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Business News/ News / Think Companies Are Struggling to Fill Offices? Look at the Government
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Think Companies Are Struggling to Fill Offices? Look at the Government

wsj

The White House has been telling federal agencies to increase their return-to-office rate. But goals haven’t been reached.

The office vacancy rate in Washington, D.C., hit a record 20.3% in the third quarter. Premium
The office vacancy rate in Washington, D.C., hit a record 20.3% in the third quarter.

The Biden administration is telling federal employees to get back in the office on a more regular basis. It isn’t having much better luck than private companies.

The White House has been amping up the pressure on federal agencies to increase their return-to-office rate. White House chief of staff Jeff Zients sent an email in August to cabinet agencies instructing them to “aggressively execute" a shift to more in-person work in the fall. But administration officials say their return-to-office goals still haven’t been reached.

“We still have work to do," an administration spokesman said. “We’re not there yet."

How far below the administration’s goal is difficult to determine. It is up to individual agencies to publicize that data, the spokesman said.

But the Government Accountability Office’s review of 24 federal agencies earlier this year wasn’t encouraging. The GAO estimated that 17 agencies had used on average only one quarter or less of their headquarters’ buildings’ capacity during a three-week sample period.

Federal agencies spend about $2 billion a year to operate federal office buildings “regardless of the buildings’ utilization" and $5 billion annually to lease privately owned office space, the report said.

Other parts of the country with large federal workforces are also struggling to bring back workers, said John Fish, chairman of the Real Estate Roundtable, a trade organization that has more than 250 member companies.

“Whether you’re talking about downtown Boston, or Denver or Northern Virginia, occupancy is down substantially," he said.

Government return-to-office policies increasingly have been a hot-button issue for office and retail landlords and small businesses that depend on commuters for their livelihoods.

They have called for the public sector to make up for the anemic return-to-office by private-sector employers that stalled at a national average of about 50% of prepandemic usage earlier this year. It has been especially detrimental to the Washington, D.C., region, where about 270,000 workers are employed by federal agencies.

Office owners and brokers say they have seen a slight improvement in traffic in some federal buildings since Labor Day. But the activity still falls far short of what is needed to restore the vibrancy of business districts, they say. Many government workers are reluctant to return to the office for some of the same reasons that private-sector employees have stayed away, preferring to avoid long commutes or welcoming the conveniences of work from home.

The federal return-to-office policy is likely to become an issue in next year’s elections. Republican members of Congress have introduced legislation to require federal workers to return to prepandemic schedules and have criticized the Biden administration for not doing more.

“It’s not working," said Rep. Clay Higgins (R., La.) during a subcommittee hearing on federal workplace this fall. “We need our executive branch to perform in person in your office, end of story."

Some federal agencies are doing better than others. The Department of Veterans Affairs and the U.S. Agency for International Development have reached their goals in adopting and enforcing new workplace requirements, according to the administration spokesman. Other agencies haven’t reached their targets, the spokesman said.

The District of Columbia’s office vacancy rate hit a record 20.3% in the third quarter, according to commercial real-estate services firm Cushman & Wakefield. Numerous federal agencies, including the Securities and Exchange Commission and the U.S. Patent and Trademark Office, have shed space when leases have matured, said Nathan Edwards, a senior research director at Cushman.

The federal government and some cities that are telling workers to come back are squaring off against unions, which have stepped up the pressure to let employees work from home some days.

“Flexible scheduling is a viable option that does not hinder performances," the National Treasury Employees Union said following the release of chief of staff Zients’ email in August.

Cities have done a better job than the federal government in bringing workers back to offices partly because mayors recognize the importance of commuters to property values and tax revenues. In October, 71% of federal agencies offered hybrid workplaces compared with 59% for all government agencies, according to Scoop Technologies, a software firm that developed an index monitoring workplace strategies.

New York City Mayor Eric Adams called city workers back when he took office in 2022. But he agreed to a hybrid plan in labor talks negotiated with the city’s largest municipal union earlier this year.

Mayors have had a harder time insisting that city employees have to come to offices five days a week when the federal government permits much more flexible schedules.

“When something like that happens at the federal level, it makes it difficult to do something different," said Kathryn Wylde, head of the business group Partnership for New York City.

Write to Peter Grant at peter.grant@wsj.com

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