Return-to-office orders might not be enough to save commercial real estate from more pain

Working from home, alongside hygiene practices and viral recipes, is one of few positive social effects from the pandemic. Now, though, some companies are acting ASAP on RTO mandates to eradicate WFH.

Remote control

At the end of last week, JPMorgan Chase told employees that it would enforce a five-day in-office mandate, sparking a companywide pushback against the perceived infringement on work-life balance… even inspiring some employees to evaluate forming a workers’ union, Barron’s reported.

JPMorgan isn’t the first industry titan to lay down the law on full-time office attendance, with Goldman Sachs and Amazon already tightening their rules, but the internal response indicates an ongoing sentiment in America: many just don’t want to go back to their desks full time.

Office vacancies hit another record high at the end of last year, according to the latest tally from Moody’s, with ~20.4% of office space in the top 50 US metro areas now estimated to be empty.

Vested interests

One group watching the commuter crawl-back trend with interest: commercial real estate (CRE) investors. The latest data from FRED shows that CRE prices were down 12.5% since early 2023.

Although that’s not yet anywhere near as bad as the two most recent CRE crashes in the US — when values fell by ~17% (1989-1993) and ~35% (2007-2010), respectively — if swathes of workers continue to rebuff RTO instructions, the market could come under further pressure. Eventually, collapsing office loans could result in traditional corporate hubs like NYC’s Financial District being adapted into residential or retail properties to recover some of the losses incurred.

TL/DR: America doesn't need as much office space as it used to... how much less still isn’t clear — but there’s a lot at stake for employers, employees (particularly unionized ones), and investors.