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  August 2nd, 2022 | Written by

Home is Where the Heart is … and the Office 

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Office occupancy rates are struggling. San Francisco, New York, Los Angeles, Philadelphia, Chicago, and others are inching along with occupancy rates in the mid-40s (%). Less than half of workers are returning to their respective business districts and the trickle-down effects have been devastating. 

An estimated 26,300 New York City small businesses closed between April 2020 and March 2021. The available office space in the financial capital is now up to 125 million square feet. This has been increasing at an uncomfortable rate since 2020 (90 million square feet in the first quarter). Expectedly, Manhattan rents have been declining for 18 consecutive quarters, a phenomenon that actually began even before the pandemic. 

While Covid certainly altered how many folks engage in work, there are other factors contributing to worker aversion to a return. In most major cities, crime is up. A Goldman Sachs employee was shot and killed on a Manhattan subway line in May prompting CEO David Solomon to begin lobbying the mayor’s office concerning the declining quality of life in the city. Employees expressed concern for their safety, indicating they had been engaged in the same work at home over the previous two years thus negating any argument that their presence at the office was necessary. Earlier this year employers were pushing back on this argument, but remote work has become so commonplace now that firms are worried they’ll lose valued employees if they push too hard. 

According to a study conducted in March by the accounting and consulting firm PwC, approximately two out of every three employees who can carry out their work remotely would prefer a hybrid (in-person and remote) arrangement. A November 2021 survey by the payroll provider ADP revealed that 68% of workers would consider leaving their current place of employment if their managers insisted they work in-person, full-time.   

Another compounding factor to a return to the office has been gas prices. Deloitte was providing in some instances up to $1,000 in reimbursements for commuting costs. Gartner surveyed employers in March and found over 25% were providing some sort of subsidy (free food, etc) to offset higher fuel costs and provide an incentive to return. While this has worked in some cases, it has not been overly effective. People have gotten a taste of what it’s like to work more casually, avoid annoying traffic, eat with loved ones, and lead a less stressful life working from home. Many of these surveys point to a desire for employees to see their co-workers and share in person, but that is the hybrid argument. A very small percentage wants to return to the pre-pandemic status quo. 

While Covid was a public health crisis, it has clearly upended our notion of work. Recruiters and human resource offices have caught on for the most part. It’s leadership that either rows in the opposite direction, risking good personnel, or finds an acceptable middle ground. Firm behavior will ultimately reveal who has done the best job negotiating the new normal.