Although the spike in remote working has had a clear impact on office vacancy rates, researchers from Moody’s Analytics believe that there is more to the story.
Last month, data from Kastle Systems showed that office usage reached a post-pandemic high as companies began ushering employees back into the workplace following a dip in Covid-19 cases. As a result, the researchers believe that physical office usage will continue to climb “in the short run.”
“However, a multitude of surveys and early indications from initial post-COVID-19 work arrangements, it is likely that some workers will average around two days less in the office, which may ultimately form somewhat of a fuzzy ceiling at around 60%, with continued wide variance by office market, firm industry, and individual job type,” wrote Moody’s researchers Xiaodi Li, Victor Calanog, and Kevin Fagan.
Despite office usage seeing a decent rebound, the analysis notes that vacancies in major cities like New York City and San Francisco are still climbing up.
This year, leases representing 243 million square feet will expire according to JLL, which is the largest level seen since the company started tracking lease expirations in 2015.
While shedding leases may be financially driven according to Moody’s, there may also be regional and industry-related factors in play.
For instance, San Francisco saw its vacancy grow from 8.8% to 12.4% between the fourth quarter of 2019 and fourth quarter of 2021, while its work-from-home levels came in at around 50%. The city is a hub for technology workers, who are likely to have a lot of office space while simultaneously embracing remote working arrangements.
Boston shares a similar work-from-home percentage, but its vacancy has remained largely unchanged thanks to its historically level office market.
“It’s clear that there are many caveats to WFH impact on office vacancy rates. These caveats vary market-to-market, firm-to-firm, and job-to-job,” according to Moody’s. “The office market is on an evolutionary path, and we will continue to monitor it closely as new office vacancy models solidify into their eventual form.”