Still Hoping for Full Offices? The Fed Says Don’t Hold Your Breath

Yes, many CEOs want all workers to come back into the office. Yes, may office property owners and operators, worried about what working from home would eventually mean for rent roles, want it as well.

The Federal Reserve Bank of New York says that while there may be more people back in headquarters, remote work isn’t going away. But then, neither has the amount of workspace used, at least in New York.

“As has been found by others, we find that some of the increase in remote work that began early in the pandemic is sticking,” the organization wrote. “According to firms responding to our August regional business surveys, about 20 percent of all service work and 7 percent of manufacturing work is now being conducted remotely, well above shares before the pandemic, and firms expect little change in these shares a year from now. While responses were mixed, slightly more firms indicated that remote working had reduced rather than increased productivity. Interestingly, however, the rise in remote work has not led to widespread reductions in the amount of workspace being utilized by businesses in the region.”

Remote work is down there but is still averaging about 20% of all work. Even in manufacturing, 7% was being done remotely, which is double pre-pandemic levels. And the New York Fed expects remote work to decline “only modestly.” About 18% of service firm work will be remote next year. Here’s the part that’s likely painful: “For industries typically geared toward office work, such as professional and business services and financial services, the share of hours worked remotely was above 50 percent, on average.”

There’s been some reduction in workspace footprint on average: 5% in service and 2% in manufacturing. But is this going to continue/? Hard to tell. As some experts have told GlobeSt.com over the last couple of years, it may be that companies are still playing a waiting game, as work from home doesn’t add much in infrastructure costs. Right now, companies can have people work remotely, keep the space they have, and still maintain margins. The question is whether that will continue if ongoing further reductions seem possible.

The New York Fed was looking at its local region, but it is hardly the only organization that sees hybrid work as something that isn’t about to disappear. The JLL Future of Work Survey 2022, taking 1,000 responses from 13 key global markets, found that top CRE execs see hybrid work as a permanent change. “The number of employers not offering some form of hybrid working option has dropped from 45% pre-pandemic to only 9% today, which means the vast majority of occupiers in our research recognize that providing hybrid working options is essential to attracting and retaining talent,” JLL wrote.