Delta force: Surging Covid variant spoils return-to-office plans
Dashed hopes for a widespread revival of in-person work after Labor Day leave office markets in limbo
As recently as July, visions of reoccupied desks and packed commuter lines danced in the heads of employers and office landlords, who clung to hopes that a widespread return to the workplace after Labor Day might still be in the cards.
But an explosion of Covid cases driven by the highly contagious Delta variant has forced a growing number of firms to reconsider their plans.
With infection and hospitalization rates rising across the U.S. — and persistent vaccine hesitancy rendering herd immunity unlikely — many companies are now putting off previously announced deadlines for employees to start reporting to the office.
Delta’s rise has muted cautious optimism for a speedy economic recovery in general, and for the office market in particular. The vacancy rate in Manhattan, the country’s largest office market, stood at 16.9 percent in August, a hair below the record 17.1 percent set in May and matched in July.
Despite a slight uptick since the start of the year, office use in major markets remains just a fraction of pre-pandemic averages from the first quarter of 2020 — 38 percent in New York, 49 percent in Chicago and 62 percent in Los Angeles, according to anonymized data from Brivo, a firm that supplies card-swipe and other access-control systems for offices.
In each of the first three weeks of August, office occupancy actually declined in New York, Los Angeles and San Francisco as delta continued to generate headlines, according to card-swipe data from Kastle Systems.
“The delta variant is a meaningful threat to [New York City’s] recovery,” Mark Zandi, chief economist at Moody’s Analytics, told the New York Times in mid-August.
Firms in the tech sector — among the first to go remote at the start of the pandemic — are now leading the retreat from the Labor Day consensus. Google and Apple both announced in late July that they were pushing their office reopenings to October. But a month later, both firms decided to put it off until January, as did Amazon and Facebook. Twitter, which last year announced that employees could work from home indefinitely, has closed offices that it had recently reopened in New York and San Francisco.
Financial firms including BlackRock, Wells Fargo, Credit Suisse, PIMCO, T. Rowe Price and Liberty Mutual have all pushed back plans to return to their offices until at least October. Boston-based asset manager State Street announced in August that it would abandon and sublease its two Manhattan office buildings entirely in a more permanent embrace of hybrid remote and in-person work.
JPMorgan — whose CEO, Jamie Dimon, fired the starting gun in April for Wall Street’s return when he announced July as the banking giant’s target date — is still sticking by its revised September reopening plan, at least for now, as is Goldman Sachs.
But the list of major firms postponing their office reopenings keeps growing across numerous sectors — from ViacomCBS and Sony Pictures to Ford and Coca-Cola.
An August survey by the Partnership for New York City found that 44 percent of employers in the city have delayed their return-to-office plans because of the delta variant surge. Employers estimated that 41 percent of their office workers would be back at their desks by Sept. 30 — down from their previous prediction of 62 percent three months ago — and they expect nearly a quarter of employees to be working remotely even by the end of January 2022.
Boston Properties, which owns approximately 12 million square feet of office space in the New York metro area, has seen a decline in occupancy of about 10 percent in August, according to the New York Times, but CEO Owen Thomas remains optimistic.
“I think the return to the office is a ‘when’ question, not an ‘if’ question,” he said. “Delta is affecting the when.”