Senior Client Partner, North America
Is Half Empty the New Normal for Office Occupancy?
The company launched a spring campaign to bring workers back to the office. The goal: three days per week. Months later, the results are in. Some employees quit; promising candidates balked; and many employees, including high performers, strategically used vacation days to whittle down their weekly in-office time to 2.5 or even 2 days.
Call it a new low in what has become a yearlong corporate effort to get more workers back into the office. According to the latest figures from building-security firm Kastle Systems, office occupancy in 10 major cities has been holding steady for more than a month at 43% or lower, prompting the firm to suggest for the first time that this may be the “new normal” for businesses nationwide. That’s still up for debate, but experts say that employees’ continuing resistance, coupled with reemerging COVID concerns, has pushed back-to-office plans to the brink. “We’re likely at the reckoning point for finding the power balance between organization and employee,” says Mark Royal, senior director for Korn Ferry Advisory. “This has been coming for a while.”
The stakes are high. Many firms have invested heavily in renovating offices for the post-pandemic era, with special safety protocols. More importantly, high-level leaders generally feel that in-person meetings are a critical component of business success. But they also know that pushing that agenda risks alienating workers a time of a deep labor shortages. Across the labor market, employee expectations about flexibility have become deeply rooted. Experts expect office occupancy to inch up a bit more, but not much. “It wouldn’t surprise me if employees who can work remotely spend half their time in the office,” says Royal, though he says this will vary widely depending on role, organization, and industry.
Most firms are now in a real-estate holding pattern due to long leases, which are typically 5 to 12 years long. “It’s not like most executives can make a decision today and cut half of their real estate. They’re committed,” says Anthony LoPinto, global sector leader in the Real Estate practice at Korn Ferry. In any case, he adds, now is not the time for substantial real-estate shifts. For example, a company with 100,000 square feet at 43% occupancy and an expiring lease would do best to not cut its footprint in half. “That’s ill-advised,” he says. “I would be really careful not to make a long-term decision based on today’s short-term environment.”
Footprint and space-utilization needs will play out over the next decade, he says. LoPinto advises executives to accept that the current détente is not permanent. “Don’t kid yourself. It won’t be 43% occupancy a year from now, or three or five years from now,” he says. Office usage will continue to evolve, he says, given that there are so many impactful variables—such as the new generation of employees already being integrated into firms, whose layout and utilization needs will differ from current pandemic-era employees.
This said, the needs of office workers a decade from now are not altogether mysterious, says Royal. “Leaders can help themselves by listening and gathering feedback about people’s experiences and preferences,” he says. That information gathering will likely be surprising, he adds, as employees are learning in real time how their office needs are changing. For example, some companies are finding that staffers are biking or jogging to work more, and need more shower facilities. These details help executives develop their views on future real-estate needs and decisions.
Whatever a firm’s current in-office policies may be, Elise Freedman, leader of the Workforce Transformation practice at Korn Ferry, emphasizes the importance of making sure that employees understand why those policies exist: Why is it valuable for a staffer or team to be in the office? What does the organization seek to achieve by bringing people in consistently? Why is a mostly remote schedule unsustainable? Without that explanation, policies can seem arbitrary: if employees feel safe and believe that coming back is worthwhile to them personally, she says, “return to the office will go much more smoothly than with any big mandate.”