In a sign of economic progress, the number of employees returning to the office has been slowly edging higher. Office occupancy averaged just over 36% in October, a pandemic era high. The figures come from the Kastle Back to Work Barometer, a measure of anonymized keycard, fob and app access data from the top ten metro areas in the country, as compiled by Kastle Systems- a firm which secures 2,600 buildings and 41,000 businesses across 47 states.
As firms bring more people back to the office and the economy transitions into a post-pandemic era, no one really knows what the office economy will ultimately look like. Although high-end office buildings are starting to see rents rise and vacancy levels fall in New York and nationally, the vacancy rate for offices not considered elite remains stubbornly high.
While office space continues to reopen, a potentially permanent shift to more remote work undermines the very model that supports thousands of small businesses. These businesses- shops, restaurants, cafes, bars, boutiques, hair stylists, bakeries and more- are the fabric of commercial corridors in cities and towns across the country. Look at it this way, office occupancy may have risen to 36%, but that represents 64% of the workforce not in the office! Commercial cores depend on the business of office workers and two-thirds of office workers are still working from home.
Consider this- according to a report by the Office of the New York State Comptroller, the vacancy rate in New York City is at 18.3 percent, a level not seen in over 30 years. This is obviously a different rate than occupancy, as vacant space doesn’t even have a tenant. Manhattan alone is the largest office market in the country, with 463.8 million square feet of office inventory, representing nearly 11 percent of all office space in the nation, and over 18% of it is vacant. Average vacancy rates across the country are lower than that in New York City, but the problem is present everywhere.
These vacancy statistics brought to mind a Chicago Booth Review of the effect that remote work is having on city centers. It’s worth a read. What are your thoughts?
~ Brian Kasal- The Leadership Matrix
Click here- How remote work could change city centers
Added bonus- Office of the New York State Comptroller Report, The Office Sector in New York City
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