The first six months of this year looked promising for a recovery in U.S. office-space market as vaccination efforts took off and Covid-19 cases began declining.

The Delta variant, which has led to a resurgence in hospitalizations and deaths, has put a crimp in those expectations.

After six straight months of increased demand for office space, the August VTS Office Demand Index showed that growth slid 1.2 percent in July from June. Still, the decline is lower than the average decline in July 2018 and 2019 of 5.1 percent and demand remains 282 percent higher on a year-over-year basis, the report sad.

“The Delta variant is causing some uncertainty across the economy, so it’s no surprise we’re seeing that reflected in demand for office space as well,” VTS CEO Nick Romito said in the study. “But there’s no need to hit the panic button yet. We’re likely looking at another delay to full recovery, but early indications point to continued relative stability as seen earlier in the year — not the massive drop-offs we saw when the pandemic first began.”

The shift to remote work clearly continues to play a role in office-space demand, the report said. Growth in office-using employment in June reached its lowest level since June 2021.

“San Francisco, Boston and Seattle — markets with some of the nation’s highest shares of remote-friendly work — continue to lag overall and are farther than other markets from full pre-Covid office demand levels. The three markets are, respectively, at 62, 64 and 76 percent of their typical 2018-2019 office demand,” VTS said in the study.

By comparison, New York City, Los Angeles and Chicago “have remote work shares that are much closer to average, and their office demand is already 92, 112 and 86 percent (respectively) of their 2018-2019 levels.”

The Delta effect

To be sure, the emergence of the highly transmissible Delta variant is weighing on employee enthusiasm for a return to the office anytime soon.

According to a survey by GlassDoor, an online job and recruiting site, a majority (66 percent) of employees in the U.S. in July had positive sentiments about returning to in-office work. But that’s down from 72 percent of workers in April, when virus cases were dropping.

The study found that about 90 percent of workers were worried about returning to the office and about a third (35 percent) were wary of contracting Covid-19 there.

Among other virus-related office issues, 32 percent were worried about touching things that other people had touched; 30 percent were concerned about knowing whether to shake hands, fist bump or touch elbows with others and a fifth (19 percent) worried about not having a permanent desk at the office.

Despite the health crisis, 96 percent of employees plan to return to the office in some capacity, as many have struggled with working remotely, the study said.

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