Increased Office Visits Don’t Make Up for High Vacancy Rates

Since April 2024, Nick Villa, associate director and economist at Moody’s, has been looking at the connection between office visits and vacancy rates. Using data from Placer.ai, which uses cell phone data to analyze foot traffic down to a property level, and Moody’s data as well, Villa didn’t find a strong correlation between visits and occupancy.

Now, Villa returns to additional Placer.ai data and reexamines the relationships. The news hasn’t improved.

The new Placer.ai data said that national employee office visits were 27.8% lower than in July 2019 and 16.5% higher than in July 2023. There are some weaknesses to the analysis with only 11 metros included and a time series that is only five years old. At the top, Miami saw a 90.6% recovery from its July 2019 building visits. New York was at 89.6%. Atlanta was third at 76.7% recovery, Dallas was fourth at 76.9% and Washington, D.C. was at 73.9%.

San Francisco was at the bottom with 47.3% lower office visits than in July 2019, meaning a 52.7% recovery. Houston was second from the bottom at 57.0% recovery. Then came Los Angeles at 62.8%, Denver at 63.7%, and Chicago at 69.2%.

These are different metrics from office occupation. The question is how far off the two might be. As of July 2024, national office occupation was 330 basis points lower than in July 2019 and 110 bullet points lower than in July 2023. But, as Villa noted, the data suggest that “higher employee utilization rates have a minimal impact on occupancy rates.”

Every full percentage point increase or decrease in office visits resulted in about a 16-basis-point increase or decrease in occupancy. While increases in visits are good for surrounding retail businesses, this will likely be more of the “new normal” that will be closer to a hybrid schedule.

Given the weak relationship between the two types of data, Villa says other variables — called confounding factors as they can affect both elements — may be at work. They might include employment growth and population growth. Also, increased foot traffic doesn’t necessarily mean higher occupancy (it could be more people spending time out of the office and coming in periodically, perhaps an extra day or two a week) just as lessening foot traffic could still occur with higher occupancy. And the data can seem to jump back and forth, with a hypothetical 10 percentage point increase in office visits leading to a 160-basis-point increase in occupancy rate based on July 2019 data or a decrease using data from July 2023.