The Back to Work Barometer

October 10, 2023

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: 11-line chart showing office occupancy levels across the U.S. Chart subtitle: Average office occupancy in the largest U.S. cities has plateaued at around 50% of pre-pandemic levels. Chart source: Kastle Systems as of September 30, 2023. Chart description: Y-axis is labeled “Office Occupancy Level” and ranges from 0% to 100%. X-axis labels range from Feb-20 to Aug-23 in 3-month increments; data is weekly and through September 27, 2023. Legend is at right; top 10 metro areas in the U.S. are plotted in differing colors and average for Top 10 is plotted in top layer. In following, data point refers to most recent available, September 27. New York metro in orange, 47.9%; San Francisco metro in purple 43.5%; D.C. metro in light teal 47.2%; Chicago metro in blue 53.2%; Dallas metro in light purple 55.1%; Los Angeles metro in slate 47.8%; Houston metro in dark green 60.0%; Philadelphia metro in dark orange 42.7%; Austin metro in dark teal 58.9%; San Jose metro in dark blue 40.7%; Top 10 Average in green, 49.7%. Please contact us for the full dataset. End chart description. See disclosures at end of document.

The allure of work-from-home flexibility continues to impact the utilization of office buildings across the United States. Based on analysis of data from key fobs — the form of identification that grants one access to an office building — average occupancy across the country in the last week was roughly 49.7%. Cities in Texas like Houston (60.0%) and Austin (58.9%) lead the pack in terms of office occupancy, thanks in part to population growth in the last few years, attractive employment opportunities, and newly developed office assets with attractive amenities. It is also worth noting that the occupancy spread across specific days of the week continues to be significant at the national level. As of the end of September, Tuesday (59.4%) and Friday (32.9%) were, on average, the highest and lowest days of the week in terms of occupancy, respectively.

Many are paying close attention to these trends, as utilization is a robust indicator of future demand for office assets. For instance, real estate managers can identify in- and out-of-favor trends within portfolios based on occupancy levels. Additionally, companies can study the patterns of employees to understand future office footprint needs. To that point, among businesses with at least 10,000 employees, 68% plan to undertake a reduction in office space in the near future. Smaller employers seem less inclined to reduce space at present, with 36% of businesses with fewer than 1,000 employees planning to downsize according to a recent publication by The Real Deal, a leading source for real estate news and information.

The data points displayed in this week’s chart underscore the notion that work-from-home trends will likely persist into the future, which will have impacts at various levels of society. For instance, cities must continue to adjust to a relative lack of foot traffic, which has already been disruptive to demand for restaurants, shopping centers, and parking garages. City budgets may also exhibit ongoing strain due to reduced funds collected from public transportation and lower tax revenues resulting from depressed office asset valuations. In conclusion, it is impossible to omit the “stickiness” of full or hybrid work-from-home environments which have persisted for more than three years when discussing the outlook for the office market at both the national and local levels. Marquette will continue to monitor dynamics within the office market and provide education and guidance to clients accordingly.

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