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A slower-than-anticipated return to the office for workers across the region may have significant implications not just for those who own office buildings, but for the local governments that rely on the tax revenue and vibrancy that they provide.

“Experts all agree that telework and hybrid-work arrangements are here to stay,” noted the Apartment and Office Building Association (AOBA) of Metropolitan Washington, which on Aug. 18 parsed current return-to-the-office data as well as mulling what the future might hold.

The organization’s view? There’s a lot not yet known about what might transpire, but there are some hints.

“Industry experts now face growing uncertainty and dwindling optimism as telework and hybrid-work arrangements continue to reshape the market with significant long-term implications for local government tax revenues, placemaking in our downtown corridors, and the health and viability of ancillary and retail businesses who cater to and serve our weekday crowds,” noted AOBA. which said the growth back from pre-pandemic employee-occupancy levels has been both inconsistent and “slow and arduous.”

Expectations in early spring were for an ongoing increase in return to offices. Instead, occupancy rates have plateaued since April at about 40 percent, AOBA noted.

Data from a variety of sources suggest that more employees are working from home on Mondays and Fridays, while Tuesdays and Wednesdays are showing the most people back in offices. Even peak days, however, only hit around 50 percent in terms of workers being back in the office.

The future may already be beginning to take shape, as some employers are reducing their total office-space footprint, which is leading to increasing office-vacancy rates that will, if they continue over time, erode the value of those buildings and the taxes that local governments collect from them. Urbanized localities like the District of Columbia and Arlington stand to lose the most, since so much of the value of real estate in their jurisdictions is commercial and retail, compared to residential.

The implications “are clear,” AOBA declared, giving this analysis:

“In addition to funding the local-government services our community demands and offsetting residential-real-estate tax rates, businesses remain the lifeblood of our downtown urban areas. Beyond the tax implications, these trends could dictate a shift in economic development and business attraction strategies. Reducing our office-vacancy rates will require creativity as well as a rethinking of which targeted industries will drive greater occupancy of office space moving forward.”

AOBA is a non-profit trade organization representing the owners and managers of approximately 172 million square feet of office space and more than 400,000 apartment units in the Washington metropolitan area. Of that portfolio, approximately 69 million square feet of commercial office space and 169,000 multi-family residential units are located in Northern Virginia.

Also represented by AOBA are more than 200 companies that provide products and services to the real-estate industry.

AOBA is the local federated chapter of the Building Owners and Managers Association (BOMA) International and the National Apartment Association.

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