As companies cut back on telecommuting, employee tensions continue

More than three years after the start of the Covid-19 pandemic, returning to the office versus working from home has yet to be established. There is a constant tension around working from home between management’s need for innovation and discipline and workers’ desires for more flexible arrangements and reduced commute times. As urbanist and historian Dor Poleg is fond of reminding us, “man’s most productive hours are wasted.”

The ever-quotable Elon Musk pushes back against employees, saying that working from home is “crazy.” In an interview on CNBC, Musk told remote workers to “get off their moral horse” because others, such as workers in auto factories, food service delivery and home repair, can’t work from home, a divide he called “morally wrong.”

In addition to morale, earlier this week asset manager BlackRock told staff “we will be moving at least four days a week to the office” starting in September. They will join JPMorgan Chase, Amazon, Apple, Disney and many other firms that require office work at least three days a week.

More companies are requiring workers to come in at least a few days a week. This “hybrid” style may end up being the new norm for offices, with uncertain impacts on work and careers, but the jury is still out.

In the early stages of the pandemic, there were experiments with full-time remote work. But many senior leaders increasingly feel that having employees together in the office is essential to company culture and generating new ideas and innovations.

In January, Disney CEO Bob Iger explained how many CEOs feel. In a memo ordering employees to at least four days a week, Iger wrote, “In a creative business like ours, nothing can replace the ability to connect, observe and create with your peers.” Fear of losing creativity and competitive advantage, along with concerns about onboarding new employees, maintaining productivity, and employee discipline, all support an increase in office work.

But if firms are accelerating their return to offices, why isn’t the office usage data showing it? Office occupancy, rental rates and employment data all show tensions between employers and employees. The indicators that we have for office work have been static for more than a year and do not show a major upward trend.

One often-watched indicator is Kastle Systems’ Back to Work Barometer, which measures office keyboard entry sweeps in ten metropolitan areas. These numbers don’t move much. Castle’s latest occupancy estimate is 49.3%, up from 42.9% at the end of May 2022, but nowhere near the 100% occupancy baseline just prior to the pandemic.

The second data source comes from’s office visit data, which indicates somewhat higher levels than Kastle’s data. But the two indices do not measure the same thing, and both are what economists call “noisy” measures (with small and imperfect samples and many other issues that are reflected in the indicator). This makes them more useful for seeing trends than for very precise measurements.

Like Kastle’s keycard hits,’s office visit data shows no significant growth. Its April 2023 numbers were “virtually unchanged from April 2022” and “continue to be about 60% of what they were four years ago” in the early stages of the pandemic.

A third set of indicators appeals to economists – market rents, new construction and occupancy of commercial office space. These market demand-based indicators also show continued weakness.

Commercial Edge reports that office space rents nationwide rose an average of 2.3%. You may be encouraged by this – at least it’s positive. But the consumer price index, a broad measure of headline inflation, rose 4.9% over the same period. This means that office space prices have actually fallen in real dollar terms. In contrast, the CPI for the same period registered an 8.1% increase in household shelter spending.

The pressure from home on central business districts means that national office rent growth is actually made up of two opposing trends – rising office rents in the suburbs and falling rates in central cities. The national vacancy rate also rose, again with CBDs as the weakest performers.

It could be the increased company requirements for working in offices, it just hasn’t settled down yet. Or it could be that workers—especially the highly skilled, educated, and mobile—are resisting more office work, and companies haven’t figured out how to deal with it.

All of this comes in a very tight labor market, especially for highly educated workers. Last month’s unemployment report showed an overall rate of 3.4%, while workers with a bachelor’s degree or higher had an unusually low rate of 1.9%. Education levels are highly correlated with working from home, so the low numbers are linked to persistent weaknesses in office occupancy and rents.

BlackRock’s call for more time in the office shows one side of the coin—employers often want employees back on issues of innovation, culture and control. But falling real rents and high vacancy rates for office space, particularly in CBDs, are showing resistance from higher-educated and higher-paid workers, which has continued in part because of the strong economy.

We’ll see how that plays out if the economy weakens (or even goes into recession) with the Federal Reserve continuing to raise interest rates. But for now, employers may find it difficult to enforce their wishes for more employees in the office.

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