Although the Centers for Disease Control and Prevention (CDC) loosened its COVID-19 recommendations in August, U.S. workers still aren’t rushing back to the office.
Kastle Systems reported office occupancy in America's ten biggest cities stood at 47.3% in late September. The low percentage contrasts with the fact that several large corporations instructed their staffers to return to the office. With health experts telling the public that working in person is safer than in recent years, it's evident infection anxiety isn’t the issue.
A McKinsey survey of 25,000 U.S. employees found that most want to work remotely partially or fully. A shift in the landscape of that scale indicates that the office building market could face unprecedented challenges.
However, the data behind the acceleration of the return to the office trend on the East Coast suggests that a massive transition makes more sense than a collapse.
New York City’s Big Banks Are Committed to the Office
Two New York City-based multinational banks have prioritized bringing their teams back in-house, significantly impacting occupancy rates. While only 49% of Manhattan employees have returned to the office, 56% of financial sector staffers are working on-site again. The profession's higher-than-average rate of return is seemingly driven by a mix of philosophical and economic priorities.
Goldman Sachs leadership believes its success is built on a strong apprenticeship model that depends on in-person collaboration. Accordingly, the world's second-largest bank recalled its team members to Manhattan recently, even though its net income increased by 24% in 2020 when only 10% of its workforce operated on-site. Moreover, the corporation raised $3.5 billion this April to add more real estate assets to its portfolio. Thus far, its directed 50% of that capital to acquiring housing, logistics, and office properties.
Goldman also plans to build a $500 million, 800,000-square-foot office tower in Dallas and extend its footprint in Miami and Atlanta.
J.P. Morgan Chase is another New York City financial services powerhouse committed to accelerating the return to office trend. The bank’s leadership believes remote work hurts productivity and wants team members working on-site five days a week. It's also building a three billion-dollar, 70-story office on Park Avenue that will house 15,000 workers. Al Brooks, the bank’s Head of Commercial Real Estate, recently advised owners to revamp rather than shred their office properties.
Like Goldman, J.P. Morgan has significant office real estate investments. Both corporations have a major incentive to support the idea of a physical workspace as a financial and cultural institution. And because of their massive resources and influence, they can cultivate a movement in a way other businesses in other sectors cannot.
The Big Apple’s biggest banks are significant boosters of the return to the office trend, but they’re far from alone in having faith in the power of the physical workspace. A recent survey showed that many organizations have an enduring attachment to the physical office.
Companies in the Northeast Support the Return to the Office Trend
The Building Owners and Managers Association (BOMA) recently published a report revealing that office space tenants nationwide have become significantly more enthusiastic about working in person. The organization surveyed 1,267 decision-makers and influencers about several topics this summer, including employees returning to the office. The survey found that 86% of participants agreed that “in-person office space is vital to conducting a successful business/operation” now or in the future. By comparison, previous surveys showed only 74% and 78% of participants felt that way in 2020 and 2021, respectively.
In addition, BOMA’s report found that 72% of office space tenants plan to renew their leases this year, up from 38% last year. Return to the office sentiment has increased in every region of the United States, but the East Coast leads the nation. 81% of area respondents intend to extend their leases in 2022, and 65% see more value in their office space than last year.
So, why do East Coast office tenants overwhelmingly want their employees back at their desks?
BOMA determined the main issue is the adverse effect “operational and collaborative impacts of the work-from-home environment” on company culture. Theoretically, the East Coast’s high concentration of financial sector legacy brands could be making them more resistant to modes of operation preferred by novelty-embracing West Coast Big Tech firms. But even though leaders want a full-on return to in-person office culture, their employees aren't on board. While no magic bullet solution to that conflict has emerged, experts believe changing how offices look and function is the best way forward.
Al Brooks recommended that firms change their office layouts to accommodate hybrid workers. He also said businesses wishing to attract and retain top talent should offer on-site amenities like daycare, outdoor space, and catering. J.P. Morgan Research asserted that high-quality and flexible office spaces would be the future of the workplace.
It’s worth noting the bank’s forecasts align with BOMA’s survey findings. The organization found that 71% of owners and managers intend to improve their properties’ health and safety features. And an average of 67% plan to upgrade their on-site amenities. Because East Coast commercial tenants and owners lead the nation in return to the office enthusiasm, the region could kickstart an office space renovation movement in 2023.
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