Office Usage Slowly But Surely Recovering, While Demand Stays Put
Physical office occupancy is crawling its way back up but, at least in January, the new demand for space hasn’t budged.
According to data from Kastle Systems, office occupancy in the top 10 metros across the country has been on the rise steadily since January but was still only averaging about 36% as of early February.
That’s slightly behind the pre-omicron variant average from 12 weeks ago, in mid-November, when the occupancy rate was nearly 39%, Kastle data showed.
Occupancy may be recovering lost ground, but demand for office space seems to have stalled.
New demand for office space in January was unchanged from December, holding steady at 58% of its pre-pandemic level, according to the VTS Office Demand Index, which tracks unique new tenant tour requirements at office properties, virtual and in person, in major U.S. markets.
Demand hit a high of 87% of pre-pandemic levels in August 2021, then dropped off in the latter half of 2021. Since October, it hasn’t gone above 61% of pre-pandemic demand.
Some office watchers weren’t surprised by the disconnect between occupancy and demand.
“While January was a quiet month both nationally and locally, it’s not an uncommon occurrence,” VTS Chief Strategy Officer Ryan Masiello said in a statement. “January is generally a reset month where people take a step back and reevaluate strategies before ramping up in earnest in February and March.”
Of the companies that have their workplace strategies figured out, it seems many are taking the hybrid route. Stanford University economics professor Nick Bloom told The Atlantic he talks to hundreds of companies about remote work and 95% of them say they are going hybrid. The remaining 5% are going fully remote, he said.
“The number of person-days in the office is never going back to pre-pandemic average, ever,” Bloom said. Still, that isn’t necessarily a reason for concern from office owners. “Many companies planning for hybrid work are expecting most of the office to be in on some days of the week, so they can’t shrink their space,” Bloom said.