Dive Brief: Builders, developers and investors should expect a slower epidemic recovery in the office market in cities with a greater proportion of remote friendly jobs and a faster recovery for cities with fewer remote friendly jobs, according to the VTS Office Demand Index. Seattle, Boston and San Francisco, the job markets with the most remote-friendly positions in the country, have at least recovered from the level of demand they had before the pandemic. According to the index, Chicago, New York and Los Angeles – markets with the least remotely friendly positions – fared much better. Washington, D.C., an exception to the pattern with a high rate of remote-friendly jobs and a prolonged recovery, has a large proportion of government employers who may be less willing to keep remote work arrangements in place than employers in Boston, San Francisco and Seattle, according to the VTS, a commercial real estate rental, marketing and asset management platform. Dive Insight: While cases of COVID-19 in the US remain at relatively low levels compared to the beginning of 2021, the pandemic has changed the way America operates, with more employees choosing to work remotely. That effect is still being felt in the office rental market, where the trend of remote work appears to be lingering, according to VTS CEO Nick Romito. “The pandemic has not only changed the way we work, it has changed the way we live,” Fey said. “Many workers have found value in remote or hybrid work and may be reluctant to return to the way life was before the pandemic.” Press release. The index, which tracks in-person and virtual tenant tours of office property across the country, is an early indicator of upcoming office leases as well as the only commercial real estate index that clearly tracks tenant demand, the company said. Remote fit job posting data was extracted from a study by Apartment List which builds on the previous academic work of Jonathan Dingell and Brent Neiman. All markets, except Chicago and Los Angeles, saw a drop in demand for office space in May, according to the index. Seattle saw the biggest drop, down 24% during the month. However, more than half of the markets covered by the VTS were within 25% of its pre-pandemic index as of May. The decline marks a shift to the normal swing movement of office demand, which is likely driven by a seasonal slump and the easing of pent-up demand, according to VTS. Chicago, New York and Los Angeles remained down by 14%, 15% and 24%, respectively, of their pre-pandemic VODI values. On the other hand, Seattle, Boston and San Francisco remained down 39%, 43% and 46%, respectively, from their average in 2018-2019. Chicago is the closest of all US markets to its pre-pandemic level, and the only market that saw an increase in demand for office space in May. This increase is partly due to a higher proportion of jobs not classified as remotely friendly, according to VTS. Seattle was the only city covered by VODI that saw a decline in office hiring in May, largely due to its relatively high share of remote friendly jobs slowing the recovery in office demand. But office demand in Seattle has been volatile in the past, and the current decline is modest compared to fluctuations in office demand in the city in the years immediately preceding the pandemic, according to VTS. As more employees return to the office, companies will adjust their office space to accommodate the increasing reliance on decentralized work, such as working from home. Research by architecture firm Leo A Daly has found that in the coming months and years, more office tenants will require flexible workspaces.
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