Employees in big city business districts are working mostly from home or at other remote locations as return to the office momentum generated a few months ago lost steam in August, The Wall Street Journal reports. Commercial real estate owners were mostly optimistic that their office space would fill up again after Labor Day in part because of elevated vaccination rates and falling COVID-19 infection rates. Unfortunately, office spaces either remained empty or became less occupied.
Offices in 10 major U.S. cities were only a third occupied during the week ending August 25, according to Kastle Systems, which tracks how many people swipe to enter a building. The 33.1% mark is a small increase from the prior week, but down from the 34.8% peak from late July. Meanwhile, New York and San Francisco remain two of the worst markets among the 10 major areas Kastle tracked, with 22.3% and 19.7% occupancy rates, respectively.
Douglas Durst, chairman of real estate developer the Durst Organization, said that the company’s New York office buildings saw more than 35% of the workforce return earlier this summer. Unfortunately, the return rate during the last week of August was approximately 25%.
“We’re obviously disappointed,” Durst told The Wall Street Journal.
The time of year could be part of why occupancy and return rates have fallen. August is a popular vacation month for a lot of workers. However, concerns of new COVID-19 variants also figure into these low numbers. Businesses such as Amazon and Apple already announced they’d delay their return to the office until 2022. Others have pushed back their office return until at least October.
“We have seen organizations start initiatives to return to work and then scale them back almost immediately,” Xavier Menendez, who heads the real estate and workplace solutions team at consulting firm Accenture told The Wall Street Journal.
A lot of executives just a few weeks ago expected to be back in the office in the fall when their children return to school, but “That sentiment has largely fallen away.” Menendez said.
Delayed office returns just don’t impact CRE office owners. The businesses that serve office employees like retreatants and gyms will also feel workers’ absences. Meanwhile, landlords who’ve counted on many of their tenants paying rent despite not working at the office, might not be as fortunate if these companies decide they prefer remote work and don’t want to keep leasing space going forward, according to Green Street senior analyst Daniel Ismail.
“It’s not a bold claim to think that the longer we’re away from the office, the more employees expect to retain that in the future,” Ismail told The Wall Street Journal.
Joe Dyton can be reached at firstname.lastname@example.org