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Is the Return to Work Outpacing Demand for Office Space?

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According to a recent report by Upwork, one in four Americans worked remotely in 2021. In 2022, people have been gradually returning to the workplace, but the trend of remote or hybrid work isn’t slowing down.

In major cities across the country, office occupancy is still below 40% despite the increasing number of employees coming back to work in person. Still, the demand for office space seems unaffected.

Interestingly, new demand for office space in January of this year was unchanged from December 2021, holding steady at 58% of pre-pandemic levels, according to the VTS Office Demand Index, which tracks unique new tenant tour requirements at office properties, virtual and in person, in major U.S. markets.

Demand hit a high of 87% in August 2021, then dropped off in the latter half of 2021. Since October, it hasn’t gone above 61% of pre-pandemic demand.

Some office watchers weren’t surprised by the disconnect between occupancy and demand.

“While January was a quiet month both nationally and locally, it’s not an uncommon occurrence,” VTS Chief Strategy Officer Ryan Masiello said in a statement. “January is generally a reset month where people take a step back and reevaluate strategies before ramping up in earnest in February and March.”

This shifting supply and demand is largely due to the fact that many companies are switching to a hybrid system with partial remote setups and partial in-office work.

Nick Bloom, a professor of economics at Stanford University, told The Atlantic in an interview that 95% of the hundreds of companies he’s spoken to about their in-office plans expect to switch to a mixed in-office and from-home system of work.

Bloom says companies in the technology, media, and finance sectors have ceased discussing the idea of a full return to the office, and exceptions to that have been extremely rare.

By 2025, the number of people working from home is expected to reach 36.2 millionan increase of 87% compared to pre-pandemic numbers. It’s worth noting, too, the trend of remote work had already been growing before the pandemic, increasing 159% in the 12 years before the arrival of the coronavirus.

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In November, before Omicron arose, office space occupancy rates were at about 40% in major urban areas across the United States. At the time, Austin, Texas had the highest occupancy in the nation at a rate of 59.3%.

Although some employees are indeed returning to their old offices, there are two main trends that will continue on even as we recover further from the pandemic: firstly, remote work is here to stay; secondly, in some cities, the need for office space may never be the same as it was before the pandemic.

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About Author

Marie Edinger is a multimedia journalist and news anchor. She’s originally from Gainesville, Florida, where she went to the University of Florida’s College of Journalism to study Communications and Spanish Linguistics. She loves hiking, trying new recipes, and all things relating to The Lord of the Rings.

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