Commercial Landlords Fret As Office Occupancy Still Stubbornly Below Pre-Pandemic Levels

Commercial Landlords Fret As Office Occupancy Still Stubbornly Below Pre-Pandemic Levels

Despite Jamie Dimon’s initial insistence (during the throes of the pandemic) that the white-collar office-worker lifestyle wasn’t doomed, and that workers would likely return to the office in due time once the virus had subsided, corporate landlords are increasingly reckoning with the fact that their marquee properties (especially in cities like NYC) may never return to the levels of occupancy – and thus, profitability – from during the pre-pandemic days.

Even some junior bankers at Goldman Sachs – once considered a highly-sought-after career path for young people in finance – have been threatening to quit over management’s demands that they return to the office five days a week (management has even resorted to tracking in-office attendance using spreadsheets that some have described as ‘creepy’). If Goldman can’t convince the next generation of white collar workers that reporting to a cubicle is ‘worth it’, who can?

And so far, the direct data illustrating the rebound in office occupancy has been a whole lot more grim than the general labor-market data released by the Department of Labor have let on (although things aren’t rosy in that department either).

Right now, the gold-standard measure of contemporary office-occupancy trends is the card-swipe data provided by Kastle Systems. The national average office occupancy is up to 43%. That represents an increase of 50% since the beginning of the year.

But while the company tried to spin that as a positive, it’s worth noting that occupancy levels haven’t even recovered to their level from before the start of the omicron wave.

The pressure for companies to try and lure employees back has created a surge in demand for so-called ‘occupier services providers’ – companies that used to perform day-to-day maintenance and other upkeep related activities, but now find themselves called upon to perform a host of additional duties related to trying to keep tenants happy so they don’t reconsider renewing their leases.

But even executives at some of these firms understand this to be a band-aid on a bullet wound. For example, Vestian Global Workplace Services Chairman Michael Silver told one business news outlet that the commercial real-estate market right now resembles a “slow-moving train wreck”.

Which is why tenants would be wise to have a long, hard think on their occupancy needs before signing another lease.

Tyler Durden
Thu, 04/14/2022 – 13:24

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