When the U.S. working economy informally reopened in March 2021, the notion of returning to the office was put on the table, largely due to the roll-out of COVID-19 vaccinations as well as overall fatigue from managing circumstances related to the pandemic. While professionals were returning to the office in certain industries, many in the Tech sector took a different approach.
Within the Tech sector, many U.S. workers celebrated the concept of permanent remote working as a mechanism to unlock personal freedom and eliminate geographic bias. An anonymous MFAANG employee in NYC said that of the 300 desks in her group, on April 18, 2022, she was the only one physically present.
In this blog, Newmark’s Technology & Innovation Practice Group (TIPG) explores trends in corporate tech behaviors, how these behaviors will drive decision-making and addresses the question of whether or not tech firms will mandate employees return to the office.
U.S. employment trends are outlined below (from an employment perspective only, without bias for the potential impact of inflation or other macro themes):
National employment is up 14.4% from the pandemic low in April 2020, though recovery has varied across industries. Employment in many office-using industries has rebounded to near or full pre-pandemic levels, while hospitality industries like food services and accommodation experienced a slower recovery.
Populations are migrating from highly populated states to those with historically fewer people, lower taxes and higher quality of life. States such as North Carolina, Arizona, and Utah have experienced steady population growth at the expense of states like New York, Illinois and California.
Pronounced employment recovery has occurred in TAMI and Financial Services sectors, which exceeded pre-pandemic employment as of December 2021.
With the above in mind, we address the original question – whether or not tech companies will mandate employees return to the office. While there is conflicting information and behavior, we navigated this research and compiled several perspectives for consideration:
PERSPECTIVE #1: WORK FROM HOME IS PERMANENT; HOWEVER, BIG TECH AIMS TO BRING EMPLOYEES BACK TO THE OFFICE OVER THE NEXT 24 MONTHS AND GROW ITS OFFICE FOOTPRINT
Most professionals left the office in mid-March 2020, and many in the Tech sector have still not formally returned. 26 months is enough time to form a habit, and while most are operating with the understanding that employers will eventually ask everyone to come back in some fashion, it won’t be for a traditional Monday – Friday, 8 AM – 5 PM schedule.
The migration statistics support a newfound emphasis on quality of life and work/life balance. Employers will continue to grant flexibility in support of this realization.
Big tech – including MFAANG – continued leasing when the rest of the market came to a halt.
NYC MFAANG occupancy statistics:
12.1M SF occupied pre-pandemic
1.2 M SF leased during the pandemic
13.3M SF occupied in 2Q22
1.7 MSF expected immediate term leasing
15M SF future inventory, late 2022
3M increase in RSF LEASED since the start of the pandemic
Microsoft acquired 90 acres of land in Atlanta
Google has committed over $10 billion to expand its U.S. offices and data center footprint
PERSPECTIVE #2: HYBRID OFFICES WILL BE THE NEW NORMAL, OFFICE OCCUPANCY WON’T EXCEED THREE DAYS A WEEK
Corporate culture implementation, mentorship programs and succession plans are far more effective within an in-person environment and tech companies will begin making investments to foster these engines of growth.
In the biggest US tech cities – New York City, Los Angeles, San Francisco, Chicago – the office is a critical part of work/life balance, especially for younger employees.
According to Gensler’s article Why the New Workplace Ecosystem is Key to the Future of Work, offices “are a melting pot to connect, build relationships, and establish cultural norms.”
Landlords will spend more money on installations of “Zoom rooms” to link those at home with those at the office.
Tenants will place greater emphasis on amenities and offerings, with food, beverage, comfortable furnishing and appealing decor.
Over time, equity amongst remote and in-person employees will improve; however, the at-home technology required to make that happen has a long way to go.
PERSPECTIVE #3: OVERALL OFFICE FOOTPRINTS WILL NOT SHRINK, EXPANSION WILL HAPPEN HORIZONTALLY
There will be significant re-design and reconfiguration of offices with a focus on flexibility.
The office workplace will include a higher prioritization around spaces that cater to both individual work and group meetings.
Distributed office expansion will offset the reductions made in large headquarters (hub-and-spoke model).
New construction projects will lease at premium pricing while commodity office spaces will lag, and some will be re-positioned into another asset class.
FINAL CONCLUSIONS – WHERE WE ARE HEADED:
When the technology catches up, employees in the Tech sector will likely follow a Hybrid office model, on average, a few days a week. The macro variables that will influence Hybrid guidelines are location and quality of office; the micro variables will be task type and department within the organization. Corporate decision makers will conclude that an office is a necessity but will re-imagine how it’s designed to support a new way of space utilization, targeting group work and team building activities, especially those that foster and create a culture for emerging, younger talent.
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