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Workers are returning to U.S. offices at the highest rate since the pandemic forced most workplaces to temporarily close in 2020, as infection rates continue to fall and more companies intensify efforts to bring employees back.

Office use on average was 47.5% of early 2020 levels for workers in the office over the five business days from Sept. 8 to Sept. 14 in the 10 major metro areas monitored by Kastle Systems. The company, which tracks security swipes into buildings, said that was the highest percentage since late-March 2020.

Midweek days were especially strong, with office use for Tuesday and Wednesday last week at about 55% of the prepandemic workforce, also a high during the pandemic for those days, Kastle said. The data through last Wednesday were the most recent weekly figures available.

Other indicators show a return-to-office pickup after Labor Day. On Wednesday, ridership on the Long Island Rail Road surpassed 200,000 for the first time since March 2020. Metro-North Railroad, another commuter line in the New York region, also reached a high for the pandemic period on Wednesday with 174,900 riders.

Even in Texas, where return-to-office usage figures have led the nation most weeks, workplace attendance is rising. Downtown Houston experienced a 10 percentage point rise after Labor Day to 63% after being stuck at about 50% for around five months, according to Central Houston Inc., which monitors the movement of mobile phones entering office buildings.

Most employees are returning as part of hybrid workplace strategies that allow them to split time between the office and remote work, though even here employees have experienced a recent shift toward the workplace. Some businesses are moving toward requiring three days of in-office attendance, up from two days, said Kristopher Larson, Central Houston’s chief executive.

The higher return rate this month contrasts sharply with the post-Labor Day return a year ago, when businesses dialed back office-return plans because of the spread of the Delta variant. Companies geared up for a more robust office return once more at the start of this year, only to be foiled by the spread of the Omicron variant.

Even after Covid-19 cases began declining in the spring, many employers remained hesitant to call resistant workers back to the office for fear that many would quit before returning to the office.

Now, infection rates are down and the economy is looking shakier, emboldening employers to act more forcefully to bring workers back to the office.

Comcast Corp., NBCUniversal, Prudential Financial Inc. and Zurich North America are among the companies that have been implementing policies for more time in the office. A month ago, when Peloton Interactive Inc. announced store closings and layoffs, it also said it would mandate a three-day-a-week in-office policy.

The post-Labor Day bump in office return is still far below what is needed to restore vibrancy to business districts. Many small businesses that rely on commuters say that sales have been up slightly but are nowhere near prepandemic levels.

Nikita Shimunov, owner of the First Class Barber Shop near Grand Central Terminal in Manhattan, says his business is up 10% to 15% since Labor Day. But it is only half of what it was before Covid-19 because of hybrid work.

The office return has also been uneven across the U.S. The New York metro area, which relies heavily on the financial-services industry, saw its return rate last week leap up to 46.6% from 38% one week earlier, according to Kastle. But in and around San Francisco, which has lagged behind most other office districts throughout the pandemic, the rate between those two weeks increased only 2.3 percentage points to 40.7%, Kastle said.

San Francisco restaurants that used to depend on office workers are pivoting. “We do a lot of weddings,” said Tony Marcell, a partner of Wayfare Tavern in the city’s Financial District. Fridays that used to be known for happy hours at the end of the workweek have become “brunch Fridays,” he said, in a bid to capture the stay-at-home crowd.

Owners of office buildings aren’t celebrating, either. Office demand looks unlikely to return to prepandemic levels, brokers and analysts say, as some businesses adopt remote-only work strategies and others downsize to adjust to their new hybrid schedules.

A mere 5% of 187 companies surveyed by consulting firm Gartner Inc. before Labor Day reported that they expected employees to be in the office five days a week. Nearly a third of those that adopted hybrid plans said they had no requirement for the number of days in the office.

U.S. office vacancy stands at 12.4%, the highest it has been in the pandemic, up from 9.6% in the first quarter of 2020, according to data firm CoStar Group Inc.

In a sign that more companies are trying to reduce office space, 230 million square feet of sublease space currently is available, up from 120 million in the first quarter of 2020 and the highest amount since CoStar began tracking the metric in 2005.

Many tenants are postponing leasing decisions until they get a better sense of how new hybrid and remote work patterns will evolve. An index by data firm VTS that tracks companies looking for office space fell 17.5% in July to its lowest reading since February.

“Most companies aren’t in a position to make a 10-year commitment to new office space because they don’t have real confidence in what the future looks like,” said Ryan Masiello, VTS’s chief strategy officer and co-founder.

Some companies also are facing pushback from employees who don’t like the new strategies. A group of Apple Inc. employees who call themselves Apple Together posted an online protest to that company’s three-days-a-week return-to-office plan.

Still, landlords are taking some comfort from a shift in the conversation from one focused on health concerns to one that is more of a tug of war between managers who want workers to return and employees who want more flexibility. That shift decreases the chances that the post-Labor Day boost is transitory.

“Covid-19 has become a part of daily life,” said Ben Brown, managing partner in the real-estate group of Brookfield Asset Management.

Source: September 20, 2022 | By Peter Grant