Empty Lobbies, Untouched Doughnuts And Shattered Plans: Offices Stayed Quiet The Day After Labor Day
As Ardent Cos. Managing Director Mike Guynn strolled around the manicured grounds of his firm's Piedmont Center 1 office building in Atlanta Tuesday morning, the property around him was largely quiet.
Before the coronavirus pandemic, the Piedmont Center complex in the city's Buckhead financial district would have been bustling with 8,000 employees from its 225 tenants. But only around 15% of its tenant employees were on campus Tuesday, Guynn said. On a rainy Tuesday morning, most of the outdoor gathering spaces were empty, a few people walked about the hallways and no one was in Arden's indoor lounge.
At the start of the year, Guynn was among those who expected corporate America to embrace a full return to the office right after Labor Day. But Guynn said he began to see the writing on the wall a month ago among his tenants, with some planning to delay a return to the office en masse until later this year.
“Talking to tenants, it was all related to delta and the unknowns,” he said.
Tenants across the country have pushed back their office returns from Labor Day to the fourth quarter or even to next year as the delta variant of the coronavirus has brought Covid-19 cases to their highest levels in months. Office owners, managers and the retailers that depend on workday foot traffic are now grappling with the frustration of yet another delay in the return to normal.
In the central business districts of D.C., Atlanta and Los Angeles, Tuesday morning didn't bring a significant surge in office activity. Tuesday being the day after a federal holiday and the day of Jewish holiday Rosh Hashanah may have delayed some office returns, but office owners and managers say they aren't expecting a major increase in office occupancy until later this year or early next year.
“Most people had said they were targeting coming back after Labor Day, but what I'm seeing now is people are extending that further,” said Stream Realty Director of Property Management Dorothy Hamilton, who oversees 3M SF of office the firm manages in the mid-Atlantic region.
Hamilton said the portfolio she oversees is still around 15% to 20% occupied, and she hasn't heard from any tenants that stuck to their previous plans to return after Labor Day. Some tenants that pushed their returns back are now targeting October or November, but she said they aren't making firm commitments, and she believes most returns will likely be pushed into 2022.
“They’re all saying the uncertainty of the delta variant is making them unsure about getting people back,” she said.
The long period with mostly empty buildings has created opportunities for managers to perform maintenance such as HVAC system upgrades, Hamilton said, but she said building staff members are now ready for people to return.
“We've been working on this for months and are anxious for people to get back,” Hamilton said. “Having that personal interaction is a big deal in property management, and it can be a little frustrating because you're not doing it.”
In Downtown D.C., the management team at the 1.2M SF International Square office and retail complex put out doughnuts and coffee for tenants coming in Tuesday morning. As of 9:50 a.m. ET, the offerings appeared largely untouched.
Lawrence Bryant, who leads security at the International Square complex, said the building's daily foot traffic had been increasing earlier in the summer after D.C. lifted its Covid-related restrictions. But he said fewer people have been coming in since D.C. reinstated its mask mandate July 31, and he said Tuesday appeared no busier than the previous weeks.
“In September it was supposed to return to normal, people were supposed to come back to work, but it’s been pretty much the same,” Bryant said.
Bryant said a decrease in Covid cases could bring workers back, but he doesn't expect to see a significant increase in office occupancy this year.
Cheikh Demba, manager of the Pret A Manger location in the heart of D.C.'s Central Business District at 1701 K St. NW, said weekday business is still around 80% below pre-Covid levels. He said he didn't see a noticeable increase in foot traffic Tuesday morning.
“We expected it would be busier by now,” Demba said. “Most of the time the Tuesday after a long weekend is busy, especially in September it’s usually more busy than August, but we haven’t seen that yet.”
In Downtown Los Angeles, a security officer at the City National Plaza complex said it seemed like there were more people coming into the office Tuesday morning than last week. But he said Tuesday's activity level was still below his expectations, and he hopes the next month will bring the larger return to the office he had thought might come the day after Labor Day.
“This is not everybody,” said the security officer, Michael D., who declined to share his last name.
While more data will likely come out in the coming weeks showing whether there was any uptick in office occupancy after Labor Day, preliminary data from Openpath showed that Tuesday may have just been another day for many office workers.
Openpath President James Segil, whose proptech firm specializes in keyless building access and monitors entries to buildings, said he pulled preliminary data for Tuesday and saw no material difference from previous Mondays or Tuesdays over the past 30 days.
Los Angeles-based Openpath had about 10 of its own employees in its Culver City headquarters Tuesday out of about 50 total employees that could come in. Earlier this summer, Segil said he was planning to have everyone back after Labor Day.
“Vaccinations were ramping up, everyone was feeling pretty good about higher vaccinations rates nationally and within LA, and the delta variant hadn't raised its ugly head,” Segil said.
Now, he said Openpath is looking at January for a potential return.
Highwoods Properties Vice President Jim Bacchetta, whose firm is the second-largest office landlord in Metro Atlanta with 5.5M SF that is home to 25,000 workers, said at most 35% of those workers have been coming into the office regularly. Tuesday was no different.
“I didn't expect there to be much because of the delta variant,” Bacchetta said. “A lot of our customers, you know, the big ones ... have for the most part delayed the return to work. And they make up a large percentage of our buildings.”
While many smaller companies have already been back to the office, over the past six months, Bacchetta said major companies began to push back those plans for an immediate post-Labor Day return. Instead, the larger tenants will probably continue the march of a slow but steady return throughout the rest of the year.
“I think it'll be a mixed bag,” he said. “Some of them will do it in October. Some of them haven't announced and at this time [don't] have a plan because they don't know what's going to happen with the virus.”
Rachel Garibay, concierge operator at Atlanta's Colony Square mixed-use complex that includes more than 900K SF of office space, said she had previously expected a rush back to the office after Labor Day. But that didn’t materialize.
Ramon Casso, a security officer at Downtown D.C.'s 888 17th St. NW office building, also said Tuesday morning had much less foot traffic than he expected.
“It's still slow, very, very slow,” Casso said.
Emily Sircy, Transwestern’s vice president of asset services for Atlanta, said properties the firm manages still hover around 30% to 35% of pre-Covid occupancy on any given week.
She said occupancy in downtown buildings is slightly higher, and some suburban tenants that mandated a return to the office have reversed course or slowed their timeline. Most tenants are still giving their employees the option of whether or not to return.
“Businesses with a stated, mandatory return plan for all employees seem to be the exception for now, but most of our tenants have expressed a strong desire to see everyone back in the office as soon as it’s safe and comfortable for everyone,” Sircy said.
Akridge Chairman Chip Akridge, whose firm owns and manages more than a dozen office buildings across the D.C. area, said its building occupancy rate peaked at around 30% earlier this summer, but it has fallen back down since the delta variant surge and the return of D.C.'s mask mandate.
He said Tuesday afternoon he was still waiting to see the data on this week's office occupancy, and he is hoping for a slight bounce. But because of the rise in the number of Covid cases over the past month, he doesn't know when to expect a larger return to the office.
“It is very frustrating,” Akridge said. “At this point we’ve got enough people refusing to get vaccinated that it’s going to pull us all down. It's maddening to me. I can’t believe these people aren’t getting vaccinated.”
Clune Construction West Region President Randy Starbird had planned a July 12 return to the office for his firm, which moved into a new 16K SF Downtown Los Angeles space at EY Plaza in January.
The delta variant forced Clune to allow more workers to return to remote work and flexible work schedules that involved being in the office some but not all days of the week. He said the company this summer averaged around 50 employees, or 80% of its office, coming in on an average day. Tuesday morning was a bit slower, with about 30 employees joining him in the office.
Starbird said he noticed an increase in downtown office traffic in mid-August after students returned to school, but he hasn't seen any noticeable change over the past few weeks. He is hearing from Clune's clients that they are focusing more on their business and their own clients than when and how to bring people back to offices.
“The focus isn't necessarily on having everyone at their seat again,” Starbird said.
Greenbridge Investment Partners partner Josh Farahi, who commuted from Brentwood to his firm's Beverly Hills office Tuesday morning, said he didn't see any more traffic than last week, but he thinks it will take until later this week to get a full sense of the post-Labor Day return.
Farahi said the majority of Greenbridge's 15 employees have been coming into the office at least part of the time since late last year, and he thinks more companies should bring their employees back to the office.
“We're going to have to live with this for a long time,” Farahi said. “This is something that the business community and beyond will have to work around for years ... For those who are sitting around waiting for this to be over before they return to work, I don't think that's the right strategy.”
Guynn said many of Ardent Cos.' smaller tenants have been coming into the office regularly for some time now, but the larger tenants haven't yet brought all of their employees back. Still, he said the continued activity in the leasing market indicates to him that companies will eventually return in larger numbers.
“I'm encouraged that the chatter is about coming back,” Guynn said. “People sincerely want to come back to the office and see their co-workers. I think you'll see an uptick in population next quarter and hopefully full-on in 2022.”
CORRECTION, SEPT. 8, 8:15 A.M. PT: A previous version of this story incorrectly attributed a quote from Randy Starbird to his company. The story has been updated.