Office Stress Not Over Yet — Evening Brief – 07.01.24
Demand for office space will continue to fall sharply as work-from-home demand rises, according to a report by Moody’s CRE Insights. Based on data from several studies and reports, the team concluded that the impact of working from home will be around 14% on average over a 63-month period, with national vacancy rates peaking in early 2026 at around 24%.
As per the Federal Reserve’s Report on Economic Well-Being of U.S. Households, a considerable number of workers associate the idea of being compelled to go back to the office with a reduction in their salary. Additionally, 28% of respondents expressed their intention to look for new job opportunities if they were mandated to return to the office.
Despite the debate between many employees and employers, employees are and will continue to spend more time outside of the office working. According to research conducted by the Survey of Working Attitudes and Arrangements, it is projected that nearly 20% of full working days will be conducted from home post 2021, as opposed to 5% before the pandemic.
The authors, led by Todd Metcalfe, associate director at Moody’s CRE, also observe that there has been a general decline in the space per office that employees utilize, and “due to the number of hybrid workers who are only in the office one or two days a week, this trend is likely to continue.”
Office workers now need only 75.9% to 80.5% of the office space required prior to the pandemic, according to the Bureau of Labor Statistics. Using data from the U.S. Survey of Working Arrangements and Attitudes, between November 2021 and March 2024, there was a 12.15% difference of working-from-home workers.
“While increasing levels of work-from-home reduces the demand for office space, office using employment has still been growing…[but] on a year-over-year basis, these jobs have grown continuously since the recovery, but at a declining rate,” the report said.
“We expect that growth in these jobs will continue, but at a much slower rate over the next 10 years. The increase in office-using workers will partially offset reductions in demand due to work-from-home.”
In addition to remote working patterns, Moody’s stated that the amount of office space per worker has been in a “general downward trend for decades.” During the peak of the Dot-Com boom, office workers used an average of 190 square feet. The figure dropped to 155 square feet in 2023.
Related research from the McKinsey Global Institute forecasts that office property values will decline by $800 billion to $1.3 trillion by 2030. Moody’s expects vacancy rates to top out as office towers are demolished or converted to residential ones in the coming years.
“Right-sizing will continue over the next decade as the market shakes out less efficient space for flexible floorplans that support our relatively new working habits,” the report said.