Written by Josh Herrenkohl from FTI Consulting on April 16, 2025
There has been a lot of buzz in the market about the significant number of employers who have summoned their employees back to the office recently, in many cases for five days per week. Reactions from employees have been mixed, and the impact on the office real estate market is even more uncertain.
Major employers, including large banks, technology companies, retail giants, media and entertainment conglomerates, and others across the spectrum of geographic location, industry and company size have changed their policies to require their employees to work in the office Monday through Friday. Many others have taken a somewhat more flexible approach but now require their employees to be in the office three to four days per week or have given their employees a “bank” of remote workdays that they can use at their discretion throughout the year. If this trend continues, the office real estate market, largely battered during the pandemic and post-pandemic eras, stands to benefit. In fact, 4Q24 witnessed the first positive net absorption of office in three years, but given vacancy rates, we will need to see a significant uptick to materially impact the market.1
To be clear, the return to office (“RTO”) fueled trend line of increased absorption is not without nuance. We’re aware of the view from the executive suite at these companies, which is that employees sitting in a corporate office are more productive and accountable — and better able to facilitate on-the-job training and contribute to what many executives point to as their secret sauce: corporate culture. The question in our mind is “what do employees think about these changes?” More specifically, would employees follow the directive — or would they revolt? Without further ado, we set out on a journey to find out. In partnership with Southpaw Insights, FTI Consulting asked the views of 1,000 mid-level employees who work in an office setting. The findings were astounding. Some key themes, how this could unfold and our view on the impact to the office real estate market follow.
Workers May Dig in Their Heels
Seventy percent of workers who currently work in a remote or hybrid environment said they would seek alternative employment if required to return to the office five days per week. How many employees actually end up leaving their position is anyone’s guess; but what is clear is that the mandate is not sitting well with employees who have grown accustomed to being able to integrate their work and personal lives together flexibly in a way not possible pre-pandemic.
Remote Work Flexibility Is important, But Salary and Benefits Are More Important
Salary and benefits were consistently rated as the most important factor for employees across all demographics, and significantly rated above remote work flexibility. This is particularly important given that, as fully remote positions become scarcer, it is likely that the salary and benefits of these positions will be pushed lower. This may ultimately become the governing factor that causes employees to remain in their current positions when called back to the office.
Generational Divides Matter
Among Gen Z’ers, three-quarters said that they would be either excited or accepting of an RTO mandate, versus more than half of Gen X’ers who said they would be excited or accepting. Boomers and older workers are least likely to seek alternative employment compared with their millennial and Gen Z counterparts. Interestingly, workers with children under the age of 18 are more excited to return to the office than those without.
Employers and Employees Will End Up Meeting in the Middle
It is very likely that employers will strongly encourage, if not require, employees to return to the office for some portion of the week. The days of most companies offering employees the option to work where they want, when they want may soon be behind us. However, we think it unlikely that the majority of employers will land on requiring all employees to return to the office full time. It is likely that we will see a meeting somewhere in the middle of the extremes, where most employees are required to work in the office three or four days per week. This may even be the strategy of some CEOs, that is, to “require” everyone back to the office five days per week, knowing that they will end up at three or four.
Occupier Demand Will Continue to Center Around Class A Space
Many corporate tenants already operate in a smaller office footprint, and we expect that this trend will continue. At the same time, occupiers have been willing to pay a premium for location, amenities and newer, comfortable spaces that are conducive to collaboration and creativity. In practical terms, this means less focus on traditional cubes and more focus on high-end, open-plan space for employees to collaborate, create and ideate. We also believe that there is a solid case for increased flex space such as lounge space, conference space or non-traditional space that appeals to younger employees, even if that space is shared by more than one corporate tenant. Technology will also continue to play an important role, whether that be back-office technology that facilitates data collection and analytics on building and occupancy metrics — or customer-facing technologies, such as those that connect employees with surrounding amenities.
Whether you are an owner, investor, occupier or developer, FTI Consulting can help to navigate the complex real estate landscape. Find more information about our services at: https://www.fticonsulting.com/industries/real-estate.
