Employers Are Getting Workers Back to the Office

Workers are returning to U.S. offices at the fastest rate since the pandemic forced most workplaces to close temporarily in 2020, as infection rates continue to fall and more companies ramp up efforts to rehire employees.

Source: WSJ | Published on September 19, 2022

Personal perspective of five corporate coworkers photographed through windows sitting at their desks on two floors in modern office at night.

Over the five business days from September 8 to September 14, office use averaged 47.5% of early 2020 levels in the ten major metro areas monitored by Kastle Systems. According to the company that tracks security swipes into buildings, this was the highest percentage since late March 2020.

Office use on Tuesday and Wednesday last week was around 55% of the prepandemic workforce, which was also a high during the pandemic for those days, according to Kastle. The figures through last Wednesday were the most recent available weekly figures.

Other indicators point to a pickup in office activity after Labor Day. Ridership on the Long Island Rail Road surpassed 200,000 for the first time since March 2020 on Wednesday. Metro-North Railroad, another commuter line in the New York area, reached a pandemic high of 174,900 riders on Wednesday.

Even in Texas, where return-to-work figures have led the country most weeks, workplace attendance is increasing. According to Central Houston Inc., which tracks the movement of mobile phones into office buildings, downtown Houston experienced a ten percentage point increase after Labor Day to 63% after being stuck at around 50% for about five months.

Most employees are returning as part of hybrid workplace strategies that allow them to split their time between the office and remote work, though even in this case, employees have recently shifted toward the workplace. According to Kristopher Larson, CEO of Central Houston, some businesses are moving toward requiring three days of in-office attendance, up from two days.

This month's higher return rate contrasts sharply with the post-Labor Day return a year ago, when businesses curtailed office-return plans due to the spread of the Delta variant. Companies prepared for a more robust office return at the beginning of this year, only to be derailed by the spread of the Omicron variant.

Even after Covid-19 cases began to decline in the spring, many employers were hesitant to call resistant workers back to the office for fear of them quitting before returning.

Desks are no longer the primary focus at LinkedIn's new headquarters. The company's office serves as a hub for its hybrid workforce, with dozens of different work settings and conference-room configurations. The WSJ gets an exclusive inside look. Karl Mollohan / The Wall Street Journal

Infection rates are now lower, and the economy is looking shakier, giving employers more leeway in re-engaging workers.

Companies that have implemented policies for more time in the office include Comcast Corp., NBCUniversal, Prudential Financial Inc., and Zurich North America. When Peloton Interactive Inc. announced store closings and layoffs a month ago, it also announced a three-day-a-week in-office policy.

The post-Labor Day increase in office return is still far below what is required to revitalize business districts. Many small businesses that rely on commuters report that sales have increased slightly but are still far from pre-pandemic levels.

Nikita Shimunov, owner of the First Class Barber Shop near Grand Central Terminal in Manhattan, reports a 10% to 15% increase in business since Labor Day. However, because of hybrid work, it is only half of what it was before Covid-19.

"There were 20 business days per month before the pandemic," he said. "It's now been eight days."

The return on investment has also been uneven across the United States. According to Kastle, the return rate in the New York metro area, which is heavily reliant on the financial services industry, increased to 46.6% last week from 38% the previous week. However, in and around San Francisco, which has lagged behind most other office districts throughout the pandemic, the rate increased by only 2.3 percentage points between those two weeks to 40.7%, according to Kastle.

Restaurants in San Francisco that used to rely on office workers are shifting their focus. "We do a lot of weddings," said Tony Marcell, a partner at the city's Financial District's Wayfare Tavern. Fridays, which were once known for happy hours at the end of the workweek, have been renamed "brunch Fridays," he said, in an attempt to attract the stay-at-home crowd.

Owners of office buildings aren't happy either. According to brokers and analysts, office demand is unlikely to return to pre-pandemic levels as some businesses adopt remote-only work strategies and others downsize to accommodate their new hybrid schedules.

Only 5% of 187 companies polled by consulting firm Gartner Inc. before Labor Day said they expected employees to work five days a week. Nearly one-third of those who chose hybrid plans stated that they had no requirement for the number of days spent in the office.

According to data firm CoStar Group Inc., office vacancy in the United States is at 12.4%, the highest level since the pandemic began, up from 9.6% in the first quarter of 2020.

230 million square feet of sublease space is currently available, up from 120 million in the first quarter of 2020 and the highest amount since CoStar began tracking the metric in 2005, indicating that more companies are attempting to reduce office space.

Many tenants are deferring leasing decisions until they have a better understanding of how new hybrid and remote work patterns will evolve. The VTS Index, which tracks companies looking for office space, fell 17.5% in July to its lowest level since February.

"Most companies aren't in a position to make a 10-year commitment to new office space because they don't have real confidence in what the future looks like," said Ryan Masiello, CEO and co-founder of VTS.

Employees who are unhappy with the new strategies are also causing friction in some companies. A group of Apple Inc. employees calling themselves Apple Together launched an online protest against the company's three-days-a-week return-to-work policy.

Still, landlords are finding solace in a shift in the conversation away from health concerns and toward a tug of war between managers who want workers to return and employees who want more flexibility. This shift reduces the likelihood that the post-Labor Day boost is only temporary.

"Covid-19 has become a part of daily life," said Ben Brown, managing partner of Brookfield Asset Management's real-estate group.