When the pandemic hit in early 2020, the office-building markets in Boston, New York and Chicago — like many industries — were left reeling by the rapid flight to remote work.
Now that the pandemic is beginning to subside in the U.S., many companies that reduced their office footprint amid the workforce shift already are welcoming some workers back to the office, at least on a partial basis, fueling demand once again for commercial real-estate space.
Still, remote work continues to play a large role on the pace of the uneven recovery.
According to a study from the VTS Office Demand Index (VODI), cities including Seattle, Boston, Los Angeles, New York, Washington D.C., Chicago and San Francisco are seeing different levels of demand depending on the share of jobs in the area that are remote-friendly.
The office-market recovery is slower in Seattle, Boston and San Francisco, whose share of remote-friendly positions are among the highest in the nation, the study found. Those markets also have recovered the least from the pandemic-inspired drop in demand, and are 39, 43 and 46 percent lower than their 2018-2019 average, respectively, it added.
In Chicago, New York and Los Angeles, which have a smaller share of remote-friendly positions, they are only down 14, 15 and 24 percent from their pre-pandemic figures, respectively, the report showed.
Seasonal patterns for office-space demand
“The pandemic didn’t just change the way we work, it changed the way we live. Many workers have found value in remote or hybrid work and may be reluctant to go back to the way life was pre-pandemic,” VTS CEO Nick Romito said in the study. “In cities with higher rates of fully remote jobs, hiring and retaining talent means employers will need to provide choices and flexibility — including fully remote and fully in-office.”
On a national level, demand for office space slowed in May following signs of a rapid recovery in early 2021, according to the study.
Demand for office space in May fell 8.5 percent from April after rising 173 percent in the first four months of the year. Still, the level remains five times higher than the May 2020 pandemic low, the report said.
“Demand for office space tends to follow seasonal patterns; it should not be concerning that most markets saw demand for office space taper in May,” Ryan Masiello, VTS’ chief strategy officer, said. “Depending on the market, we anticipate that demand will continue to fluctuate this summer before rising again in August and September.”
The report found that as of May, more than half of the markets covered in the study were within 25 percent of their pre-pandemic benchmark level.
“All markets, with the exception of Chicago and Los Angeles, saw demand for office space recede in May with Seattle losing the most ground, down 24 percent during the month,” the study said. “Chicago, a market that has lagged behind all others on the march to recovery, is now the closest of all markets to its pre-pandemic level. Chicago is also the only market to see an increase in demand for office space in May.”