Dangling Carrots And Wielding Sticks: Employers Aim To Accelerate 'Slow Drip' Return To Office

At Crocker Partners' 11M SF of offices across the Southeast, occupancy has stubbornly hovered around 25% over the past six months. 

But as vaccination rates have risen and restrictions have lifted, its offices are more like 35% filled this month, Managing Partner Angelo Bianco said, a disappointingly low number for this point in the year.

“I would think based on how long the vaccine has been out and where we are, it should be over 50% occupied today,” he said.

Workers have been drifting back into offices since the start of the year, but companies have been reluctant to call them back full time for a host of reasons, including a shortage of childcare workers and general anxiety over a return to normalcy. While some expect that the trickle will turn into a stream by the fall, office buildings across the country aren't likely to see the same number of white-collar workers that were there prior to the coronavirus pandemic.

“Right now, it's a slow drip,” said Gensler Senior Associate Erin Greer, a co-director of the design firm's workplace studio. “There's that push and pull between traditionalists, if you will, who think you can put the genie back in the bottle.”

As of the middle of May, occupancy at office buildings in the nation's 10 largest metro areas was just below 28%, according to Kastle Systems, which operates entry control systems in commercial buildings.

Office occupancy in Austin, Houston and Dallas was over 40%, while the Northeast and California were still hovering in the teens, but the overall average has crawled up from the low 20% range since January, Kastle General Manager Adam Joseph said.

“The nicer the building it is, the less traffic that is going into those buildings,” Joseph said. “Our experience has been, at least in most markets, despite progress and better education about Covid, it's been slower.”

Prior to the pandemic, Kastle door swipes averaged between 50% and 70% of employees daily, which is considered full occupancy, Joseph said. Going forward, the peak occupancy could top out at around 50% as companies adopt a permanent flex schedule for employees, he said.

“I think the baseline will evolve,” Joseph said. “I think usage of office space is going to change and the expectation that employees are there 9-to-5 on a daily basis is going to change.”

Despite the continued reticence, some of the country's largest companies are telling workers to come back soon.

JPMorgan Chase has announced a general return to the office by July, while Goldman Sachs is expecting office workers to return next month, Bloomberg reports. Blackstone has said that fully vaccinated investment staffers should plan to be at the office by June 7. 

Some companies are dangling carrots to get employees back. Bloomberg LP is offering $1,500/month in commuting costs for its employees, The New York Times reported. California-based MS International partnered with a tutoring company to help employees’ children and Chicago-based AbbVie offered grants up to $1,500 to help pay for employee childcare, Inc reported.

At least one company is wielding a stick. Portland power company PacifiCorp. informed employees of its headquarters this past week that they are to return to the office full time by June 1 or face the risk of a pay cut by 10% to work remotely, The Oregonian reported.

“Sadly, it's human nature oftentimes to take advantage of a situation if you're able to, and I think people are just finding excuses of why they don't want to be in the office today that are not related to the pandemic,” Bianco said.

Pope & Land Real Estate's more than a dozen office buildings in suburban Atlanta counted about 40% of workers in the office on a regular basis in recent weeks, compared with 15% in January, Managing Director Jennifer Koontz said.

“I feel like it’s back up to normal in some buildings,” she added.

Many point to the vaccine rates as reasons for the return to the office coming later this year. As of May 23, the Centers for Disease Control and Prevention reported that 39.2% of the U.S. has been fully vaccinated. By July, that rate is projected to be 70%, according to a recent Cushman & Wakefield report.

“In the U.S., most are still coalescing around this idea of returning after Labor Day — recognizing that people will travel this summer and see family and friends and then return to the office in the September timeframe,” Cushman & Wakefield Chief Economist and Global Head of Research Kevin Thorpe and Global Head of Occupier Insights David Smith wrote.

Greg Kraut, the CEO of New York City development firm KPG Funds, said he is taking advantage of Gov. Andrew Cuomo’s lifting of the state’s mask mandate at his newly delivered office redevelopment at 446 Broadway. Two days after the order, Kraut’s company issued a press release for the building, dubbed L’Atelier, advertising that brokers and companies were welcome to tour the five-story, 46K SF building without having to wear a mask.

“We want our employees to come back, but we don't want them to feel like they're still in the pandemic and wearing masks,” Kraut said, adding that he’s already given 20 tours in just the past two weeks. “If you really want to spur people to come back … you have got to make it as normal as you can.”

But few expect the world to return to a 9-to-5, five-day-a-week work habit as more companies acquiesce to a flex work model for employees. Numerous surveys have fortified the belief that employees are preferring to work from home, at least some of the time. A May Harvard Business School survey found that 81% of respondents either wanted to work from home or would prefer a hybrid work schedule moving forward, and 27% of those surveyed wanted to work remotely full time. Employment app Blind found in a survey of 3,000 office workers that they would give up $30K a year in order to work from home, Forbes reported this month.

While companies are yearning to get employees back, Mark Grinis, EY’s global real estate, hospitality and construction leader, said he thinks office use will only reach 80% of average pre-pandemic levels.

“I think it's permanent,” Grinis said. “I think the hybrid work model is here to stay.”

Grinis said companies are now wrestling with how to structure a flexible work schedule, avoiding scenarios where employees cram the office Tuesdays through Thursdays while leaving the space a ghost town on Mondays and Fridays, something EY observed occurring in Asia, Grinis said.

“It's going to be hard to have a laissez-faire attitude where people can come and go as they want,” he said.

Don Peebles, a prominent developer and chairman and CEO of The Peebles Corp., is already switching to a permanent remote work platform. For Peebles, it has come down to recruitment: offering a flex work schedule gives employers a leg up with talent.

“We're out here recruiting now, it's hard to attract people, especially top talent and especially young talent, that they have to be in the office five days a week,” he said. “Anybody who believes there's going to be a rush or return to work the way it was before is going to be in for a rude awakening.”