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As Return-To-Office Mandates Threaten To Get Serious, Management Scrambles For Strategy

Employees have heard it before: return-to-office deadlines mandating workers get back to the office this month, another in a long series of inconclusive and muddled moves by management.

But what employees still haven’t heard, years into the pandemic-era shift in working habits, is a quantifiable case for the need to return to the office, or in most cases, concrete plans from CEOs and management. Some analysts suggest firms, stymied by a lack of actionable data to inform working arrangements or real estate planning, are simply ordering people back in “or else” as a means of cleaning house and reducing headcount.

“Companies are trying to get a stake in the ground,” said Rob Sadow, CEO and co-founder of Scoop Technologies, which sells an app focused on hybrid office productivity. “Executives are saying, ‘I'm going to put out a point of view on what we think the right answer is. We're going to make that really clear to the organization.’ Employees can then vote with their feet, and they will stay here or they will leave."

It’s unclear how effective recent return-to-office mandates have been for U.S. corporations.

After another post-Labor Day letdown in terms of office occupancy, Bisnow reached out to a number of firms, including AT&T, Comcast, MetaTikTok and Farmers Insurance, that announced return-to-office mandates in early summer that were expected to be followed by employees this month. None responded with specifics on how many employees have left, how they would police and enforce such policies, and how it has or will impact their space needs and real estate planning (AT&T did sign a large new lease in Atlanta in July).

Farmers Insurance, for example, responded with a statement that said starting Oct. 2, employees within 50 miles of an office will work from their respective office location at least three days per week.

“Our intent is to foster greater collaboration, creativity and innovation while also providing better opportunities for learning, training, mentoring, career development and organic interaction,” the statement said.

But there were no details on how that policy would be enforced, and how many remote workers may be affected, even after a June announcement of a policy shift angered thousands of employees. Just last year, the former CEO told many they’d be classified as virtual employees and offices in Grand Rapids, Michigan, Kansas City, Kansas, Oklahoma City and Phoenix would soon be closed.

Sadow believes real estate will be a significant driver in this transition, but the ultimate policy positions and implications remain unclear. After roughly three years of debate, only one-third or so of the standard 10-year commercial office leases signed before the pandemic have expired, giving firms a chance to reorganize or shed space to recalibrate and avoid cavernous, underutilized offices.

At the same time, roughly a third of Fortune 100 companies have announced they’ve shrunken their real estate footprints in the last few years. Office employment has increased 6.5% nationally since March 2020, yet office leasing is “protectionist,” said Avison Young Senior Director of Market Intelligence Craig Leibowitz. Typically, with that kind of employment growth, a CRE market would be significantly busier.

“The concrete hasn’t hardened on what companies are going to do,” Sadow said. “I do think the vast majority of firms will end up with roughly half the time in the office, and that’s enough so companies can start spending less energy on policy and enforcement of policy and more on how they can make it work.”

Comcast, which just announced that employees would move to a mandatory four-day in-office workweek in a Sept. 12 memo from President and CEO Dave Watson, also didn’t respond when pressed about details around how many employees had resigned in the wake of the shift and how many it might impact.

Watson’s memo said “we value flexibility, and in return, we expect you to be responsive to the needs of the business and your team.”

Roughly a third of the Fortune 100 have shed significant office space since the outset of the pandemic.

Despite years of analysis, hand-wringing and changing policies, it’s unclear if corporate America has reconciled with remote work, successfully ordered workers back or publicly made a data-driven case for a return. Even leading CEOs haven’t sounded very assured of the idea.

At Salesforce, Marc Benioff told employees that “I don’t work well in an office — it just doesn’t work with my personality,” while at data-obsessed Amazon, CEO Andy Jassy said returning to the office was a judgment call unsupported by data.

Without articulating a clear, well-researched reason for coming back to the office, corporate leadership appears to be taking the old-fashioned parenting approach of “because I said so,” said Heidi Gardner, a leadership adviser and Harvard Law School fellow. 

“Oftentimes, companies have terrible data, and the data that they're trying to use for this wasn't set up for this purpose, and they're using a bunch of proxies,” Gardner added. “They don’t know what happened last week, let alone have predictive analytics to help them understand what they're going to need seven years from now, when their lease runs out.” 

The imperfect record of existing case studies, which can be gleaned from employee and employer statements, have suggested that strict return-to-office policies can be problematic for retention, while other examples of companies allowing more freedom have resulted in cost savings and advantageous changes to employee retention and recruitment.

“I haven’t heard of any systematic accountability,” Gardner said. “What I have heard is people are using it to selectively clean house.” 

There has been some emerging evidence that worker leverage peaked in March.

According to Leibowitz, quits by employees have declined by 25.7% since April 2022, signifying increased leverage for employers. He’s also tracking a 34% drop in job postings since that same period. It’s not a perfect barometer of activity, but more what he calls a “directional indicator of office demand in the current environment.”

“When managers say, ‘get back to the office,’ employees are now incentivized to listen [in] ways they simply weren't in prior months,” he said.

Grindr, the LGBTQ dating app, announced an extremely strict return-to-office policy on Aug. 3, ordering all of the firm’s 180 employees to return to the office two days a week. Coming on the heels of a union drive, the move ended up driving away a significant number of employees. Eighty resigned.

Grindr management shared a response with Bisnow that states: “We have full confidence in our team and their ability to continue to drive the business forward and make the world and lives of our users freer, more tolerant, and more just. We are looking forward to returning to the office in a hybrid model in October and further improving productivity and collaboration for our entire team.”

It notes financial performance continues to be positive, and the firm recently raised its annual guidance for the year. 

Other more detailed case studies suggest the benefits of leaning more toward remote work. Allstate Insurance, which has a workforce of 54,500, followed employee preferences and allowed roughly 83% to remain remote, cutting down its real estate footprint in response. The firm has boasted that the move has meant a 60% increase in applications and a more diverse talent pool. The decision has led to the company offloading its HQ and more than half of its office real estate, cutting costs from  $316M to $157M since 2020 according to spokesperson Ben Tobias.

“A headquarters used to be the center of power,” Allstate CEO Tom Wilson said during a session at the Aspen Ideas Festival. “You came there to get noticed and be seen by people and move up. And we don't have one of those anymore.”

Allstate enacted a remote work policy that allowed the insurance giant to ditch roughly half of its office space.

While most employees have been reluctant to give up a work life that’s more balanced and requires fewer commutes, a nontrivial portion of the employee base of many firms, especially those who offered the ability to move and work remotely, now don't live within a reasonable commute to the office.

A Redfin study of the home market, based on May and June survey data, suggests that 1 in 10 people moving right now are doing so to comply with return-to-office mandates.

According to Redfin data journalist Lily Wachter-Katz, those who may have sold in high-cost coastal markets and moved elsewhere in, say 2021, when companies pushed a “work anywhere” policy, might have bought at the top of the market. That means if they’re being called back now, they could be taking a loss on a home they just bought in a cheaper market, plus finding it impossible to move back within commuting distance of their former office, due to rising mortgage rates. 

“Some people are just choosing to quit their jobs, instead of actually moving because they don't want to take on a higher mortgage rate,” Wachter-Katz said. 

“It is interesting to think about how for a lot of people, it financially doesn't make that much sense to move right now, and that is happening at the same time as all of these companies saying, ‘Hey, you should move right now,’” she added.

Markets like New York, LA or Seattle, especially with Amazon’s more strict RTO policy in effect, are places where one doesn’t get much bang for one's buck. Wachter-Katz has found that home sales are falling through — being canceled mid-transaction — at the highest rate in 10 months, due in part to this phenomenon. Anecdotally, Redfin agents are hearing buyers back out of deals because they’re being called back to the office.

Ultimately, as RTO policy has been a moving target, it has made figuring out space an inexact and frustrating science, Scoop Technologies’s Sadow said.

Square footage requirements will look very different depending on whether firms adopt flexible schedules versus fixed days in the office. Another aspect of this complex calculation is that if people come in for different amounts of time, they’re probably doing different amounts and types of work, requiring both space for collaboration and head’s down, individual work, necessitating varied office setups. So even those firms that have laid down stricter mandates, for the most part, still lack the data and understanding to accurately gauge future space needs. 

The debate about the return to office is akin to political primaries, Sadow said. The extreme positions have gotten most of the attention and oxygen thus far, but everyone will retreat to a comfortable middle soon enough. Those pushing an orthodox return to the office, or fully remote workspaces, are extremes, with most of corporate America likely to find some sort of balance.

Data backs that up. A survey by Build Remote of the work policies of the Fortune 100 found that 77% offer hybrid work, and three days in the office is the most common policy.

Sadow hasn’t found any examples yet of employees getting fired for not coming back to the office. It has mostly been a slightly stronger push for a return to more in-office work and the vague threat of performance review ramifications in the future. 

But there are signs that suggest the mean has shifted toward less in-office work and smaller offices. Given the rising cost of real estate and talent, office space per employee has shrunk considerably over time, especially in markets like New York City. The old barometer of 250 SF per employee had already fallen to 150 SF to 175 SF just before 2020. CoStar data shows the average size of an office lease signed in Q2 of 2023 was 19% below the pre-pandemic average. Scoop research has also found that the younger a company is, in terms of its founding date, the more likely it is to embrace more remote work.

This evidence of a sustained shift over time suggests that as corporations fail to find or enact a solution, they’ll only encounter more resistance trying to bring people back into the office. 

“This preference for different ways of working has permeated virtually every rank of the hierarchy,” Gardner said. “The mandate piece isn’t going to work. They’re going to have egg on their face, again.”