Office attendance continues to tick up each year after plummeting during the pandemic, which has important implications for the broader commercial real estate market, as office space demand is linked to residential, retail and self-storage usage.
Placer.ai data, which uses anonymized cell phone data to track where people spend their time, indicates that office traffic has grown to 72.6% of pre-pandemic attendance this year. That’s up from 29% in June 2021, 52% in 2022, 66% in 2023 and 67% in 2024. That shift likely helped office vacancy rates peak at 17.2% in early 2024, up from 12.2% at the end of 2019.
Notably, rising office attendance correlates with increased downtown apartment demand. Downtown vacancy was down 60 basis points year-over-year to 4.8% during the first quarter this year. Cities with the highest office use, including New York, Miami, Atlanta and Dallas, not surprisingly, are seeing the strongest downtown apartment demand, said John Chang, chief intelligence and analytics officer at Marcus & Millichap.
Though a full return to five-day, in-office work is unlikely, the return-to-office trend is gaining momentum, as noted by Chang. A tight labor market from 2022 to 2023 caused many employers to be cautious about enforcing in-office mandates for fear of losing employees. However, with the job market softening this year, companies are increasingly pushing for office returns. Companies in the finance and tech sector are leading the charge, including Goldman Sachs, JPMorgan Chase, Dell and Amazon, which have all implemented five-day, in-office policies.
“With many private sector employers slowing their pace of hiring, the pressure to return to the office will likely increase, and that will likely bolster demand for office space in the coming quarters,” said Chang. “In turn will influence where people live, where they shop, and where they go for entertainment. The strengthening return to office trend will likely influence demand for all types of commercial real estate.”
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