When workers across the U.S. were told to pack up their desks at the start of the pandemic and prepare to do their jobs from home, many expected to be back at the office within weeks, maybe months. Fast forward more than two years, and many people have yet to return to the office.
And it's not like companies haven't been trying to get back to in-person work. Many announced plans last year to return to offices, only to delay or cancel them due to various COVID-19 surges.
Now that the omicron wave seems to have settled, more and more companies are finally starting to firm up office-return plans. But that doesn't mean remote work isn't here to stay.
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Data shows that remote work arrangements could stick
While many workers are itching to get back to the office, many are also content with their at-home setups. And companies might actually struggle to get staff on board with the idea of showing up in person -- that is if they decide that particular battle is worth fighting.
If push comes to shove, many will probably opt not to fight it. Companies stand to reap savings by downsizing office space and being flexible with remote work. They also stand to retain staff. And at a time when so many industries are grappling with labor shortages, that's important.
Meanwhile, recent data from researchers at Arizona State University, Virginia Commonwealth University, and the Dallas Federal Reserve show that about 75% of the increase in remote work that came about during the pandemic will likely stick. Furthermore, twice as many workers as those already working remotely pre-pandemic will be working 100% remotely. And going forward, we can expect 20% of workdays to be from home.
It's this projected permanent shift that's apt to leave office REIT investors rattled. Office REITs have been sluggish since the COVID-19 outbreak began, and now, their prospects look even more precarious in the wake of changing work arrangements.
Of course, the permanence of remote work won't just hurt office buildings. It's apt to also hurt local businesses, many of which rely on nearby offices for customers.
Take small cafes and sandwich shops that once relied on the pre-pandemic lunch rush to stay afloat. Granted, some of those businesses may have shuttered by now due to not being able to shift to a pandemic-friendly model. But those that have been holding out hope for a full-fledged office return may not get to see that happen.
Cities could suffer, too
Not only might office building landlords and local businesses struggle in the wake of permanent remote work, but cities also might see their own budgets take a hit. Fewer in-person workers could translate into less sales tax collected, less revenue from parking lot fees gathered, and fewer tolls paid.
All told, a permanent shift to remote work could do more than put office REITs in an unfavorable spot. It could also have a worrisome effect on local economies. And that's a problem that lawmakers, as well as real estate investors, will need to grapple with.
