Goldman Sachs Estimates What Remote Work Will Have Done to Office Vacancy By 2030

Just in time for Labor Day, Goldman Sachs took a look at something that has become near and dear to many employees: work from home (WFH).

Right now, it’s running about 20% to 25% of workers who skip the office at least part of the week. That’s down from the peak of 47% during the worst of the pandemic, but it’s almost 10 times higher than the 2.6% before 2020.

What the CRE industry might want to know is how long this is likely to go on. According to the report, the current level has stabilized, no matter how much employers have said that they want everyone back in the office. 

Now the bad news for office. “Going forward, 17% of all office leases are scheduled to expire by the end of 2024, 47% between 2024-2029, and the rest after 2030,” the report said. “Our baseline estimates suggest that remote work will likely exert 0.8pp of upward pressure on the office vacancy rate by 2024, an additional 2.3pp over 2025-2029, and another 1.8pp in 2030 and beyond, though this is likely to be partially offset by a decline in new construction.”

Who Is Staying Home? 

As might be expected, the percentage of employees staying home varies depending on the industry. For hospitality or retail, the combination of hybrid and fully remote is around 10%. Transportation seems to be about 15%, manufacturing a little higher, government under 20%, and so it goes upwards through healthcare, education, wholesale, utilities, real estate, business services, entertainment, and up to maybe 38% for finance and something over 40% for IT. 

“The share of employees working remotely remains remarkably elevated in industries like information that require less face-to-face interaction, while it is much lower in contact-heavy sectors like retail and hospitality,” the report says. “As of July 2023, 16% of workers are in hybrid roles and 8% are in fully remote roles, suggesting that the hybrid work model remains the more prevalent option across industries relative to the fully remote model.”

WFH is an effect of “both structural and cyclical factors,” which helps explain why it hasn’t subsided as many thought it would — or should.

The structural issues are largely technology that has been around for some significant time before the pandemic. But not being able to go to offices put a spotlight on technologies that allow communication and collaboration at a distance. In response, at least partly, the report said that “surveys show that workers now place more value on being able to work from home.” And, as people in business know, it’s hard to take benefits away once people have become accustomed to them.

Then come the cyclical aspects, like labor markets having been on the path of becoming tighter for years now. The last two years only accelerated the pace and “made employers more willing to allow employees to work remotely.” The study said that state-level data showed a 1 percentage point increase in the job-worker gap leading to a 0.3 percentage point increase in the share of remote job postings.