October 2022: Will Office Occupancy Get To 60%?

by Chris Brablc in October 28th, 2022

This month's newsletter will include new data on office occupancy, facilities industry labor shortage, JLL's office outlook, U.S. labor market outlook and myths surround return to office.

We hope this content is helpful as you navigate your return to the office plans and flexible work.

Kastle Chairman: Office Occupancy Will Hit 60% by GlobeSt

Tracking office occupancy is crucial to ensuring you have the right resources, real estate and office amenities for your employees to be as productive as possible. The question with hybrid is what will be the normal occupancy during the week and what days will be the most utilized. Kastle System's data has most metro areas at 40-50% capacity with the expectation that it will grow over the next year.

Here are some key takeaways:

  • Kastle’s 10-city occupancy average, based on its survey of entry card swipes, stalled at 43% in March—a level it hovered around for the next six months—and then registered a modest bump to around 47% in the weeks since Labor Day.
  • “We’re already at 60% in some markets on certain days of the week,” Ein noted, adding the caveat that Kastle’s barometer is not a full vs. empty metric.
  • “Our data is not a test of whether [office tenants] are using their space at all—if it was, it would be at 90% [occupancy],” he explained. “It’s a test of how many of them are using it each week.”

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Overcoming the Facilities Management Talent Shortage by Emily Gallagher (Propmodo)

Like many industries, facilities management is struggling from a talent shortage for both experienced leaders as well as team members. With the integral service that they provide, there is a lot to be said for how we recruit more candidates into facilities management to power our physical properties.

A few interesting tidbits include:

  • As of September 26, HR-reported data shows that the average facilities manager in the U.S. earns $105,056. Now obviously that number varies by region and certification level, but even on the low end, facilities managers are looking at over $75,000 a year. 
  • As of September of this year, the average age for a working facilities manager is 50 years old, which means that the facilities management is in for a scramble to both replace employees and train them. Twenty three percent of facilities managers have worked in the industry for 20 or more years, so there’s ample concern that veteran knowledge will retire along with the retirees.

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Myths Swirl About Return To Office: Here’s What’s Real by Tracy Brower (Forbes)

There are a lot of hot takes on the office and the desires of employees with their work locations. This is a good post that looks at these statements and provides data on office usage, employee preferences and the impact of face to face.

A few talk tracks of note include:

  • According to a study by Eden, they definitely want flexibility and they prefer to have the ability to work remotely some of the time, but not all the time. In fact, 34% prefer to work in an office full time. And tech workers say if they’re away from the office too much, they miss community and camaraderie (44%), have difficulty communicating (35%) and they miss opportunities for mentorship (26%).
  • A large proportion (69%) of the youngest generation want flexibility in when, where and how they work, but according to the Oyster survey, they also rate the opportunity for career development as the most important attribute of work—something they get from being present in the office.
  • In addition, a new study by MIT examining the effects of face-to-face interactions and knowledge flow, found when people had more in-person interactions and meetings, they tended to produce more effective work outcomes. Specifically, workers in Silicon Valley who interacted face-to-face received significantly more patent citations—a clear measure of innovation, results and job prestige. The study found that if in-person meetings were reduced by 25%, patent citations would in turn be reduced by 8%.

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US Office Outlook – Q3 2022 by JLL Research

JLL shared their Q3 data (download required) on real estate and office footprints. Many organizations are shortening their lease terms and opting to relinquish space that is expiring. While some of these trends lead to smaller real estate footprints, I believe that it is also organizations seeing where everything settles with the return to office and hybrid work before making strategic decisions.

Here are a few key stats:

  • After lengthening for several quarters, average lease terms are again beginning to decline as companies reconsider short-term space needs—the average lease term had grown to 9.1 years over the past 12 months but fell back to just 6.2 years in the third quarter.
  • Gross leasing activity totaled 45.5 million square feet, a 3.6% decline from the second quarter, as tenants in many of the industries that had been driving post-pandemic growth dramatically slowed expansion plans, and others continue to downsize office footprints. A record volume of lease expirations occurring in 2022 and into 2023 is putting upward pressure on leasing activity, but renewal rates are declining significantly, and tenants are frequently opting to downsize while upgrading to higher-quality space rather than renew in place.

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The US Labor Market Is Looser Than It Appears by Gary Shilling (Bloomberg)

With inflation rising, we are in a period where according to the Fed, wages need to fall. This article is a good look at all the data regarding supply and demand and what it might mean for our labor market and inflation going forward.

Some key data points include: 

  • Job openings are about twice the number unemployed, which means that to return to the 63.4% labor participation rate of February 2020, before the pandemic, it would require 2.8 million people moving into the labor force. Layoffs in July of 1.4 of million were about 23% below the average in 2019.
  • If there really isn’t any slack in the labor market, then why are real wages falling? Corrected for inflation, average hourly pay in August had fallen 2.1% this year, with the year-over-year jump in the consumer price index at 8.2%. The many employers who scrambled to add employees are now reluctant to cut staff even as the economy slips on concern that they may not be able to find workers when things turn around.

  • In recent months, job openings are falling and so is hiring. Ditto for quit rates as employees begin to worry about finding new jobs. And the unemployment rate ticked higher from 3.5% in July to 3.7% in August.

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