Some Office Buildings Are Thriving, According to Placer.ai
While much of the office sector news continues to focus on high vacancies and less usage, a recent Placer.ai report noted that some office properties aren’t just being used – they’re in out-performing territory, complete with higher occupancies. To delve further, Placer.ai analysts studied four office buildings in major metropolitan areas – Chicago, Dallas-Fort Worth, New York and San Francisco – to discover why utilization recovery was so strong.
“The similarities between the overperforming buildings were striking especially since they are markets with very different populations, migration trends and industry mixes,” Placer.ai Head of Analytical Research R.J. Hottovy told Connect CRE.
What separated these buildings from the rest of the pack?
More Single-Family Households
The report indicated that “in all the labor catchment areas of the analyzed Office Indexes, the share of one-person households was larger than the nationwide share of 27.5%.” Meanwhile, families with children were underrepresented. Because workers with young children at home were less likely to go into the office, “the office buildings seeing the strongest post-COVID recovery are those that serve a large contingent of single employees,” the report noted.
Many Managers and Executives
The report also noted that “executives and managers make up an outsized portion of the outperforming buildings’ catchment areas.” Specifically, more people in managerial or executive roles visited the office. Many of the executives are likely choosing to be on-site, while others “might be looking to encourage their staff to return to the office through leading by example, the report said.
A Higher Share of Professional Services Jobs
The report found that the outperforming buildings have a higher share of employees working in finance, insurance and real estate. Meanwhile, a larger share of the catchment area population of the high-occupancy office complexes works in high-tech jobs as well. Many financial institutions and tech companies ask employees to return to the office at least three times a week, which could also explain the numbers.
Population Returns to City Centers
Hottovy indicated that migration trends definitely play a role in return-to-office trends. While populations fled Chicago, New York and San Fransisco during and in the immediate aftermath of the pandemic, “we’re now starting to see younger employees moving back into urban areas because of return-to-work mandates and to be closer to their jobs,” he added.
Don’t Expect RTW Onslaught
While the data indicated positive return-to-work trends, Hottovy cautioned that employees like work-schedule flexibility. “It’s unlikely that we’ll return to pre-pandemic levels where only 10% of the population permanently worked from home,” he said. “It’s more likely that we’ll see a continuation of a hybrid home/office model going forward.”
Still, this shouldn’t prevent property owners or employers from continuing to encourage return-to-work activities. “There are still ways for employers to successfully encourage employees to return,” Hottovy commented. And for landlords, “this data can help to identify and recruit those companies that have the greatest potential for office-building utilization,” Hottovy added.
