Kastle Says 43% Office Occupancy "New Normal" Nationwide

With its 10-city average Back to Work Barometer hovering at 43% of occupancy for more than two months, Kastle Systems said this week that offices barely half full may be the new normal for businesses nationwide.

“The consistency suggests these occupancy rates may be the new normal for businesses nationwide,” Kastle said, in an email alert this week of its May 30 barometer tally, which reported a 10-city average of 42.9%.

Kastle’s weekly barometer measures office entry-card swipes in major US markets and compares them to pre-pandemic levels to create its occupancy averages. Six of the 10 markets surveyed reported declining office occupancy rates in the May 30 report, including Austin, Dallas and New York City. NYC’s occupancy dropped to 38% from last week’s level of 38.2%

The average office occupancy rate has leveled off as hybrid work arrangements are widely being adopted across corporate America— highly flexible and evolving work patterns that allow workers to have a big say in how often, when or even whether they do any in-person office work.

According to CBRE’s 2022 Spring US Occupier Sentiment Survey, 73% of companies plan to enact some sort of hybrid workplace policy this year. Stefan Weiss, a senior economist at Econometric Advisors, has projected that under average hybrid work models, employees will spend 24% less time in the office than they did before the pandemic, GlobeSt.com reported.

According to Weiss, the shift to hybrid work patterns will reduce office space demand by an estimated 9%.

How much the shift to hybrid work will impact on overall office footprints is hard to predict at this point because, even as companies downsize in lease renewals, demand is growing for flex office and co-working space.

Factors including runaway inflation and spikes of Covid variant cases also are taking the steam out of the return-to-office push. At the same time, a skilled labor shortage that may last for years, if not decades, has increased the leverage of workers seeking higher wages and better working conditions.

This much is certain: a new paradigm has emerged in the relationship between labor and management on the US, a seismic cultural shift that is one of the continuing aftershocks of the pandemic. Even as people resume activities like in-person retail shopping, travel, attending sports events and other pre-pandemic behavior, the changing perception of office work is a shift unlikely to be reversed anytime soon.

In numerous sectors involving millions of US workers who spend their workday staring at laptops and using programs hosted on cloud services, it’s no longer theoretical that remote work isn’t damaging to productivity.

Convincing them to fill their gas tanks with $6/gallon gas and resume spending an hour or two commuting to offices is an argument that may be over before it really got started. The flex-work era has begun.