In the U.S., the return-to-office (RTO) movement has evolved into a tug-of-war between workers’ desires for flexible schedules and virtual workspaces — and companies’ rationale for preserving a traditional weekly in-office routine.

Globally, employers are grappling with RTO policies and the utilization of physical space. As many as 87% of international companies said they would like employees to work from the office at least part of the week, if not the entire week. But what this move will look like and what it means for commercial real estate is still up for debate and will vary country by country and from region by region.

Against this backdrop, let’s examine how different countries and global regions are navigating their way back to the office, starting with the average number of days their workers spend in the office each week.

China — 4.7 days
India — 4.4 days
South Korea — 4.2 days
Japan — 3.8 days
Belgium — 3.7 days
Canada — 3.6 days
France — 3.5 days
Singapore — 3.4 days
Thailand — 3.3 days
Australia — 3.1 days
Switzerland — 2.9 days
Germany — 2.7 days
Netherlands — 2.6 days
U.K. — 2.2 days
U.S. — 2.0 days

Asia-Pacific
Asia-Pacific trends fluctuate widely by country, but in general, countries in this region — namely China, Korea and India — have emphasized RTO and are occupying space with greater swiftness than their international counterparts. On average, Asia-Pacific’s re-entry into office is 85%, compared to 55% in the U.S.

So, what’s happening in this region? Experts say that how Asia-Pacific nations managed the pandemic, allowed people to transition back to the office more easily. Household size and multigenerational households have also made working from home less desirable. For example, the average home size in Hong Kong is under 500 square feet and doesn’t allow for much “wiggle room,” whereas in the U.S., the median home size measures just about 2,300 square feet and offers a lot more flexibility. Cultural perceptions also greatly contribute to increased office re-entry volumes. Asian firms, for example, are known to correlate job performance with office attendance, which adds to the success of RTO policies.

Looking ahead, office usage across major Asia-Pacific cities is expected to grow over the next few years, backed up by nearly 80% of executives who said the office will be key to their long-term business strategy. Another 68% of companies plan to increase attendance, and 44% are considering expanding their office portfolios over the next three years. New space in high-quality buildings will be especially in demand.

Europe
At a 75% re-entry level, it looks like Europe takes second place in the race to the office. In the United Kingdom, four out of 10 industrial workforces are already back in the office full-time. Office re-entry in cities like Paris, Madrid and Amsterdam nears 90%. In general, European countries are more city-center focused and are connected by robust public transit networks, which makes it more convenient and affordable for employees to go into the office — compared to countries like the U.S. that have a lot more commuter ground to cover.

The European work culture is also partial to office environments, especially eco-buildings in prime central business districts. Sustainable buildings should see the most activity in response to new regulations like the European Sustainability Reporting Standards that took effect at the beginning of this year.  Research points to areas like London and Amsterdam where Environmental, Social, and Governance (ESG) regulations are already in place and “have seen the highest differential between prime and secondary CBD office rental growth.”

For the remainder of 2024, it’s expected that the RTO movement will intensify the need for space across all European central business districts (CBDs) where supply is already limited.

Canada
A recent analysis found that 76% of Canadian companies are choosing to “partially or fully mandate a return to the office with productivity, team communication, and workplace culture as key drivers for the decision.” The good news is, the majority of employees (64%) are on board and support such a mandate.

There does, however, appear to be a disconnect between employee expectations and current office offerings. Canadian workers rank technological infrastructure and connectivity as the most important need in an office, followed by office configuration and availability of collaboration and meeting spaces. But 60% of employees say their current offices don’t meet these needs.

Prospective Canadian office tenants have a unique opportunity to rethink their office design to meet employee needs. Demand for quality buildings will heat up, and landlords across all asset classes will equally need to reassess the tenant experience with increased amenities and technology in an effort to stay competitive.

Statistically, U.S. companies are eager to get their employees back in the office with as much as 90% of business leaders planning to implement RTO policies by the end of 2024. Only 2% of leaders say they never plan to require employees to work on-site. There’s a particular amount of movement from tech companies like Google and Amazon that have recently created more structured RTO mandates requiring employees in the office at least three days per week. Boeing, X, and UPS have adopted an office-only approach that expects workers five days a week. It’s likely that other tech firms will follow suit.

U.S. office use varies by CBD and available inventory. Texas cities Austin, Dallas and Houston are leading the way with above average RTO volumes, followed by Chicago, Illinois, (as of April 8, 2024).

The greatest RTO momentum lies in well-amenitized top-tier buildings in gateway markets, which account for only 10 to 15% of total U.S. inventory. Demand should hold steady for this asset category and locations as more tenants make their return.

Housing priorities and increased cost of living may also apply added pressure on mixed-use projects from incoming tenants looking for centralized work-live-play environments, such as KBS’ iconic 40-story Accenture Tower, located in the rapidly gentrifying West Loop area of Chicago. As the Windy City’s first and largest full-service office location, Accenture Tower not only includes Class-A office space, but also retail and entertainment amenities, plus access to transportation via the Ogilvie Transportation Center.

CRE Opportunities
A recent survey from the Urban Land Institute (ULI) found that only a small percentage of tenants believe their existing workspace portfolios align with their business objectives — which presents an opportunity for companies and CRE building owner/operators to reimagine their design and offerings as part of their RTO strategy, including:

  • Dynamic space — There continues to be a big strategic shift toward Activity-Based Working (ABW) — that is, offices that maximize productivity, human connection, collaboration, and socialization through culture, technology, and the physical space. Look for updating and refining existing space with ABW elements that offer flexible workstations and areas that allow employees to modify their workday experience. Additionally, ABW office buildings equipped with functional social areas and lifestyle amenities will also be highly sought after.
  • Sustainability — Sustainable offices and energy-efficient buildings will continue to gain traction with adoption of standardized ESG policies, as well as with tenants seeking to reduce harmful emissions and prioritizing employee wellbeing. However, a survey shows that across 20 global markets, 65% of demand for “low carbon workspace will not be met with existing stock or the current development pipeline by 2030,” which is an excellent starting point in the development and repositioning of future office properties.

KBS, for instance, has set a goal of achieving a 5% greenhouse gas (GHG) emissions reduction in five years and has been tracking progress to reach its goal by 2025 (based on a 2021 baseline year) — the goal being to cover both emissions that are under KBS’ direct control and the on-site emissions generated by tenants of the properties it manages. Achieving  KBS’ goal includes Implementing energy efficiency measures at all of its properties (where practical); exploring opportunities to integrate renewable energy; continuing to prioritize green building certifications; engaging with our tenants to promote environmental awareness and initiatives; and consistent benchmarking and tracking of our energy usage and emissions profile.

  • Technology — Innovative and hyper-connected technology will be critical as people continue to head back to the office. Artificial intelligence operations and systems beyond the physical office will help create a high-tech environment where employees can have almost complete autonomy and flexibility over how they work.

 

Conclusion
Although worldwide RTO policies have become more prevalent, there’s likely some mutually satisfying compromise between employers and employees that will be adopted. Office utilization will continue its upward trajectory and should reach some kind of stabilization in most mature markets across the globe. And while there’s no “one-size-fits-all solution,” the central theme to get more people back into the office may just come down to the dynamics of the physical space.

 Learn more by visiting KBS.com/Insights.