Office Space Demand Dwindles as Remote Work Grows in 2021

By 

Dr. Francesca Ortegren

Updated 

February 1st, 2021

SHARE


Widespread shutdowns and health concerns amid the pandemic forced 88% of organizations worldwide to adopt remote work in some capacity during 2020.[3] That shift toward remote-based teams shined a light on the fact that remote work is not only possible but also beneficial for both employees and employers, causing many to consider remote work in the post-pandemic world.

Letting employees work from home can save companies a lot of money in the long run, especially when it comes to commercial real estate costs. Dell, for example, saves approximately $12 billion in real estate costs annually by encouraging remote work.[4]

Remote work isn’t without disadvantages, though. Many huge organizations, including IBM, Zappos, and Google, limit remote work opportunities because science suggests in-office work is better for collaboration.[5]

The pandemic has severely impacted the commercial real estate industry, as many businesses have lessened office space or closed completely. Gross square footage leasing for office space specifically took a dive in 2020, dropping from over 57 million square feet in Q3 of 2019 to less than 26 million in Q3 of 2020.[1] Prices for office space are in decline, as well, particularly in large and expensive markets in the Northeast, California, and Texas.[6]

We surveyed 1,000 remote workers and in-office workers in the U.S. to learn more about people’s intentions to return to work, causes for concern regarding working in an office environment, and desires related to office real estate.

About 63% of respondents said they prefer working remotely to in a traditional office, and nearly 30% said they plan to continue to work remotely in the future, even after the pandemic.

The possibility that many won’t return to work in an office could have long-term effects on the commercial real estate market, as 53% of larger organizations plan to scale down office size post-pandemic.[7]

There are, however, certain amenities that can entice employees back to the office, which businesses and those in the commercial real estate sector can consider for 2021 and beyond in the hopes of decreasing the need for downsizing office space. Read below to learn more.

Key Insights

63% of employees prefer working remotely over working in a traditional office space.
29% of remote workers don’t plan to return to the office, even after the pandemic.
Only 24% of those currently working in an office feel safe at work.
Gross commercial leasing square footage in Q3 2020 was around 25.8m, down 52% from 53.6m in Q4 2019.[2]

63% of Employees Prefer Working From Home to in the Office

Nearly two-thirds of employees said they prefer working remotely over working in a traditional office space. This preference was especially pronounced for those who are currently working remotely, while in-office employees were more evenly split: 72% of remote employees prefer remote work compared to 48% of those currently working in an office.


People aren’t simply enjoying the ability to wear sweatpants and nap in the middle of the day as part of the work-from-home lifestyle: They’re recognizing the real, long-term benefits. In particular, they enjoy the flexibility and lack of commute.

Here’s what people like about remote work:

  • Saving time by eliminating commute (62%)
  • Flexibility (61%)
  • Saving money (55%)
  • Spending more time with people I live with (50%)
  • Sleeping in (43%)
  • Increased productivity (39%)
  • Spending time with pets (38%)
  • More breaks during the workday (30%)
  • Developed healthier habits working remotely (29%)
  • Ability to live in a different location than company (24%)
  • Less management oversight (20%)


The average American spent about 200 hours commuting to and from work each year prior to the COVID-19 pandemic.[8] Eliminating that time in a vehicle or other transportation doesn’t just save workers time; it saves them money, too. In fact, working remotely could save more than $1,200 in annual fuel and car maintenance costs from their commute alone.[8]

What’s more, the additional flexibility improves employee productivity: 85% of businesses in one survey said increased flexibility led to greater productivity among employees.[2]

Nearly 30% of Remote Workers Plan to Work Remotely After the Pandemic

About 89% of respondents said they worked remotely at some point in 2020 — many more than the 24% of workers who worked remotely in 2019.[9]

Very few workers (17%) have already returned to work in the office, suggesting that many companies and employees still don’t feel safe enough to shift back to conventional workspaces.

The newly approved vaccines, however, have many expecting to go back to the office sooner than later: More than 60% anticipate a return by Q2 2021 or earlier.


And despite the majority of workers preferring remote work, not all can do so permanently. About 29% of those currently working remotely intend to continue to do so after the pandemic. That 21% increase from the 2019 remote workforce means fewer workers will return to the office.[9]

Those who are returning to the office, however, aren’t necessarily doing so because they want to. The majority of workers said they have already or plan to return to the office because their job requires it. Far fewer want to return for office perks and amenities such as socializing.

Top reasons employees plan to return to in-office work include:

  • My company requires returning to the office (54%)
  • My specific position requires me to be in the office when possible (35%)
  • I enjoy the social aspects of office life (29%)
  • I am more productive in the office (28%)
  • Distractions make working at home hard / unenjoyable (20%)
  • I don't have a sufficient home office (13%)
  • I enjoy the shops, restaurants, and/or bars around the office (12%)
  • In-office amenities and perks (11%)
  • Office-building amenities (10%)


Only 24% of Office Workers Feel Safe in the Office

The uptick in COVID-19 cases moving into the winter months has caused many Americans to feel uncomfortable with the idea of working in an office. The majority reported concerns related to their and their family’s health, along with feelings of anxiety, when asked how they felt about returning to the office. Just 20% of workers reported feeling safe at the thought of working in an office.

Reported feelings related to working in an office for all workers:

  • Worried about their health (54%)
  • Worried about their family’s health (52%)
  • Anxious (45%)
  • Uncomfortable (45%)
  • Productive (22%)
  • Connected (20%)
  • Safe (20%)


Those who are currently working remotely tended to report more concern when asked about working in an office, but even those who are currently working in an office don’t feel completely comfortable. In fact, just 24% of in-office workers reported feeling “safe” in an office, and 46% said it provokes worries about their health.

Remote workers, on the other hand, were more concerned about the thought of returning to an office, with only 17% feeling safe and nearly 60% reporting worries about their health.


Considering many companies plan to return to in-office work in early 2021, employers should take steps to ensure employee safety and comfort.[2]

Currently, 56% of respondents don’t think their company is taking appropriate safety measures regarding COVID-19, which has led many to feel leery about working in an office. In fact, 16% reported they wouldn’t feel safe in an office until the pandemic was under control. Those currently working remotely were nearly 2x more likely to feel that way than in-office workers.

Encouraging in-office work hours will require employers to put more safety measures into place, as more than 80% of remote workers said they’d feel more comfortable returning to the office if certain precautions were taken.

Employees aren’t requesting extraordinary measures; instead, the majority of their safety requests are in line with CDC guidelines for office workplaces, such as spaced-out workspaces, social distancing in communal areas, improved ventilation, and daily health checks, among others.[10]

Precautions that would increase employee comfort in the office include:

  • Requiring everyone to wear a mask (62%)
  • Easy access to sanitizing equipment (62%)
  • Office deep cleaning each evening (57%)
  • Properly distanced desks (56%)
  • Equipping office with a sanitizing AC system (52%)
  • Temperature / symptom checks each morning (50%)
  • Properly distanced meeting spaces (47%)
  • Individual office space for each worker (45%)
  • Weekly COVID-19 testing (44%)
  • Requiring vaccines for all workers (34%)


Commercial Real Estate Developers Need to Stand Out to Get People Back to the Office

The commercial real estate market may continue to be devastated by the shift toward remote work, and many companies are beginning to downsize their office space to account for fewer in-office workers.[2]

Gross leasing activity in U.S. office space is much lower in 2020 than previous years, with a 47% decrease between Q1 and Q2 alone.[1] And, while there was a slight uptick in Q3 compared to Q2, activity remains startlingly low.


Some accounts estimate that the need for office space will decrease by 15% in the coming months as a direct result of continued remote work, as 77% of large companies plan to increase flexibility when it comes to working from home.[2]

Although downsizing office space doesn’t provide a great outlook for commercial real estate, it does mean there will be movement in the industry and office-space owners will need to stand out to employers looking to move.

We asked employees what amenities they’d like when it comes to their office building. Unsurprisingly, location matters! Employees prefer nearby parking and places to grab a snack or lunch during their break over nightlife and retail.

Office building amenity wishes:

  • Close to coffee and lunch spots (49%)
  • Close parking (45%)
  • On-site cafes and restaurants (44%)
  • On-site security guard, cameras, security fobs, etc. (41%)
  • Parking garage (38%)
  • On-site gym (37%)
  • On-site day care (31%)
  • Eco-friendly building certifications (30%)
  • Rooftop / patio space (29%)
  • Pet-friendly building (26%)
  • Close to public transportation (23%)
  • Communal space in building (19%)
  • Nearby retail shops (18%)
  • Close to nightlife and bars (14%)
  • Busy, commercial area (11%)


Takeaways

In the wake of the pandemic, companies have fundamentally changed the way they think about remote work — both during and after the pandemic.

Many employees are enjoying perks of the work-from-home lifestyle but are mostly hesitant to return to the office due to COVID-19. In fact, 56% don’t believe their company is taking appropriate precautionary measures to prevent COVID-19 spread, causing many to delay returning to the office.

Nearly 1 in 3 don’t plan to return to a traditional office even after the pandemic, which will increase the remote workforce overall and cause companies to reconsider their current office space.

Fewer in-office employees will undoubtedly negatively impact commercial real estate in the coming years, and commercial real estate developers will need to make adjustments in order to stand out to attract potential lessees in what will be a competitive market after restrictions subside.

Methodology

We surveyed 1,000 Americans who reported currently working from home for a company that has office space (N = 607) or working in an office (N = 397) most of the time.

Respondents answered up to 20 questions on December 11, 2020, about their experience during the pandemic as part of a larger Remote and Office Work Survey. Select questions related to COVID-19 safety; office and building amenities were selected for this study.