As the prolonged period of uncertainty and volatility persists for real estate stakeholders, one of the biggest question marks continues to be whether occupiers will be able to nudge office utilization back to pre-pandemic levels. Our proprietary, anonymized data gathered from 55 sites around the globe indicates that they’ve struggled to do that in 2023. Overall, office occupancy rose only from 21% to 22.5% from January to August of this year. During the same period in the U.S., utilization increased by 2.6 percentage points, to 15%, while the figure in the U.K. was higher overall but fell over the course of the year, from 27.5% to 26.6%. By comparison, occupancy hovered around 40% globally in the months leading up to the pandemic.
Hybrid work is here to stay… For now
What’s behind this stagnation in office occupancy numbers? It may be down to the different ways in which companies have navigated return-to-office (RTO). While RTO mandates from corporate titans like Amazon and Goldman Sachs have made headlines, only 5% of U.S. respondents to a Conference Board survey of C-suite executives said that getting workers back in the office was a priority in 2023. In fact, the McKinsey State of Organizations 2023 report showed that 90% of organizations are embracing hybrid work.
There’s no doubt, however, that some of these companies will revert to an office-first model as external conditions shift to give employers the upper hand in setting and enforcing their preferred work model. For example, an increase in unemployment could make RTO mandates harder for employees to resist and less likely to hurt recruitment as competition for jobs heats up. This dynamic has not yet materialized, thanks to jobless rates that have remained stubbornly low despite a 210% increase in job cuts in January through August compared with the same period in 2022. The unemployment rate sat at 3.8% in September, up only three-tenths of a percent from a year earlier. Meanwhile, companies have laid off more than 557,000 workers in the year through August in industries ranging from healthcare to retail. The tech sector alone has shed more than 239,000 jobs so far this year.
There’s no data like your data
The secret to finding the right approach to RTO is information – about the state of labor in specific industries or regions, about economic conditions and outlooks and, most importantly, about occupancy and utilization within your own facilities and portfolio. Unfortunately, there is no one-size-fits-all solution for organizations looking for data on which to base decisions about how to optimize their portfolios and workplaces, cut costs and support sustainability efforts. That’s especially true in a real estate sector that promises to get more volatile – not less – as economic, social and political storylines play out over the next eighteen months. From the heightened risk of commercial real estate defaults to the 2024 federal election cycle to the evolving inflation and interest rate picture, there are plenty of potholes in the road ahead.
So, how do companies know which RTO strategy they should be following and when to strengthen or change their approach? They could try to draw actionable conclusions from reports released by government agencies or other external sources, but those reports tend to be made available weeks or months after the data has been gathered, and they may not be region- or sector-specific. Specificity is key to supporting good business decisions, and data from outside sources just can’t provide the level of timeliness, insight and relevance that agile organizations need. For example, while our data shows that global occupancy has been basically unchanged over the first eight months of this year, it also reveals that average occupancy in the financial sector has risen from 21.3% to 25.1%. This may have something to do with the fact that, in the U.S. at least, that industry is the second-highest source of layoffs so far this year, behind tech. Whatever the cause, a bank looking at the global figure would only be seeing part of the picture.
Another critical question real estate stakeholders have to answer is how they can optimize office utilization while they wait for a “new normal” to solidify when it comes to work models. As our CEO, Kurt von Koch, recently shared with the commercial real estate publication Globe St., “What our workplace occupancy data has continued to tell us over the last 3+ years is that every organization is using their workplaces a little differently. For smaller companies, it might be easier to determine their evolving workplace needs, but for mid-sized and larger organizations, they really need quality, accurate, reliable data to inform how to best deliver a workplace that’s optimized in terms of space and cost reduction and that helps people make the most of those in-office days.”
Find the right RTO approach for your organization
To stay nimble in the face of instability and uncertainty, businesses need both a clear, customizable view of what’s happening within their portfolios and the tools to help them quickly adapt and respond to what that data tells them. [Workplace management technology helps businesses gather and analyze data to support hybrid workers, deliver better experiences, improve the efficiency and sustainability of buildings, and optimize real estate portfolios. To learn more about how businesses are leveraging workplace analytics to support the hybrid model watch our on-demand webinar series on the Tenets of Hybrid Work.