As workers began returning to the office in 2021, many companies and platforms began tracking occupancy rates on a weekly and even daily basis. It enabled the industry to compare cities, states, and even countries’ return-to-office progress. The real estate industry became hyper-focused on gauging the return to office, given the implications of empty offices and the massive impact that can have on an individual property, a neighborhood, a company, and an entire city’s economy. While office occupancy is overall on the rise around the world, average rates in the United States have lagged behind many of the largest countries in some studies. Why exactly that is the case is being studied by many in the real estate industry, who are attributing the lackluster numbers to several factors.
Many companies are tracking occupancy rates through things like badge swipes and sensors, and while the results vary a bit, all show an uptick in office occupancy. In the latest quarterly report from XY Sense, a workplace analytics company that uses sensors to provide office tenants with real-time data on occupancy, office space utilization was up 70 percent in January 2023 compared to January 2022. Among all the office space tracked, which includes 17 countries around the world, office space was used an average of 29 percent of the time in the first quarter of this year. Figures for each country varied widely. The United Kingdom posted the highest average weekly space utilization, with 62 percent, while the U.S. posted the lowest, at 21 percent. XY Sense attributed the low numbers to many companies’ continued remote work policies and workers’ ongoing opposition to returning to the office.
Another way to get insight into how offices are being used is through tracking movement using cell phone data. A May 2023 report from Basking, a workplace analytics platform that uses cell phone data to track occupancy in office buildings, found that in the first four months of this year, Europe recorded the highest weekly average peak occupancy rate at 37 percent. North America had the second highest number with 36 percent, followed by APAC with 35 percent and LATAM with 21 percent. Across all regions Basking tracked, Tuesdays and Wednesdays were the most popular days for workers to be in the office, while Fridays continued to be the least popular day. Within the U.S., offices in the Midwest had the highest weekly average occupancy rate with 52 percent, followed by the West and South with 32 percent, and then the Northeast with 24 percent.
Workers returning to the office has been one of the big questions weighing on many in the office sector ever since offices closed their doors in early 2020. There have been ebbs and flows, but this year has marked a turning point for a lot of companies that have taken a hard line on in-person attendance. “The data is saying it will increase month-over-month and that it will continue to do so,” said Scott Nelson, CEO of Global Occupier Services at Colliers, who sees firsthand what occupiers are doing to encourage more office attendance. In the U.S., many large office tenants are taking the flight-to-quality route and looking to lease in buildings with attractive amenities and good access to transit. They’re also looking to add more collaborative space in their offices.
Whether it’s because of those efforts or not, more people are coming back to the office. While some reports, like the recent study from Basking, show that North America is actually faring well compared to other countries, other reports show the U.S. is still somewhat behind others. “North America has been used to a hybrid working environment for a long time, even before the pandemic,” Nelson said. “So we’re kind of set up for that type of environment already and are used to it.” He also pointed to the U.S. generally being more conducive to people working at home versus other places around the world.
In many parts of the U.S., homes are larger, providing more space for working environments. In cities where workers live in a cramped space, there’s more desire to go to the office. Office workers in the U.S. also tend to have longer commute times, especially those who drive to the office. Workers who previously commuted to the office but now work at home are saving on average between $3,000 and $15,000, depending on whether they used public transit or a car, according to consulting firm Korn Ferry. But the key factor in his mind is one that is hard to fully explain—the cultural factor. “You go to countries outside the U.S. and the norm is much more that being in the office is a way of life,” Nelson said, adding that in comparison, the U.S. and Canada are places where working from home had already been a growing trend and was further accelerated by the pandemic.
Generalizing the data for one country, region, or even city doesn’t always tell the whole story. Some individual companies have been doing extremely well in getting employees back to the office, while others in the same industry and same city have had serious struggles. Andrew Farah, the co-founder and CEO of Density, a company that uses sensors to measure office space usage, has seen this in the data his company collects. In one example, he saw a building where a company had close to a 90 percent utilization rate, while in the same city and same industry, a company with just a 16 percent utilization rate in the office. “Getting people in person at the office is very helpful from a trust-building standpoint, and figuring that out culturally is really tough right now,” Farah said.
While we haven’t been able to fully understand why the U.S. as a whole lags behind the rest of the world when it comes to bringing workers back to the office, there are efforts taking place to figure that out. Janet Pogue, global director of Workplace Research at the design firm Gensler, has been trying to understand the very different rates of return to the office in cities around the U.S. As she’s looked at data from sources like the Census Bureau’s Household Pulse Survey, they’ve been able to get a better idea about specific issues in some cities, like how the safety of a commute can be a factor in returning. “We’re trying to get out what those nuances are and connect secondary data like the Back to Work Barometer and really look at how we can paint a fuller picture of what’s going on,” Pogue said. She and her team are in the midst of collecting responses to a survey asking workers in-depth questions about what’s keeping them from returning to the office, and what would make them go in more often. The study is expected to be published this fall. “We think it’s going to give us some real insight into what’s really going on,” Pogue said. “It’s like peeling back layers of an onion, you find one thing and then find that fascinating, and then you keep revealing more.”
The return to office movement has been a contentious, drawn-out effort that has made progress but is still a long way off from where office landlords and office tenants want it to be. Even pre-pandemic, office occupancy averaged between 70 and 80 percent at the top of the scale, and hybrid and work-from-home styles were gaining in popularity. To understand how, or if, we might get back to those numbers will require the office industry to dig deeper into what’s holding the U.S. back compared to the rest of the world. We are starting to see the connection between commute time and preference for office attendance, but bigger issues will take more time and research to fully grasp. Office occupancy may continue to be lower in the U.S. going forward, but we’re getting closer to understanding why.