Another Labor Day Came And Went Without An Office Occupancy Bump

In the week after Labor Day, evidence has mounted that a wave of primarily remote workers returning to the office did not materialize. Again.

Despite scattered anecdotes to the contrary, two major data sources for worker occupancy in offices found that in the days immediately following Labor Day, the percentage of employees working from the office was essentially unchanged from the previous week.

With all but the most hardline office backers acknowledging that hybrid work is the new standard, the possibility of offices routinely being well more than half-full could be vanishing.

“I think that employees have gotten so comfortable working from home that expecting [office occupancy] to go from the mid-40s to the mid-70s is a bridge too far," Gartner Vice President Brian Kropp, who leads research for the consulting firm's HR practice, said in an interview at the end of the post-Labor Day week for the Bisnow Reports podcast.

Kastle Systems' Back to Work Barometer, which measures card and badge scan data across 10 U.S. markets, dropped by 50 basis points to 43.4% from the week ending Aug. 31 to the week ending Sept. 7.

Meanwhile, Stanford University professor Nicholas Bloom, who helps lead the multi-university survey program called WFH Research, told The Wall Street Journal there was no post-Labor Day bump, despite major companies signaling that they were switching from asking workers back to demanding them back.

“Labor Day 2022 is looking to be completely flat,” Bloom told the WSJ. “This is 3-0 to employees vs. employers in the battle to keep working from home.”

The potential for a recession to harm the labor market looms as a threat to shift power from employees back to employers. But as it stands, knowledge workers' preference for hybrid work arrangements appears to have won out over managers' desire to have subordinates close at hand.

Data from WFH Research shows the average number of in-person days per week companies expect of employees who could work remotely has held steady at about 2.3 for months.

In early June, Kastle researchers declared that an occupancy percentage in the mid-40s is the "new normal."

Even so, an optimistic statement on its website current with its release of data through Sept. 7 states, "We’re confident occupancy rates will continue to rise in the months to come." The statement is positioned directly below a chart showing largely flat occupancy over the past 12 weeks.

There are still differences from market to market and industry to industry in how the battle is playing out.

New York saw a 3.5% increase in office occupancy from Aug. 31 to Sept. 7, the biggest jump among the 10 cities Kastle tracks. Executives at New York-based office landlords Silverstein Properties and RXR Realty both told Bisnow they saw increased occupancy and vibrancy at their properties in the days after Labor Day.

And Ernie Jarvis, the Washington, D.C.-based founder and CEO of tenant representation firm Jarvis Commercial Real Estate, said in an interview Thursday he has seen full parking garages at his own building and office buildings he's visited in the past week.

“What I hear from all of our clients, and in the marketplace across all business sectors, is that they are returning [to offices] on a hybrid structure at least three times a week," Jarvis said. "My sense is that many companies, post-Labor Day, went back five days a week.”

Yet Arun Nijhawan, managing principal of Atlanta-based office landlord Lucror Resources, said he did not see much difference at all in the number of workers at his company's buildings pre- and post-Labor Day. 

“There’s this thesis that summer’s over and we’re all back to work, but we expect more of a gradual transition in the fourth quarter,” Nijhawan said.

Office backers pinned their hopes on a Labor Day return to in-person work in 2020 and 2021, but such grand designs were scuttled by spiking Covid case counts. Though there was perhaps less optimism for this Labor Day, the fact that no external event could be blamed for the disappointing result is telling.

“Most organizations have not successfully answered the fundamental question: ‘Why is working from the office more important than working from home?’” Kropp said.

Upper-level management has been the driving force in trying to re-establish the office as the place work is done, but the glut of job openings has kept management fearful of workers quitting in response to office mandates. But considering the well-known preferences of management, even the threat of a recession or a less robust job market could be enough to drive lower-ranking employees back to the office, Jarvis and Nijhawan agreed.

"Smart employees will say, ‘I need to make a contribution to the company. I need to be seen, socialize with leadership, leadership needs to know me, because if the market continues to be volatile, there may be some cuts,’" Jarvis said. "And we saw that from Goldman Sachs announcing [potential] layoffs this week.”