CRE Mulls Whether Federal Vaccine Rules Will Push Workers Back To Workplaces

The coronavirus delta variant’s hold on the U.S. has hampered the fall return to work office landlords had been banking on, but while some are hoping the federal government’s new vaccine mandates will limit the spread of the disease and drive office occupancy up as workers' anxieties are eased, others think it may instead further complicate the future of work.

President Joe Biden last week announced vaccination would be mandated for all federal employees and that the Occupational Safety and Health Administration would issue a rule in the coming weeks to require any employer with more than 100 workers to mandate vaccination or run weekly tests. Many questions remain about what this means for businesses, and the impact on the office market is likewise hazy.

“It's a very cloudy windshield we're looking through right now and I'm not sure what's coming,” said Chip Akridge, founder and chairman of Akridge, a real estate company with properties in Washington, D.C., Maryland, Virginia and North Carolina. “I think people are tapping the brakes, waiting to see what's gonna unfold here.”

The Biden administration’s mandate comes after cases, hospitalizations and deaths from the pandemic surged last month as the ultra-contagious delta variant became the dominant strain, hitting the unvaccinated the hardest. Vaccines available in the United States are effective in preventing hospitalization and death from the delta variant and those who are vaccinated are less likely to spread the disease, according to the Centers for Disease Control and Prevention.

“This is a pandemic of the unvaccinated and it’s caused by the fact that … we have 80 million Americans who have failed to get the shot,” Biden said while announcing the mandate.  

Over the last week, cases, hospitalizations and deaths have ticked down, according to the CDC, but cases are still higher than they were this time a year ago and children are being hospitalized at higher rates than ever before. 

Landlords have blamed the strain for effectively killing the Labor Day return to office that was expected when the vaccines first rolled out. Two-thirds of companies pushed back their return dates, according to a survey of 238 executives conducted in late August by human resources consulting firm Gartner, and while occupancy rates vary from city to city around the country, office buildings nationwide remain very sparsely utilized. 

One theory is that, with higher rates of vaccination, the impact of the delta variant’s impact on return to office could be eased. 

A vaccine mandate like the one just enacted could boost a return to office, as many that have felt they have no choice but to stay home feel they can more safely return, said Melissa Moldano-Salcedo, a professor at New York University and a medical anthropologist who teaches courses on medical ethics and about how people in society interact with medicine. 

“I think it's a clear call to action with this mandate. If you want to have our economy be again the way it was pre-2020, people need to go to work and people need to also be able to have a right to health, it's not a luxury,” she said. “If we want people to be productive, if we want to innovate, we need people to be healthy.”

A vaccine mandate was effective in helping stymie a health crisis in the past. The smallpox vaccine mandate in the early 1900s led to the eradication of the disease by 1980, Moldano-Salcedo said. 

“People are saying, ‘Well, you know, this is not America.’ Actually, it's a very American tradition,” she said. “The only way we’re going to come out of this is really to have these mandates. I understand people's hesitation, but at this point, the science is real. This is the best way. We've had vaccine mandates before.” 

Some real estate players have already taken an aggressive approach to vaccination mandates. 

Related Cos. said it would fire anyone who is unvaccinated and does not have a health or religious exemption; the deadline for at least one shot was Aug. 31. Durst Organization set Labor Day as the deadline for all nonunion staff who do not have an exemption to be vaccinated or face having their job terminated.  

RXR Realty, which owns office buildings in New York City and multifamily properties in other parts of the country, now has a vaccination requirement for all employees, everyone working in its buildings and on its job sites. RXR CEO Scott Rechler said the mandate pushed its vaccination rate on construction sites from around 40% to 99%.

“When people came back and if [they] weren’t vaccinated post the requirement, they were sent home, they went and got vaccinated and they came back. We need to push people to do the obvious — when they see their peers doing it, and they see this is the way to restore normalcy, they get behind it,” he said. “You need a carrot and a stick.” 

Rechler has despaired at the lack of leadership on vaccine mandates from the government in the past, and he ran information sessions on the vaccine on RXR properties in an attempt to break down fears and barriers.

“The private sector is stepping up and doing what it needs to do to fill that void,” he said.

Not everyone has seen the same results from a vaccine mandate as Rechler’s firm, however. In Lowville, New York — a town in Lewis County, where 46% of the population has been vaccinated — a hospital had to stop delivering babies because too many staff members quit over the vaccine mandate. An August Qualtrics study found that 44% of all the nation’s employees would quit if they were required to get the vaccine as a condition of employment, Forbes reported.

“The major problem is the people who don’t want to get vaccinated, they’re stubborn and they’re going to say, ‘Oh OK, well I won’t go to the office, I will work remotely, I’ve been doing that for the last year, my employer paid me for doing that so I am going to continue to do that. Unless you’re going to fire me. If you're gonna fire me, go ahead, I’m going to file for unemployment,’” Akridge said. “So it sets up the employees and employers in very different corners and I’m not quite sure how that’s going to work itself out.” 

And just as vaccination rates vary across the country, so do the vaccine mandates various local governments impose on businesses. In New York City, for example, you need to be vaccinated to dine inside or use the gym. In San Francisco, proof of vaccination is required to enter restaurants, bars, clubs, gyms and major indoor events.

In Florida, a business, school or government agency that asks for proof of vaccination could be fined $5K under state laws. Similarly, Texas laws prevent any local governments and school districts from rolling out their own vaccine mandates. The governors of both states have threatened to sue the federal government over the mandates announced last week.  

David Martin, founder and president of Atlanta-based Legacy Ventures, a development company that also runs hotels and restaurants, said his firm's entities are all below the threshold of the federal mandate and it will not put in place vaccine mandates for staff or patrons. In Georgia, individual companies are able to choose their own approach to vaccine requirements. Martin said he believes, without a statewide mandate in place, requiring vaccines could be a competitive disadvantage.

“At this moment in time finding staff and properly staffing is extremely challenging, and I think a mandated vaccination would probably be a net negative to be able to recruit and retain service workers that we are having a hard time finding,” he said. “Across our enterprise, we are about 200 service employees short of the staffing level.”

But Durst's Jordan Barowitz, whose company has rolled out a vaccine mandate already, said that approach is the only solution in making sure everyone feels safe enough to come back.

“This [federal mandate] will accelerate a return to the office,” he said. “It is very difficult to operate an office where there isn’t a vaccine mandate.” 

Rechler said he believes this new federal mandate will pave a way forward for workers to feel safe to return to their offices, restaurants and businesses and will inject life into city streets again. Individual efforts alone haven't done it — RXR has found that even with its mandate in place, just 40% of workers are back in the buildings it owns, Rechler said, whereas before the rise of the delta variant he was predicting it would be closer to 80%. 

“Now, everything has been reset to October, November, December, January, and I think the uncertainty around that date is directly correlated to the percentage of the population that's vaccinated — we get over 80% vaccinated, that’s going to occur at a much faster pace,” he said.