Are people returning to a full week "in person"...nope. Not now, not ever. City's and, in particular, office space are going thru an existential crisis. Hybrid work is the new broad statistical norm (with plenty of outliers on either side of the spectrum) which means that City's are no longer as critical to American GDP as they once were. The same isn't true for their feeder suburbs.
Northern highly taxed Dem cities are going to feel the hurt particularly badly as tax revenue is likely to drop and mass transit ridership will be permanently down (creating economic chaos)
Is there a coming crash in office real estate coming? Probably. Will this pull-down or significantly impact other parts of our economy including banking? That's the big question.
The New Abnormal
In February this year, American office occupancy hit a pretty significant milestone on its journey to recover to pre-pandemic levels. Data gathered by Kastle Systems, which tracks security pass swipes for offices in 10 major cities across the US, warranted articles that featured experts pondering whether this was “as good as it gets”. The figure that occupancy rates had exceeded for the first time in just under 3 years? 50%.
February 2020 has been the benchmark month that dates have since been measured against. At that time, offices bustled with workers as they had for decades. Trains, city streets, local eateries, and coffee shops buzzed with people on their way to and from work. Indeed, before the pandemic, Kastle's data showed that occupancy levels mainly fluctuated on Fridays, and even then only to ~90%.
Of course, no-one needs reminding of what happened next. With businesses shuttered and travel restricted, office occupancy fell to less than 15% of normal in April 2020, and America’s cityscapes have been in a slow recovery ever since. Indeed, while calls to return to the office from companies like Google and Goldman Sachs intensify, city offices haven’t proved any more alluring to at-home and hybrid workers this year. The occupancy figure has hovered at about that 50% benchmark for the last 4 months.
The one thing that did bounce back quickly? Traffic.
Traffic is back
The sharp rebound in traffic — even in dense cities like New York — is particularly interesting. Data from the MTA reveals that Subway usage in the Big Apple is hovering around 70% of what it used to be pre-pandemic — a figure that, like office occupancy, hasn't budged much this year. However, usage of the cities bridges and tunnels has been back to normal pretty much since late 2021, recovering quickly from the traffic-free days of the pandemic.
Mining from home
Obviously, remote working isn't suitable for every profession. Data from the American Community Survey confirms what you might expect; writers and authors, economists and market researchers, software developers, management analysts and mathematical scientists are the occupations with the highest share of remote workers (all north of 60%). On the flip side, butchers, metal and plastic workers, mining machine operators and highway maintenance workers are all overwhelmingly working as normal, with just 2-3% of people in those occupations working remotely.
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