'Another Slap In The Face': D.C.'s Covid Surge Sets Back Return-To-Office Efforts Again

The pandemic has come back in full force over the last week in D.C. as Covid-19 cases have hit record highs, dealing yet another setback to commercial real estate's efforts to get workers back to the office. 

Mayor Muriel Bowser Monday reimposed the city's indoor mask mandate, putting it back in place through at least Jan. 31, just over a month after lifting it. The mayor also said D.C. would expand access to rapid testing and extend the holiday break for D.C. Public Schools by two days to Jan. 5 to create time for students to get tested, The Washington Post reported. 

The moves came after D.C. posted two consecutive days of record Covid case numbers Thursday and Friday, reporting 508 cases and 844 cases, respectively. These totals far surpassed D.C.'s previous record of 397 cases from January, DCist reported. The District reported 3,763 new cases between Dec. 17 and 19.

D.C. officials said it was too early to determine the full effect of the omicron variant, but the Centers for Disease Control and Prevention said Monday that omicron had become the dominant variant in the U.S., accounting for 73% of new infections last week, the Associated Press reported. 

For commercial real estate, this surge is reminiscent of the late summer delta variant spike, which led employers to delay previous plans to bring people back to the office after Labor Day. Many of those companies had set the beginning of January as their new return target, but that is also changing, Stream Realty Managing Director Andy Eichberg said. 

"Everyone had started to say, 'Now we’re going to push it to the first week in January,' because after the holidays is a natural time to do it," Eichberg said. "Unfortunately, the reality is the last week has been another slap in the face."

The D.C. area's office occupancy averaged 36% last week, according to Kastle Systems' Back to Work Barometer, representing a 0.5% increase from the prior week. D.C. was one of three out of the 10 cities Kastle tracks that saw an increase over that week, and the national average fell by 0.3%.

But because D.C. didn't report record-high Covid cases until late last week, the surge may not have impacted last week's office occupancy, and now many people are traveling for the holidays, so the question on the minds of real estate professionals is what will happen after New Year's Day. 

Eichberg noted that while the omicron variant is more transmissible, it may be less severe, and the hospitalization and death rates haven't spiked the way positive cases have. He also said that the city is in a better place than it was a year ago because the majority of residents are fully vaccinated, but the ongoing roller coaster of improving conditions followed by Covid case spikes has been frustrating. 

"Whether you’re a property manager, a leasing agent, an owner, the frustration is the unknown and how dynamic this has been," Eichberg said. "We’re used to being able to take steps to mitigate risk, and you can do it to a certain extent here, but you can't control everything ... I think everyone’s frustrated. It’s not real estate people, I think the whole world’s frustrated."

Akridge Chairman Chip Akridge, whose firm owns a large portfolio of D.C. office buildings, said he thinks this surge of Covid cases will further delay tenants' plans to return to the office. 

"I don't think there's any question about that," Akridge said when asked about the potential delay. "The real question is how deep and how long it's going to last ... it's certainly not a positive thing, but how difficult it's going to be, I'm not sure."

The advantage that office owners have today compared to last year, Akridge said, is that they have more information on how the virus spreads and the best ways to keep people safe inside their buildings. He also said that employees have become accustomed to wearing masks in shared indoor spaces, so he doesn't think the mask mandate will discourage office usage. 

"People are getting the idea that this is serious, and if we don’t play by the rules, we’re going to get sick," Akridge said. "People are finally getting the hang of it. I think it’s become the new way of life ... It’s something we’re going to have to live with."

Cresa Vice President LaMean Koroma, a D.C.-based broker who represents office tenants, said most companies aren't requiring employees to return to the office after New Year's Day. Instead, they are giving people the option and in some cases encouraging or incentivizing them to come back.

He said it is too early to predict how many employees will choose to come into the office after Jan. 1, but he said the lower frequency of severe symptoms and hospitalizations with the omicron variant may give some people the confidence to return in a safe way. 

"With this being around holidays and people taking time off, it will give people time to evaluate what’s best," Koroma said. "With the surge, and it happening with people who are vaccinated as well, it's one of those things that as we evolve with Covid, is this something that’s here to stay, and when it happens to folks they quarantine for the right amount of time and then they’re back? That’s more of what we’re seeing, as opposed to when we didn’t have any data, we didn't have vaccines, and we didn't have anything go to off. It’s really just about trusting the science as much as possible."