In-person work policies can boost office value and demand even as the sector could be headed for more pain, according to a team of researchers who have been analyzing the fallout of the pandemic on office since shortly after the start of the worldwide crisis.

The study concludes that work from home “is shaping up to massively disrupt the value of commercial office real estate in the short and medium term,” and that adopting hybrid and remote work negatively impacts demand. It notes that office occupancy fell 90% from the end of February to March 2020 with remote work in full force.

Yet the impact of hybrid mandates and adding more in-office days can help mitigate office woes, wrote New York University's Arpit Gupta, University of North Carolina's Vrinda Mittal and Columbia University's Stijin Van Nieuwerburgh in the newly updated academic report.

The report sifts through data from December 2019 to December 2023, when five-day office attendance hovered at around 50% of prepandemic levels.

The research team found a correlation between return-to-office policies and physical space demand. Companies enacting a one-day-a-week policy saw their office demand drop by 41%. In contrast, a two- or three-day-a-week policy corresponded with just a 9% drop.

Companies that enforced a four- or five-day in-office policy actually saw demand for office space grow by 1%.

The researchers also found one extra day in the office translates into a 7% reduction in falling office values.

The findings come as more companies are enforcing RTO policies. Over 80% of CEOs are looking to bring employees back to the office full-time within the next three years, a KPMG survey found.

Yet companies have also been downsizing, or rightsizing, their leases as hybrid work continues to shape demand and the need for space. Last year, leasing activity was at 290M SF, 10% behind prepandemic levels.

New leases fell from 414M SF per year in the second half of 2019 to 150M SF in the second half of 2023, according to the study.

Many of those new leases saw companies opting for luxe, Class-A office spaces rich with amenities in line with the flight-to-quality trend. Researchers found those rents declined less than lower-quality buildings and, in some cases, even increased.