Surging delta cases reverse the world’s march back to the office
The worst of the coronavirus pandemic may be receding into the rear-view mirror, but office workers are little closer to returning to their desks full-time.
The spread of the delta variant has forced many US employers that had been hoping to get staff back to their desks after 6 September to delay those plans until at least October—or even next year.
In Europe, where restrictions on people's mobility have been eased in recent weeks, many employees are waiting for the end of the school holidays before they head back. In Asia, authorities have been ramping up inoculations to ease restrictions and are betting workers would return.
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The statistics reflect this August lull. Workplace activity is still far below its normal level, according to mobility data from Google, which tracks the locations of its users.
The question for businesses and landlords is: How quickly will this picture change? Will this be a recovery without, or with only a partial, return—one in which workers remain at home, or come into the office for only two or three days a week—or will staff be back at their desks full-time in October?
The longer the process takes, the likelier the first outcome becomes, and so too the risk that city centres never quite regain their pre-pandemic zing.
New York
A surge in Covid-19 cases in New York City, along with the rest of the US, has sent a chill through the Big Apple's reopening, even as infection rates are still about a quarter what they were at their peak.
Finance companies including BlackRock Inc and Jefferies Financial Group Inc have postponed return-to-office dates. Larger Wall Street banks that have brought back employees are taking more stringent precautions, with JPMorgan Chase & Co requiring masks in common areas and Goldman Sachs Group Inc working on new safety measures to prevent outbreaks.
More firms—including Morgan Stanley and Citigroup Inc—are requiring vaccinations to enter offices, while the New York Stock Exchange is mandating shots for people on its trading floor. And in early August, Mayor Bill de Blasio announced plans to require inoculations for workers and customers at indoor restaurants, gyms and entertainment venues.
The city's public-transit is inching back to life, while remaining well below historical levels. Average monthly ridership on the subway in July was about 49% below the pre-pandemic baseline, continuing a pattern of monthly improvements since the beginning of the year.
About 23% of office workers in the New York metro region were back at their desks as of the week ended 11 August, according to building-security company Kastle Systems, up from 18% in early June but still stubbornly low. Office leasing also has ticked up across the city, yet nowhere near enough to balance out a record level of supply.
The tepid revival of office life has led to empty storefronts and closures across Manhattan, even as bars and restaurants fill up in more residential neighbourhoods such as the West Village and Soho. The amount of available retail space jumped to another record in the second quarter, the highest in at least 10 years, and landlords are struggling to fill the glut of space.
Frankfurt
Frankfurt's financial district is still largely deserted 18 months after the start of the pandemic—even if some of the obstacles to people returning to the office have been eased.
After a slow start, the pace of vaccinations has picked up steam, and the government recently lifted a law requiring non-essential staff to work from home.
But employees appear to be taking a wait-and-see approach as the delta variant fuels a spate of new infections. The seven-day incidence rate in Frankfurt has been rising once again since early July, hovering around 35 per 100,000 people for the better part of August. Although the vaccination campaign is making progress, only about 55% of residents in Hesse—the regional state in which the city is located—were fully vaccinated as of 12 August.
RMV, the transport association which serves Frankfurt and its surrounding area, estimates that local ridership in July was just 60% of what it was in July 2019, before the pandemic started. Workplace activity during the week is down 36% from its normal level, according to mobility data from Google.
Research Institute Ifo estimates that almost two-thirds of all workers in Frankfurt can work from home, based on the kind of jobs found in the city. But some banks have allowed almost 90% of their staff to do so at times, according to a Bloomberg survey.
Those empty offices may be about to get busier. Many lenders in Frankfurt have indicated they want to bring more people back after the summer vacation. DekaBank, one of the biggest financial firms in the city, wants to have up to 50% of its employees in the office by the end of August, up from about 30% at the moment.
London
Prime Minister Boris Johnson lifted the final restrictions on people's mobility on 19 July. So far, "Freedom Day" as it was dubbed by the British press, has done little to encourage office workers back to their desks while retailers wait to see the impact of rising cases spurred by the delta variant.
Fewer than one in five workers across the country have since returned, and those in London have been slower than in any other major UK city, according to a survey of mobile phone data from the Centre for Cities research group.
Public transportation data reflects that reticence. While traffic at 15 key tube stations in the City of London hit a post-pandemic peak at the end of July, it has since fallen slightly, according to data from Transport for London.
A spokesman for TfL said the service is traditionally quieter in August and so there hasn't been a noticeable impact from the reopening on passenger traffic so far.
That may be down to the school holidays. Many employers are waiting for term to begin in early September before they start to herd staff in the direction of their desks.
But it also may be a sign that the hybrid work model—where staff stay at home several days a week—could be growing in popularity.
Disappointing landlords, rents in districts traditionally favoured by financiers have seen the biggest declines in London over the past 12 months, with the cost of a home in Westminster or Tower Hamlets—where Barclays Plc and JPMorgan have offices—falling the most, according to Zoopla.
Singapore
Singapore boasts one of the world's highest Covid vaccination rates, and has suppressed infections better than the US or Europe. Nevertheless, the city-state has remained cautious about loosening virus restrictions, slowing the return to the office.
Workplace activity on weekdays in the first half of the year averaged -20.5% compared to pre-pandemic levels, according to Google mobility data. That's a significant improvement on the -32.9% average seen in 2020, when Singapore spent close to two months in lockdown.
The latest round of curbs—imposed in late July, as daily infection counts exceeded 100 and clusters of cases were discovered at karaoke lounges and a fishery port—has started to ease. Workplaces will be allowed to return to 50% capacity from 19 August and authorities plan to loosen border controls, restarting entry approvals for fully vaccinated foreign workers and their dependents.
In recent months, Singapore's virus strategy has shifted. The Southeast Asian trade hub had initially targeted complete elimination, but the government now says it is seeking a way to live with endemic Covid. With more than 73% of its 5.7 million residents already immunised, the city aims to fully vaccinate 80% of its population by early September. At that point, quarantine-free entry may be on the cards for inoculated travellers.
After a stop-start few months, the office market is in need of a boost. The vacancy rate for top-flight offices rose to 11.3% in the second quarter from 9.8% in the previous period, according to government data.
Average monthly rents for the most desirable office space fell for a sixth consecutive quarter, according to Savills Plc, declining by 0.4%. More positively, that rate of decline "has slowed to a crawl" and is the slowest since 2019, a Savills market report said.
"This may be a signal that office rents may be bottoming out," the report said.
Office demand will be unpredictable as companies try to cater to workers' desire for flexible arrangements, said Christine Li, head of research for Asia Pacific at real estate consultancy firm Knight Frank in Singapore.
"Risks could also arise from the recent tech crackdown by the Chinese government which may see demand for further expansion being put on hold," Li said.
Hong Kong
In Hong Kong, most workers are back at their desks, despite the spread of the delta variant in mainland China and other Asian countries. The government is now ramping up efforts to boost inoculation rates seen as crucial to economic recovery.
The city's 58-day infection-free streak came to an end in early August, but daily case numbers are still hovering near zero and office attendance has been steadily returning to pre-pandemic levels.
In May, average daily passenger numbers on rail operator MTR Corp's major routes reached 76% of the level seen in the same month of 2019, according to government data. Restaurants and shopping malls are packed during peak hours, while bars and nightclubs are allowed to operate after midnight as long as customers and staff are vaccinated.
The city's vaccination drive has picked up in recent weeks, helped by a wide range of incentives. However less than 50% of the population has been fully vaccinated, a rate that lags well behind other financial hubs like Singapore. Authorities are now dialling up the pressure on the local population to get vaccinated: Civil servants, teachers and nursing home staff must get inoculated or undergo regular testing at their own expense. Schools will be permitted to fully resume in-person teaching in September while only 70% of students in each grade are vaccinated.
An economic downturn triggered by the pandemic and political tension contributed to falling office rents and rising vacancies. But there are signs of a rebound thanks to the financial sector and Chinese companies.
Leasing volume in the city's Central district recorded a 69% increase in the second quarter from a year earlier, according to Jones Lang LaSalle. Office rents in the area may gradually rebound in the second half from a six-year low as vacancy rates peak, according to Bloomberg Intelligence analysts.
Meanwhile, Hong Kong ramped up its hotel quarantine period to at least two weeks for vaccinated residents returning from most countries, ending a short-lived flirtation with looser travel rules.
San Francisco
San Francisco started the summer with eased restrictions, a vaccination rate that was among the highest in the US and plans for many companies to have workers back in offices—at least part of the time—in September. Now, the return to normalcy has stalled before it ever really took hold.
The city's seven-day average daily Covid case rate jumped from a low of 10 in June to top 280 in early August, leading Mayor London Breed to require proof of vaccinations for entry to indoor restaurants, gyms and theatres. Bay Area-based companies including Google, Uber Technologies Inc and Wells Fargo & Co pushed back their return-to-office dates to at least October, while Facebook Inc and Lyft Inc said employees don't have to be back until next year.
San Franciscans are spending more money and time out of the house, according to a July report from the Office of the Controller, while traffic on the city's bridges returned to 90% of pre-pandemic levels as of June. But that rebound likely wasn't because of office commuters: About 19% of San Francisco-area workers were back in their buildings as of 11 August, according to Kastle Systems. That's little changed from mid-June and the lowest figure among 10 US metropolitan areas the company tracks.
Expecting more travellers to hit the rails, the Bay Area Rapid Transit agency returned to near-regular service on 2 August —but even as passenger numbers rise every month, the public transportation network is still at only 22% of pre-pandemic ridership on weekdays.
"San Francisco has a very good vaccination and infection situation, but our recovery has been slower than in other cities," said Ted Egan, the chief economist for San Francisco's Office of the Controller. "It's possible that delta will affect us less than other places and we will keep poking along, hopefully picking up pace in the fall."
Even when workers do come back, it will likely be only for some of the time. The technology industry, the main driver of the city's economy, has embraced flexible work or even remote-forever options. As a result, the office market is still mired in a deep slump.
Companies including Uber, Twitter Inc and Salesforce.com Inc are marketing offices they no longer need. San Francisco's office-vacancy rate topped 20% at the end of the second quarter, according to Jones Lang LaSalle Inc. That's the highest level in almost two decades.
By: Emily Cadman, Stephan Kahl, Charlotte Ryan, Felix Tam, Faris Mokhtar, Nic Querolo, Sarah Holder, Natalie Wong, Steven Arons, Hayley Warren and Sam Dodge
Editors: Edward Evans, Jeremy Scott Diamond, Kara Wetzel and Alyssa McDonald
With the assistance of Shawna Kwan
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.
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