office space is highly utilized. By comparison, 15% of respondents in Europe and 24% in the U.S. said office space was highly utilized.

The American workforce, according to the brokerage, is dominated by a shift from voluntary to formal requirements around office use. In all, 65% of companies have a requirement in place, more than double the 31% of companies with an in-office mandate a year ago.

“It is very clear to me that companies have taken a different track in their thinking in 2023, and they have become much more comfortable about stating the types of policies and behaviors that they want their employees to adhere to,” CBRE Head of Occupier Research for the Americas Julie Whelan said.

“Once we're in the fall time period, we will see a bit of a push forward,” she said. “I don't think that we're going to be seeing numbers that are getting us back to where we were before the pandemic, because I don't think that's ever going to happen. But I would expect that we're going to see marginally better office utilization.”

Rolling out mandates and supporting workers in hybrid workplaces is an extra challenge for managers, workplace experts have long warned. Whelan said managers still aren't getting the support they need.

“I think that's still a blind spot. I think that the holy grail of having very robust change management strategies around a return to office is not one that most companies have achieved,” she said. “Part of that change management strategy is helping your managers learn how to manage and build relationships in this new world. And it does not seem in the data that I see that that is happening in a robust way.”

There has been backlash. Workers at Amazon were warned last month by CEO Andy Jassy that some workers aren't complying, and those who don't show up might be better suited working at other companies. At Google, some workers have reportedly vented about being tracked.

Regardless, by the end of the year, there will be 3 million more workers under return-to-office mandates than there were in 2022, according to JLL.

“I think [the return] has been real every year. It’s just, it hasn’t been as fast as I think we all would have thought,” JLL Americas Agency Leader Jeff Eckert said. “It's the first time, I think, where everybody's kind of said, ‘Hey, we need to get back under some sort of schedule together.’”