Work From Home Is Stabilizing, That’s the Good News

Those who watch the office commercial real estate market closely have likely wondered when corporations would get serious and get workers back in the office where they belong. Unfortunately, the days of “normal” office usage may be thoroughly in the past.

According to new survey data from the firm WFH Research, things may be stabilizing where they are now. After monthly online survey data since May 2020, the percentage of paid full days worked from home is remaining at just over 30%. Although the research data doesn’t go back earlier, an estimate from government survey data before the pandemic placed the trend then at about 10%.

When looking at workers who had ever worked at home during the pandemic, the trend line is stabilizing at people working on average half the time at home. And for workers with a four-year college degree, the percentage of paid full days worked from home is about 40% of all.

As of June 2022, about 15% of employees were fully remote, 55% worked full-time on site, and about 30% were in a hybrid arrangement.

The stabilization of working patterns out of the office, even if only a part, at rates higher than before the pandemic is a major upset to the pre-existing dynamics of how work happens, where it’s done, and what it eventually means for the office sector. According to analysis out of the NYU Stern School of Business and the Columbia University Graduate School of Business, there will be significant changes in “lease revenues, office occupancy, lease renewal rates, lease durations, and market rents.”

“We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction,” they wrote. “Higher quality office buildings were somewhat buffered against these trends due to a flight to quality, while lower quality office buildings see much more dramatic swings. These valuation changes have repercussions for local public finances and financial sector stability.”

If work continues on or even close to this path, a lot of office space might not be necessary, meaning massive financial implications for land values and therefore valuations in lending, nearby retail space, and tax resources for local governments.