Is the Return to Work Revolution Here? Companies Returning to the Office

The work-from-home revolution is old news. But are Americans so tired of waking up and signing into work bedside that we are ushering in the return-to-work revolution?

Well, if it’s up to President Biden, we would already be along the way to a pre-pandemic 9-5, 5-day a week in-person office schedule. This month, his team called the return-to-office a “priority” and announced government agencies will now start enforcing a more aggressive in-person work schedule.

By the Fall, his administration expects a more robust work presence, so are we finally dealing with the slow demise of work-from-home? Because along with Biden’s new plans, a slew of companies are phasing in schedules with more days in the office, along with rigid expectations that they be followed.

In this article we cover the gradual resurgence of the office environment, and the irreversible and permanent transformations it's role has undergone.

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Return to Office?

President Biden called on called on cabinet workers to return-to-office, hopefully to set a precedent for the country at large.

“As we look towards the fall, and with the end of the COVID-19 public health emergency, your agencies will be implementing increases in the amount of in-person work for your team. This is a priority of the President — and I am looking to each of you to aggressively execute this shift in September and October,” said White House Chief of Staff Jeff Zients wrote to Cabinet officials.

This announcement comes because government workspaces are largely underutilized, an issue not uncommon to an overwhelming majority of companies today. But, in the context of wasted taxpayer dollars, paying for empty government offices is a big no-no.

He’s not the only heavy-hitter in government calling for an end to work-from-home. Because office buildings sitting empty represent a major issue- not just for CRE professionals, but for the economy at large. Millions of empty square feet are killing our nation’s metro areas, and no one seems to know what to do.

Because widespread vacancies put a major drain on banks, burdened with approximately $1.2 trillion in unpaid office loans. But beyond that, numerous small businesses reliant on white-collar clientele and foot traffic and cities that rely on office property taxes for revenue are greatly suffering.

And as the vacancy climbs while occupancy rates get lower across the country, the issue is mounting. And the pressure to do something about it is being felt. Because according to GlobeSt, “Before the pandemic, 95% of offices were occupied. Today that number is closer to 47%.” 

So many are hoping for a more gradual approach to the return-to-office will dig us out from under the mounting $1.2 trillion in CMBS loans about to bury us as they hit the market in 2024. And businesses are taking individual steps to reinstate their office presence after three years of wishy-washy hybrid schedules. But this may be easier said than done because Americans have largely gotten used to working from home.

Companies Returning to Work

As of summer 2023, nearly one-third of the country’s full-time workers were in hybrid arrangements. To navigate this new environment, companies have largely reoriented their corporate footprints to accommodate remote work collaboration.

But offices are still extremely under-occupied. And hybrid-work has unequivocally devalued the corner office. So, on an individual basis, many companies are trying to make the investments in the CRE portfolios worthwhile by upping the expectation for the frequency of office visits. The hope is to increase the utilization rate of the corporate offices and reduce the divide of wasted space.

Now the newest company to tighten their hybrid policies is Zoom, who asked employees still located within 50 miles of the office to return on a hybrid schedule. But many are not missing out on the opportunity to point out how ironic Zoom’s push t o bring employees back to the office. Because the platform that enabled the original remote collaboration is no longer interested in maintaining it on a full-time basis.

And Zoom isn’t the only one. Companies getting tired of remote collaboration and are either bumping up the expectation for office visits or removing the possibility of remote work entirely include:

• Amazon
• Blackrock
• JPMorgan
• Apple
• Citigroup
• Disney
• Chipotle
• Goldman Sachs
• Google
• IBM
  
  

Will the Office Ever Be The Same?

Those are some massive, household names driving the return-to-office movement. But, at the end of the day, the pandemic has irrevocably changed the working culture and subsequent demand for office space.

Some companies will never come back. Cutting down on the size of footprints significantly (or entirely) is a taking off a massive strain off companies’ total EBITDA. Corporate real estate is typically an organization’s second top costs, so savings in downsizing or reductions go a long way.

Plus, some companies lend themselves more successfully than online work than others. Like Big-Tech, which is in a unique position that the nature of the work does not demand a physical presence, (like is the case with the life science industry). So, on a mass-scale, companies are realizing its more sensible to cut and run than fight for the value of in-person, office collaboration right now. That’s why we see so many big names including Google, Meta, and Twitter downsizing.

A company spokesperson for Zoom explained it's decision to up the basis in which employees visit the office…

Employees Aren't Happy Over the Return to Work

But this new return-to-work movement isn’t going over entirely well. Zoom company executives were grilled by employees in an allegedly “tense meeting,” in response to the new mandate.

And Zoom isn’t the only company to face backlash from employees for similar reasons. When Amazon called employees back into the office in May, hundreds of corporate employees staged a temporary walkout to protest. Apple employees passed around petitions among their corporate offices to resist against the company’s new edicts.

Companies shouldn’t expect their employees to readily return to their busy schedules and office commutes. Pushing employees back too soon can have adverse implications on a company’s reputation and ability to attract and maintain great talent. According to Mr. Wonderful, Kevin O'Leary, it's best that businesses go with the flow considering that the tide has irrevocably shifted. "40% of the staff approximately are never coming back to the office and if you think you can force them back, they’re just going to work for somewhere else."

Are Hybrid Offices the Future?

We may have reached a breaking point in the country’s threshold to withstand remote work. But that doesn’t mean it’s over for good. Companies that value in-person collaboration will look to reinstate it on a more frequent basis. But, like discussed, not everyone is able to return. Growing pushback from employees and the undeniable money-saving tactic of a largely hybrid/ remote workforce will slow any major enforced return.

So going forward, a hybrid-friendly office is likely to persist. The key for tenants is to stay on top of evolving trends because they may implicate the leverage your tenancy has. If you’re a tenant looking for new space in this environment, you have incredible power.

The time for prospective tenants to act is now while there is still a glut of unused office space. You have the ability to negotiate for the best terms, price, and concessions for your company. But this once-in-a-lifetime opportunity to cut your CRE leasing costs won’t last forever. Developers and governments are ready to confront the wasted office space crisis, so make sure you don't miss out on what's latest in the Commercial Real Estate world and subscribe to our blog to get CRE tips to your inbox!