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Rise In Delta Variant Could Ruin The Great Labor Day Return To Work

Despite the widespread availability of vaccines, the coronavirus is roaring back in the U.S., with case counts nearly doubling over the past two weeks. If the trend continues, the assumed Labor Day signpost for a mass return to offices is in jeopardy.

A coronavirus molecule.

With little reason to assume the vaccination rate, currently still below 50% nationally, will take a sudden jump and offset the delta variant’s prevalence, Apple pushed back the date when it will expect most office-using employees to return from September to October.

With seven weeks until Labor Day, those in the market are not assuming that Apple starts a domino effect. Yet.

“I think the next month to six weeks will be very telling, and we might be bumping into Labor Day before we know,” Colliers U.S. President and CEO Gil Borok told Bisnow. “Apple might have been a little premature.”

The delta variant, more contagious than all of Covid-19’s previous strains, now accounts for 83% of all sequenced cases in the U.S., Centers for Disease Control and Prevention Director Dr. Rochelle Walensky testified at a Senate hearing on Tuesday, according to CNBC. Because the vaccinated half of the U.S. population is at greatly reduced risk of serious illness, and so much more is known about the coronavirus, public health guidance will likely be different than it was last spring. That may not matter to workers, who were already pushing back against demands for in-person work when case numbers were in decline.

“The question becomes, as company leadership makes these decisions, do they mandate that people come back at the risk of losing talent or do they ease up to prevent losing talent?” Borok said. “And I do think there’s a risk of losing talent if you are too stringent.”

That risk is acutely felt in a job market where it seems no one can find enough talent and not just in the restaurant industry, Borok said. Labor has not been in such a strong negotiating position in decades. As a result, people feel more confident than ever in their ability to find another job should they become dissatisfied with their current employer.

Wake Me Up When Summer Ends

The return-to-office decision has so far varied depending on where a company’s office is located and the size of the company, said Rubenstein Partners principal Stephen Card, whose company owns urban and suburban office properties in markets from New York and Philadelphia to Atlanta, North Carolina and Cincinnati. 

Kastle Systems Chairman Mark Ein said that offices being ordered closed again isn't strictly necessary for occupancy numbers to decline.

Rubenstein’s suburban office properties are about 30% full of workers on average, while its urban portfolio still ranges from 10% to 20% occupied. The smaller tenants in its portfolio are more likely to either be farther along in their return plans or to have already brought their employees back, Card said. 

One popular source of data for tracking office occupancy is the Back To Work Barometer from security tech firm Kastle Systems, which tracks keycard swipes into buildings it serves in the 10 markets where it has the most data, Kastle Chairman Mark Ein told Bisnow. In those markets, occupancy had been steadily rising from mid-February, ending the week of July 14 at a 34.5% average.

That data was gathered before Los Angeles became the first major county to return to requiring masks indoors for both vaccinated and unvaccinated individuals, while many other areas have begun recommending the practice. Though there hasn’t yet been any indication that offices could be ordered closed again, that isn't strictly necessary for occupancy numbers to decline, Ein said.

“The amount of people going to the office has generally tracked with people’s activities in other parts of their lives through the pandemic,” Ein said. “In periods where people have felt more comfortable congregating, we’ve seen higher office occupancy, and when people go more into lockdown, we’ve seen lower.”

If Not Labor Day, Then When?

Even though the country spent much of the past few weeks enjoying activities it hadn’t experienced since the warm months of 2019, many companies stuck to Labor Day as the target for returning to the office, if for no other reason than it felt spiritually correct, Ein and Borok said. 

“Before the delta variant’s rise in the U.S., Labor Day had a nice ring to it,” Borok said. “Then along comes delta. Only this week are those conversations starting about 'Labor Day might be too soon,' but I don’t think it’s too soon.” 

Functionally, Labor Day weekend represents the last of summer vacations, after which kids go back to school and relieve working parents of daytime childcare responsibilities. No other spot on the calendar has the same associations, which means that if the delta variant causes more employers to push their return dates back, every company will have to settle on individual dates to call employees back.

AKF Senior Manager Paul Shapiro, Rubenstein Partners principal Stephen Card and Brandywine Realty Trust Senior Managing Director Jeff DeVuono.

“Labor Day is this moment in everyone’s lives that we all organize around,” Ein said. “You close up the pool, pack up the beach house, have this long weekend and then regular life starts. It’s a really good signpost, which is why we predicted a big increase [in occupancy]. If we miss that, it’s hard to say what will happen.”

Because the Labor Day weekend made so much sense, employers will wait as long as they possibly can to deviate from that plan, Borok said. They could suggest additional safety measures like requiring masks in order to facilitate that return even if cases don’t start dropping again, or they might look to require or heavily incentivize all their employees to be vaccinated.

“I would imagine that’s another trend that will start creeping in: either getting everyone vaccinated or requesting some sort of waiver absolving the company of liability,” Card said.

The rise in cases may have thrown the immediate future into uncertainty, but it likely will not affect long-term plans around office usage, Card and Borok agreed. By now, many in real estate and across office-using industries have gained a familiarity with elements of remote work and a preference to keep it for a day or two per week. 

But the mass return of workers is also supposed to be a crucial data point for decision-makers — to see how the ideas they’ve had about office usage play out in practice. The result could be an extension of the “wait-and-see” period that has dominated the office leasing market in the past 18 months.

“I think some of those concerns will return, that the office won’t come back and people will use less office space,” Borok said. “I don’t subscribe to the perception that the office is dead. It may be utilized a little differently and a little less in the aggregate, but after a few years of economic growth, I think we’ll go back to where demand had been and maybe even more.”