When the coronavirus outbreak first erupted and employees were told to pack up their desks and prepare to work remotely, many assumed that arrangement would last for a handful of weeks, or maybe a couple of months. But now, almost a full year and a half later, a large chunk of the U.S. workforce is still remote. And while some companies are now first calling workers back to the office, those plans might change or get postponed as the delta variant takes over.
In San Francisco, a large percentage of workers are doing their jobs from home. And that's hurting not just office REITs (real estate investments trusts) but a host of local businesses.
The impact of absentee workers
San Francisco has one of the highest vaccination rates in the nation. As of early July, around 76% of eligible residents of the city had received at least one COVID-19 vaccine dose. But San Francisco's return to offices has been slow, and as of mid-June, under 20% of the city's workforce had returned to an office setting. That's low in comparison to the 32% of workers who have gone back to office buildings nationally.
Why the slow return? Part of it could stem from the fact that San Francisco is a notable tech hub, and tech companies, perhaps more so than others, are more adaptable to remote work. As such, they may not be in a particular rush to bring people back to the office.
The problem that results, however, is that the longer workers stay away from offices, the slower that sector's recovery will be. Real estate investors have already seen the value of their office REITs decline in the course of the pandemic as leasing activity has stalled. And now, with many companies adopting hybrid models and dumping office space, it could be quite some time until office REITs are able to rebound.
But it's not just office REITs that are getting hurt when workers stay out of buildings -- it's local businesses, too. Smaller establishments in business districts commonly rely on office workers to come in and spend money.
Think about your typical business district cafe. That's the sort of business that's apt to rely on foot traffic from nearby office buildings to come in for breakfast and lunch. But if workers are still mostly staying home, those local establishments may be starved for revenue.
That's bad news for the landlords who rent those businesses space, because the current situation puts them at risk of shuttering. And that, too, poses a risk for local property values, which have the potential to decline when too many local businesses close down at once.
The Millionacres bottom line
All told, the longer remote work remains the norm, the harder it will be for office buildings and local businesses to move past the events of the past 18 months. While high vaccination rates in some parts of the country may help fuel a return to offices, clearly, that's not the only factor at play, as evidenced by what's happening in San Francisco. And if the coronavirus outbreak continues to spread, remote work arrangements could end up staying in place much longer than anticipated even at this stage of the game.