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Workers Are Winning The Return-To-Office Tug Of War

Executives want their employees at their desks more frequently, but the data shows workers aren't budging. The push-and-pull is leaving a permanent mark on office spaces, which are rapidly adapting to win the hearts — and feet — of a largely reluctant workforce.

Occupancy has plateaued at just over 43% for the last month in the 10 largest office markets, according to building access technology firm Kastle Systems’ Back to Work Barometer. Office use has flatlined despite significant upticks in business travel and business lunches being back on the table.

Office seats with views may no longer be just for top company execs, as businesses unassign private spaces to lure workers back.

Many employers have mandated some kind of return to the office for workers, ranging from a few days a month to a couple of days a week. But amid a new rise in coronavirus cases and hospitalizations, plus a labor market favoring job seekers, workers' preference to be occasional office visitors is winning out over their bosses’ desires for them to be mainstays.

“I don't think that numbers are going to ramp up too rapidly,” said Ryan McKinney, executive managing director of office servicer Vestian. "It almost feels like summer Fridays have become summer Thursdays.”

Workplaces have adapted over the last few years as the pandemic prevented in-person office work: Business advocacy group Partnership for New York City found that 78% of workplaces have a hybrid model in place now, compared to just 6% prior to the pandemic. The survey also found that just 8% of Manhattan office workers were going in full time, while approximately 28% were fully remote.

Employee resistance is coming up against some hard lines from executives. As many as 77% of managers would fire employees if they refused to come into the office, according to one survey released last month. But workers are pushing back just as hard. A different survey, from recruitment firm Robert Half, found that 50% of U.S. office workers may quit if forced back to the office.

“You're already seeing that the workers' demands for flexibility and their ability to vote with their careers, and take themselves to other companies who have more flexible policies, is really starting to soften the stance of many hardcore mandates,” Convene Chief Marketing Officer Larisa Summers said.

Companies trying to force a return to office have had to backtrack, as employee pushback collided with rising coronavirus numbers.

When tech giant Apple asked workers to return to the workplace in early April, demanding employees be on-site at least three days per week by late May, employees wrote an open letter detailing concerns. The company’s head of machine learning even resigned in protest of the hardline return to office policy.

Apple delayed its return to office indefinitely this week, although the company cited rising Covid-19 cases, rather than employee concerns, Bloomberg reported. And the rising number of cases in NYC could mean further delays for more companies hoping to bring workers back to Manhattan offices, CBRE Senior Vice President Ramneek Rikhy told Bisnow

“We're in a time of flux, and we continue to vacillate in this area due to the multiple surges that we've had,” Rikhy said. “I think everyone is still prioritizing their employees' well-being, which is why you're not seeing hard-and-fast mandates. The other thing that they're trying to do is continuing to use the carrot versus the stick.”

The Malin's Charlie Robinson, Citi's Linda Foggie, SomeraRoad's Ian Ross, Silverstein Properties' Linda Bevacqua, Corgan's Morgan Gorospie and Saltmine's Liam Clark at Bisnow's NYC State of the Office Market event.

Incentivizing employees rather than punishing them seems to be paying off for workers at other tech giants. Google employees faced a similar scenario to their counterparts at Apple, pushing back as the company advocated for a hybrid work model.

But opposition at Google has been less intense, perhaps due to perks like a free live show from singer Lizzo for California office workers, The New York Times reported. Similarly, Microsoft is now giving employees free lunches in a bid to lure them back, resulting in high attendance and a packed cafeteria.

“The day that you offer a free meal, you have 100% occupancy,” Rikhy told the audience at Bisnow’s New York State of the Office event Tuesday. “Even if it’s a Friday.”

As the dynamic continues to skew toward more days out of the office than in it, office landlords are scrambling to make their spaces more appealing for prospective tenants who see a tricked-out building as an ally in the fight for worker tendencies.

“The headline in a lot of this is: Be the best and make your space fucking awesome,’” Ian Ross, the founder and principal of developer and investor SomeraRoad, told the audience at Bisnow's event. “The bottom line is a generic, antiseptic, commoditized office: Good luck. A boring office doesn't work.”

Ross was unsure how helpful some of these incentives, such as outdoor space and specialized fitness and wellness spaces, would be in luring workers back long-term, pointing out that offices have spent years installing workout facilities that employees barely use. But one feature that seems likely to stay as hybrid work arrangements continue is a workplace’s tech setup.

“Over one in three meetings now are hybrid, whereas we didn't even have hybrid solutions five years ago,” Convene's Summers said. “Hybrid A/V technology and event technology that can support in-person, virtual and hybrid is a must.”

As a result, designers are focusing on incorporating technology seamlessly into the workspace.

“Now more than ever, tech is instrumental in the design process and ensuring experience for the end user,” Morgan Gorospe, a vice president for client relations at architecture and planning firm Corgan, said at the event.

CBRE's Ramneek Rikhy, Newmark's Jonathan Fanuzzi, RXR's Bill Elder and Tishman Speyer's Gus Field at Bisnow's NYC State of the Office Market event this week.

Layouts are also changing, as workers seek more alone time in private rooms and fewer loud conversations across open-plan offices. Private offices are being unassigned and allocated on a needs basis for meetings or work requiring deep concentration. Corner offices are being abolished, giving all in-person employees the chance to take in the view, rather than reserving it for senior executives. 

With more shared amenities, tech upgrades and employee resistance to returning to in-person work, some businesses are looking for smaller spaces. McKinney told Bisnow that some businesses are looking for better quality spaces for shorter-term leases of three to five years, cutting down on space as they try to predict how many people will want to come into the office.

“One approach I’ve heard is probably something like ‘half the space, twice the experience,’” Citibank Managing Director and Head of Real Estate Linda Foggie said at Bisnow’s event.

But the downsize-to-upgrade approach isn’t universal, across industries or even companies. There are 119 50K SF requirements in NYC right now totaling 19.6M SF, according to Rikhy.

“Right now, we are pretty much at the same number of large tenants in the market requirements that we were pre-Covid,” she said. “I've had firms take extra space just to warehouse it.”

Warehousing extra space is in part a strategy as companies struggle to anticipate their future headcounts, Rikhy said. While it has always been difficult for a business to know how many employees it will have in five years’ time, this particular point in the pandemic — with a tight labor market and potential employers competing fiercely for new hires — means businesses are taking a bigger gamble on what type of office space they will need and what will continue to draw employees in.

“To find and attract and retain the very best talent, you have to become the kind of place people want to be in,” Summers said. “The kind of place people want to be increasingly is a place that has flexibility built into their culture, and built into their environment.”

Some executives believe how long employers and office landlords have to continue offering perks, bribes and flexible setups depends on when the labor market shifts.

“Right now, with supply and demand in the labor market, the employee has all the power,” SomeraRoad's Ross said. “When that starts to shift, employers can once again say, ‘Come into the workplace, Monday through Friday.”

For others, the defining factor will be whether the U.S. economy enters a recession, bringing a shift in the labor market along with it — an economic event some business leaders believe is coming, either this year or next

“Nobody’s wishing for a recession,” RXR Executive Vice President and Managing Director of NYC Leasing Bill Elder said at the event Tuesday. “But I think one of the benefits that might come out of the recession is that now the employer [will have] the upper hand.”