Trepp | Work-from-Home’s Impact on Office … Yawn

It’s been five-and-a-half years since the onerous Covid lockdowns were instituted across most of the country, devastating the office, retail, and hotel sectors.

While the latter two sectors have come back, the office market continues to feel the pain. But it’s not uniform, as the best buildings in most areas are doing just fine. It’s the others that aren’t quite there yet—t’s not clear whether they’ll ever return. The work-from-home, or WFH, movement might have played a role, but exactly how much could be argued. We’ll save that for another time.

Let’s look at the whole WFH trend. The good news: If you have an interest in most commercial properties, that trend is waning. In other words, more people are visiting the office on a regular basis than they were following the March 2020 lockdowns, when visitation levels declined to less than 10% nationwide, according to Placer.ai.

The national office visitation percentage is 64% of the assumed 100% rate in January 2020. Miami tops the country at 85% of the January 2020 level, while New York is at 75%. The actual 2020 visitation percentage is unknown. Visitation is likely never 100% as folks often are traveling and visiting with clients, so they might not show up to the office.

The U.S. Bureau of Labor Statistics estimated that in 2021, 13% of all private-sector jobs in the country were remote full time, meaning they didn’t require regular office visits. A total of 9% were remote some of the time. The information services sector was the most reliant on remote workers, with 68% of companies employing at least some staff who work remotely. A distant second was professional and business services, with a 46.3% share of remote workers.

Let’s fast forward to this past August, when a total of 11.4% of all employees worked remotely some of the time and 10.7% worked remotely all the time. So, things haven’t changed much since 2021.

Does any of that really even matter? Maybe not so much.

What matters more is economic growth. If the economy and companies are growing, demand for space—office, retail … you name it—will increase. “The underlying economic backdrop is far more important (for the office sector) than back-to-office policies,” explained Peter Linneman, the former Albert Sussman professor of real estate, finance, and public policy at the Wharton School of the University of Pennsylvania, and principal of advisory Linneman Associates, who spoke on a recent podcast with Willy Walker, chairman and chief executive of Walker & Dunlop.

Even the workforce reduction at the federal government—its shutdown notwithstanding—could be a yawn for office use as any drop in headcount could result in an increase by contractors.

Compliments of TREPP – A member of the EACCNY