RTO Is Dead, Long Live RTO: Employers Move From Policy Rollouts To Space Optimization

The long tail of pandemic lockdowns is still dragging down office usage data. Even on the most crowded days in the average office, foot traffic is only 64% of 2019 levels. Across the week, the average attendance volume averages less than 54% of prepandemic occupancy. 

Attendance data suggests companies are struggling to codify return-to-office policies five years after the pandemic struck, but brokers, analysts and even survey data suggest a more nuanced picture. The days of rolling out return-to-office policies are largely over, but how employers and their staff use their office space has permanently changed. 

“RTO is not a relevant concept anymore,” said Mark Weiss, an experienced New York office tenant representation broker and executive vice chairman at Cushman & Wakefield.

Roughly eight in 10 corporations have announced and executed their return-to-office policies, according to Lenny Beaudoin, an executive managing director at CBRE who advises firms on their workplace and space strategies.

But he also said that roughly 75% of the firms with new mandates aren’t seeing attendance levels come back to where they had hoped or expected them to be and are adjusting their strategies to lure more workers back.

“The vast majority of organizations that we support are remaining hybrid,” he said. “It doesn't really make sense to be long on space right now, when you can be short on space and accommodate your needs more flexibly.”

Companies are injecting scalability into their floor plans with fewer private offices, more shared spaces and strategies like hotdesking, where employees claim a workspace each day.

Coworking space inside office buildings have become an amenity for companies looking to be able to rapidly add more desks without increasing their footprint, which was part of the logic behind CBRE’s acquisition of coworking firm Industrious in January at an $800M valuation, Beaudoin said. 

In the last week of February, office utilization across the 10 major cities tracked by Kastle Systems, a property security solutions provider, sat at 53.9% of prepandemic activity. That level of foot traffic was slightly above what the firm tracked in 2024, but the pace of year-over-year foot traffic gains continues to slow.

Kastle’s data is generated from anonymized foot traffic at 2,600 office buildings in 47 states where it has a contract to operate. The average volume compared to prepandemic levels, reported as a weekly figure, smooths out wide gaps in attendance between workdays, and critics point out that the index fails to capture rising office usage at properties that aren’t part of Kastle’s portfolio. 

Tenants’ focus on office amenities along with fit and finish, referred to in the industry as the flight-to-quality trend, is concentrating the office sector’s recovery to a subset of properties, which also weighs on broader utilization.

“It is a tale of specific assets, locations, even microdistricts inside cities,” Beaudoin said. “When you look at superior assets that are more amenitized, and you segregate even Kastle data to specific assets, you'll find that utilization is high in those locations.”

New York City’s office foot traffic was at 54.1% of prepandemic levels in the last week of February, according to Kastle. But Weiss said the city’s highest quality office towers are busier today than in 2019.

Weiss said New York’s office market came back in full force by the middle of last year, and he pinpoints April 8, 2024 as the exact moment the market turned. 

“That was the day of the [total solar] eclipse. That afternoon on Park Avenue, it was wall-to-wall people on the street. There was no ambiguity that the elite financial firms were back and, over the next few months, everyone else was back too,” he said. 

Survey data supports Weiss’s observation. Between 2023 and 2024, the number of people spending at least four days in the office each week rose by 34 percentage points to 68% of workers, according to new data from McKinsey & Co. The proportion of mostly-remote workers fell from 44% to 17% over the same period. 

Office downsizing has also reached its lowest level since 2020 as return-to-office policies take hold, with tenants with lease renewals in the fourth quarter cutting only 2.9% of their space on average, according to Avison Young. The U.S. office market ended 2024 with its first quarter of positive absorption since 2021, and leasing volume grew consecutively over each quarter last year, according to JLL.

Taken together, the data suggests that return-to-office policies have found success after years of pushback and defiance from employees, but occupiers are looking to optimize footprints to save on rent. 

The shift is analogous to what has recently happened in the industrial market, Beaudoin said, where operators have gone from holding onto excess space in case of an emergency to looking for maximum efficiency across their portfolio.  

“We're going to use space in a very just-in-time manner, not a just-in-case manner, and that's going to create a lot of change in the composition of all office buildings,” he said. 

Employees have also largely self-selected into their preferred work arrangements, with nearly 80% of in-person and hybrid workers satisfied with their attendance requirements, compared to roughly nine in 10 remote workers, according to McKinsey. 

Less than one in five remote or in-person workers is interested in changing their work arrangement, but a third of hybrid workers would be open to a different model, McKinsey found. 

While employees have largely found work structures that match their preference, there is widespread dissatisfaction under the surface at most corporate firms. 

Regardless of an employee's work model, roughly 40% of respondents to the McKinsey survey said they were planning to leave their job, on par with the historical highs seen during the pandemic. The same is true for worker burnout, with 38% of in-person and hybrid employees reporting experiencing burnout, compared to 41% of remote workers. 

Employees report their firms are failing to adequately foster collaboration and innovation while promoting mentorship and skills development, which suggests that policy shifts that have nothing to do with office attendance could be more effective tools for solving employee dissatisfaction, McKinsey found. 

“When decisions are made based on people and performance data, changes are more likely to stick and less likely to be seen as a mandate without a purpose,” McKinsey Senior Partner Brooke Weedle said in an email.