Despite Return-to-Office Mandates, Downsizing and Vacancy Upticks Persist

Return-to-Office Mostly Unchanged in 2024

While employer-mandated return-to-office policies at well-known companies have garnered plenty of headlines, office utilization data remains mostly unchanged. Due to remote and hybrid work, downsized office footprints still appear to be the norm in the office sector, according to our most recent U.S. office market report.

Many companies have tried to entice workers back to the office with amenities and other incentives, but for the most part, these efforts have fallen short. Having grown tired of the carrot approach, some companies have instead decided to embrace the stick. Amazon CEO Andy Jassy announced in a memo that the company expects its workers to return to the office five days a week starting in January. Earlier this year, Dell announced that remote workers would no longer be considered for promotions. Meta informed its employees this summer that attendance will be tracked daily and failure to be in the office at least three days a week could lead to termination.

Key Takeaways: 

• Despite recent return-to-office mandates from major companies, office utilization remained unchanged, and vacancy rates continued to rise, with the national rate at 19.5%, up 170 basis points year-over-year 
• Under-construction office space totaled 68.5 million square feet nationwide, of which only 9.3 million square feet broke ground this year 
• Office sales totaled $23.8 billion through September, with assets trading at an average of $171 per square foot 
• San Francisco remained the most expensive market in the West, with asking rents averaging $67.32 per square foot, nearly matching national leader Manhattan’s $67.93 per square foot 
• Chicago’s office construction pipeline shrank to 827,906 square feet as of September, a quarter of the 3.4 million square feet under development a year ago
• Manhattan saw improvement in office occupancy, with its vacancy rate decreasing by 90 basis points year-over-year to 16.8%
  

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RSK: A lengthy report but read the key takeaways in the beginning. Eventually, what goes around, comes around.