Zoom made headlines in August when the video-conferencing company told employees who live near an office to work from that space at least two days a week.
And Zoom isn’t the only big company that is mandating or strongly recommending that its employees return to the office. But are these orders actually bringing workers back to their cubicles, conference rooms and collaboration spaces? Not really, according to a newly released study.
According to the second-quarter 2023 Workplace Utilization Index from XY Sense, office space around the globe was used just 30% of the time during the second quarter of this year, an increase of just three percentage points higher than during the third quarter.
This shouldn’t be too surprising to anyone watching the Minneapolis-St. Paul office sector: Vacancies remain high here, and the majority of office employees are still working from home at least part of the time.
And Alex Birch, founder of XY Sense, told Minnesota Real Estate Journal that this 30% figure might be the sign of a longer-lasting new normal in the office sector.
“This year we didn’t have any major COVID impediments where we saw new lockdowns,” Birch said. “Given that this is the first year of no new COVID developments and no new influence from COVID, are we starting to see what is a new normal in the office sector? Is this the effect of large enterprise companies dealing with long-term office leases?”
As Birch said, many of the biggest companies are locked into long-term office leases. They can’t move as easily to new, smaller space. Because of that, there’s plenty of office space around the globe that is simply not being used most of the time.
And that indicates what might be a long recovery for the office sector.
Troubling numbers
Consider the numbers from XY Sense’s second-quarter report, which aggregates data from 24,885 workspaces across the United States; the Europe, Middle East and Africa geographical grouping; and the Asia-Pacific region. This data comes from XY Sense’s network of sensors installed in client workspaces, sensors that passively monitor office areas to collect real-time insights. XY Sense says that office-utilization numbers are updated every two seconds.
According to the Workplace Utilization Index, levels of workplace utilization have plateaued at about half pre-pandemic levels. Days of the week matter, too. The index found that office utilization numbers are 84% higher on Tuesdays, Wednesdays and Thursdays than they are on Mondays and Fridays.
The report found that office usage was highest on Tuesdays at 38.2%, and lowest on Fridays at 18.2%.
What’s interesting is that U.S. office-usage rates were the lowest of all the countries tracked in XY Sense’s report. The report found that U.S. office space was used just 20% of the time during the second quarter of this year. That’s lower than the 35% usage rate recorded in the Asia-Pacific region and far lower than the 52% usage rate seen in the United Kingdom. The United Kingdom’s office-utilization rate was the highest in XY Sense’s second-quarter report.
Birch pointed to several possible reasons for the lower office-utilization rate in the United States.
Home sizes are larger here, which makes it possible for more workers to work comfortably from home offices. As Birch says, it’s the opposite of what many workers in Japan face. He points to a remote call XY Sense had with a client in Japan. That client had to take the call in a closet as it was the best available private space in the client’s home.
Commute times matter, too, Birch said. Many workers moved even further from their offices during the pandemic. That’s another incentive for these workers to remain in their home offices.
Technology has improved, too. Birch said that tech is good enough today so that many office workers can do their jobs completely from home.
And one other factor? The independence of U.S. workers.
“People in the United States don’t like to be told what to do,” Birch said.
That last factor might be an important one. As Birch says, it’s one thing for companies to mandate that workers return to the office, at least on a part-time basis. But it’s another for these companies to enforce these mandates.
“There’s a gap and a disconnect between what companies are saying and what they are actually doing,” Birch said. “They’re not always enforcing these mandates. And if they aren’t, then many employees simply aren’t listening to them.”
That doesn’t bode well for a return to pre-pandemic levels of office usage anytime soon.
“While individual companies may see increases in office attendance and utilization, it’s clear that most businesses won’t see a return to pre-pandemic office utilization levels in the foreseeable future,” said XY Sense head of customer success Shivaun Ryan, author of the report. “We’ve reached a new normal. The question is how workplace leaders are going to adapt their office portfolios to meet this new status quo.”
A new way of working?
XY Sense’s report also revealed changes in workers’ activities while they are in the office. In the first quarter of this year, XY Sense reported a 24% utilization rate for collaboration spaces compared to a lower 18% workplace utilization rate for individual workpoints such as workers’ desks or cubicles.
That changed in the second quarter when the utilization spaces for individual spaces increased by 67%. According to XY Sense, this indicates that workers are performing a more balanced blend of individual and group work than they were at the beginning of the return-to-office movement. Back then, workers spent most of their in-office time participating in group discussions and meetings.
How are companies trying to get their employees to return to the office? Birch says that companies are trying everything from official mandates to perks that make coming into the office more enjoyable.
He points to the amount of free food that some companies are offering to their workers. Then there is the move to higher-quality office space. Those companies that can afford to move, and have approached the end of their leases, often move to higher-quality space as a way to entice workers to come into the office at least two or three days a week, Birch said.
This trend is having an impact on the commercial office sector. When companies move to higher-quality space, they are often leasing less of it. That makes financial sense: By leasing less space, companies can afford the higher costs of the higher-quality spaces they are leasing. But that does leave a lot of unused office space across the globe.
The trend is especially troubling to Class-B and Class-C office space that lacks the modern amenities and collaborative spaces that today’s tenants seek.
“Companies are experimenting with a variety of approaches to bring workers back,” Birch said. “They want their employees to come in and connect with each other, even if it is for a shorter amount of time. The general sentiment is that companies want people to come back more often so that they can collaborate and be able to understand each other’s missions and values. All different forms of experimentation have happened to try to make this a reality.”
Despite the sluggish return to the office, Birch does predict that the 30% utilization figure will increase over time, even if that increases takes longer than anyone predicted during the height of the COVID pandemic.
“That 30% number has to change,” Birch said. “It just will change more slowly than organizations would like. With the duration of office leases and the time it takes for companies to downsize and find new space, it will take time. We will see the utilization percentage increase. But it will be a gradual increase.”
