Demand for office space is skyrocketing, especially in New York City and Los Angeles
Big city living officially includes offices again.
Demand for office space in New York City and Los Angeles has reached the outer edges of the pre-pandemic rate of demand, according to the latest quarterly Office Demand Index from real-estate software firm VTS, released Wednesday.
In March 2024, the nation’s two largest cities by population experienced their highest levels of office demand since August 2021. It’s part of a larger upwards trend blanketing the U.S. as March marked the ninth consecutive month of positive year-over-year growth in office demand, VTS found. Perhaps that’s no surprise, as work-from-home rates, by their count, have dropped to their lowest-ever since lockdowns.
The VTS Office Demand Index (VODI) tracks “unique new tenant tour requirements of office properties in core U.S. markets,” which the company uses as a leading indicator of office leasing activity. Last month, national office space demand grew from 58% to 65% of its average pre-pandemic level—which VTS chalks up both to a rising trend and a seasonal boost. (Office interest tends to pick up in springtime, the firm found.)
“We are hearing on the ground and on the streets that working from the office is increasingly becoming the norm again for many industries and metro areas,” Nick Romito, VTS chief executive, wrote in the report. But, naturally, some holdouts—more remote-work friendly cities like Seattle, Boston and San Francisco—are digging their heels in, keeping steadily low in-office days, despite adding more jobs. “There is likely a significant culture shift at play,” Romito said.
Indeed, the work-from-home picture has become more and more fragmented in different U.S. cities, the report said. New York, Los Angeles, and Washington, D.C. are leading the return pack, while Boston, San Francisco, and Seattle trail behind.
Between October 2020 and September 2023, the gap in in-office attendance between those groups was about 28%, per VTS’s data. But between October 2023 and March 2024, that gap swelled to 37%. (Office demand in Washington, D.C., VTS found, rises and falls in tandem with the presidential election; demand falls during election years, as some firms grapple with whether or not they’ll stay in town under a new administration. Demand there is currently down by nearly a third from last year.)
Demand for office space in Los Angeles has shot up nearly 90% over the past 13 months, per VTS’s index. Since August 2022, demand in New York City has also skyrocketed—by nearly 96%. That enthusiasm might become contagious.
A New York-esque revival of business might soon manifest in other major metros, predicted Ryan Masiello, VTS’s chief strategy officer. “But it’s slow and I expect they will take a different track to normalcy,” he wrote. “Instead of the same major tech employers leading the way in the return to the office, we will see employers in more traditional lines of work take advantage of the opportunity.”
But pro-office bosses shouldn’t get too excited; VTS is only one of many office trackers, and employees remain as bullish as ever about working on their terms. Data exclusively provided to Fortune from real-estate consultancy and security firm Kastle Systems finds offices across the 10 major metropolitan areas in the U.S. were just 52% full last week, roughly as full as they’ve been all year.
As remote-work expert and Stanford economist Nick Bloom has said, the inflection point for any major return-to-office move has come and gone. “The census data, Kastle [office occupancy data], it’s flat as a pancake,” Bloom said in August. “We’re not heading into the office, but we’re not heading out either. It is completely level.”
“The banner moment to return has probably already passed,” Jose Maria Barrero, another future-of-work expert economist, told Fortune last February. “I would’ve thought last fall or last spring, some time like that.” Any companies that had plans of making a huge shift mandatory have “probably already done so.”
