The Return to Office: What It Means for Investors and Advisors in 2024
After years of uncertainty and experimentation with remote and hybrid work models, U.S. companies are making significant strides in bringing employees back to the office. According to an upcoming CBRE report, this shift is more pronounced than at any time since the pandemic’s onset in 2020. For investors and financial advisors, understanding this evolving landscape is crucial—not just for real estate portfolios but for broader market dynamics.
The New Office Attendance Reality
CBRE’s survey of 184 companies reveals that nearly 75% have met their attendance goals, a jump from 61% last year. More companies are actively monitoring and enforcing attendance policies, with 69% tracking attendance and 37% enforcing policies, compared to 45% and 17% respectively last year. The average target is about 3.2 days a week in the office, though actual attendance slightly lags behind. This signals a maturing approach to hybrid work—companies are no longer experimenting but implementing structured policies to balance flexibility with in-person collaboration.
Manish Kashyap, CBRE’s global president of leasing, notes that companies have moved from a “loosey goosey” approach to one with better governance and clearer hybrid structures. This evolution is critical: it means office spaces will be used more efficiently, and companies are prioritizing quality over quantity in their real estate strategies.
Office Footprints: Expansion Over Contraction
Contrary to the narrative of office space decline, the majority of companies (67%) plan to maintain or expand their office footprints over the next three years. This is up from 64% a year ago and marks a significant trend reversal from recent years when downsizing and conversions to residential dominated headlines. Business growth and headcount increases are primary drivers of this expansion.
Only about a third of companies intend to reduce space, down from 36% last year and a staggering 53% in 2023. Even with economic uncertainties and tariff concerns, companies are signing more long-term leases now than they were a year ago. Julie Whelan, CBRE’s global head of occupier research, emphasizes that organizations have gained clarity on their hybrid models, enabling them to make confident leasing decisions despite economic headwinds.
Quality Over Quantity: The Rise of Prime Office Space
Office vacancies remain high at 18.9%, just shy of a 30-year peak of 19%. Yet, nearly half of surveyed companies express concern about the availability of high-quality office space in the coming years. Prime office space, which constitutes only 8% of total inventory, has significantly lower vacancy rates. This underscores a growing preference for smaller, more effective office footprints that emphasize collaboration, workplace experience, and vibrant locations.
Whelan highlights that employers are now more focused on the efficiency of seat sharing and the overall vibrancy of their office districts, reflecting a shift from sheer square footage to quality and functionality.
What This Means for Investors and Advisors
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Reassess Office Real Estate Investments: The trend toward hybrid work is not signaling the death of office space but its transformation. Investors should pivot towards properties that offer prime locations and high-quality amenities that support collaboration and employee experience. This is where demand will concentrate, and where rental premiums will likely persist.
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Watch for Conversion Opportunities: While many companies expand or maintain their footprints, a segment still downsizes. This creates opportunities for investors to convert underutilized office spaces into residential or mixed-use developments, especially in urban cores where housing demand remains strong.
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Focus on Long-Term Leases: The increase in long-term leasing activity suggests greater stability in office real estate markets than many anticipate. Advisors should encourage clients to consider office REITs or direct investments with tenants locked into longer commitments, mitigating vacancy risks.
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Monitor Economic and Policy Signals: Despite the positive momentum, economic uncertainties remain. Investors should stay alert to macroeconomic trends, interest rate changes, and corporate earnings reports that could impact office demand.
Unique Insight: The Suburban Office Renaissance
An emerging trend not fully captured in the CBRE report is the rise of suburban office hubs. With hybrid work, some companies are decentralizing from expensive urban centers to suburban areas offering lower costs and better access for employees. According to a recent JLL report, suburban office vacancies are declining faster than their urban counterparts, signaling a shift in where office demand is concentrated.
For investors, this means diversifying office real estate exposure to include high-quality suburban properties could yield superior risk-adjusted returns over the next 3-5 years.
Final Thoughts: What’s Next?
The office market is far from dead; it is evolving. Investors and advisors must move beyond outdated assumptions and embrace a nuanced view that recognizes hybrid work’s permanence and the premium on quality space. The next wave of office real estate winners will be those who anticipate these shifts and act decisively.
For financial advisors, this means guiding clients to recalibrate their real estate allocations, consider exposure to prime and suburban office markets, and remain vigilant to economic signals that could impact leasing dynamics.
By staying ahead of these trends, Extreme Investor Network readers can unlock unique investment opportunities in what many still mistakenly view as a declining sector. The office market’s transformation is an untapped frontier—those who understand it first will reap the rewards.
Sources:
- CBRE Upcoming Report (2024)
- JLL Suburban Office Market Insights (2024)
- CNBC Property Play Newsletter with Diana Olick
Stay tuned for more exclusive insights on how evolving work trends shape real estate and investment strategies.
Source: More companies are monitoring, enforcing office attendance