Remote-Friendly Jobs Create a Drag on Office Demand Recovery

Even as the effects of the pandemic are ebbing and office-using employees are return to the office, overhang from the remote working mandates imposed last year persists, says VTS. Markets with a greater percentage of remote-friendly jobs are recovering more slowly, while the opposite is true for markets with fewer remote-friendly jobs.

According to the latest VTS Office Demand Index (VODI), Seattle, Boston, and San Francisco all have shares of remote-friendly jobs that are among the highest in the nation, and not coincidentally those markets have also recovered the least from their pre-pandemic level of office demand. 

These three cities are still down 39%, 43% and 46% from their 2018-2019 average, respectively. In contrast, markets with a substantially lower share of remote-friendly jobs—Chicago, New York and Los Angeles—are down only 14%, 15% and 24%, respectively, from their pre-pandemic values.

Washington, DC is an exception to the pattern with a high rate of remote-friendly jobs and a further-along recovery. The nation’s capital is home to a large share of government employers who may be less willing to keep remote work arrangements in place compared to employers in Boston, San Francisco and Seattle.

“The pandemic didn’t just change the way we work, it changed the way we live,” said VTS CEO Nick Romito. “Many workers have found value in remote or hybrid work and may be reluctant to go back to the way life was pre-pandemic. In cities with higher rates of fully-remote jobs, hiring and retaining talent means employers will need to provide choices and flexibility—including fully-remote and fully in-office.”

As of May, more than half the markets covered were within 25% of their pre-pandemic benchmark level—i.e. a level more closely resembling pre-COVID-19 normalcy. However, all markets, with the exception of Chicago and Los Angeles, saw demand for office space recede in May, with Seattle losing the most ground, down 24% during the month.

At a VODI of 86, Chicago, a market that lagged all others on the road to recovery, is now the closest of all markets to its pre-pandemic level. Chicago is also the only market to see an increase in demand for office space in May, though the monthly increase has tapered from previous months. 

Demand for office space in Chicago is propped up by the need for physical space for a higher percentage of roles that aren’t classified as remote-friendly, VTS says. In addition, the materialization of pent-up demand in Chicago may have been delayed by the region’s cold winter climate, and that lag is now providing some extra tailwind in May.

As noted previously, Seattle also has a relatively high share of remote-friendly jobs. In addition, Seattle was the only city in the VODI to experience a drop in office-using employment in May. That being said, office demand in Seattle has been volatile in the past, and the current decline is modest in comparison to the city’s office demand fluctuations in pre-pandemic years.