Reasons Why Commercial Occupancy Rates are Below 50%
Cities including San Francisco and New York are still experiencing office commercial occupancy rates below 50%. Reasons workers not returning to office- centric business districts include an abundance of knowledge base workers who learned that they could work remotely, lingering effects of Covid variants and quality of life. Companies faced with the realities of vacant office space are advocating for an end to hybrid work.
The problem is that in 2023 employee’s interest in hybrid work has not lessen, but in many cases increased. The argument that productivity will improve with a return to the office rings hollow with many studies showing that productivity has not decreased with remote/hybrid work.
Silicon Valley saw the largest economic growth in the country between 2019 and 2021 at 19%, while 46% of workers in the Bay Area worked remotely. How and where work is performed will never be the same as pre-pandemic.
The corporate game plan has been in economic downturns to cut staff as employees are viewed as expenses and not really assets. We have seen this play out in the last quarter as numerous companies cut staff and demand that employees return to the office. Some have characterized the employees wanting to work remotely as self-absorbed.
I believe these short-term actions will fall short unless we address the reality that increasingly many workers are not coming back to work in -person because they can no longer afford to live and work in our cities. Living wages for numerous cities in the United States fall woefully short of the necessary income to rent or buy housing. In many cases you need two people to be able to afford housing. Worker’s solution has been to move out of major metropolitan areas to find affordable housing and then commute great distances to work. In some cities the cost of commuting is now over $9,000 a year. Workers are recognizing the realities of their financial situations and the solutions of starting a side hustle, cut expenses, invest in crypto while well-meaning often fall short.
The economy needs the workers who do jobs of servers, salespeople, police, fire, schoolteachers, nurses, social workers, etc. The solution may be to pay workers more. Numerous studies show that higher pay often leads to greater productivity, lower absenteeism, and ability to attract workers. S&P 500 CEOs averaged $18.3 million in compensation for 2021—324 times the median worker’s pay. Should this gap be narrowed and if it is would we see more workers returning to in-person work? Thoughts?