What Does the Delta Variant Mean for Office Market Recovery?

After embracing remote work for nearly 18 months, many companies planned for their return to office post-Labor Day; then the delta variant hit, and it’s causing some to pivot.

September 1, 2021 • Liz Wolf

Since the COVID-19 vaccine rollout picked up steam in the spring of 2021, the U.S. office market started making significant progress toward recovery. There were strong indicators of improving market conditions during the summer as space tours increased and leasing activity began to rebound.

But, just as more companies planned to bring workers back to the office after Labor Day—either fulltime or as part of a hybrid work model—the spike in cases of the more transmissible delta variant has many rethinking the timing of their reopenings. Some are postponing returns until late fall or 2022, as employees continue working remotely. And delta is causing uncertainty among some workers hesitant to return to offices and public transportation while COVID-19 cases soar.

“Throughout 2021, we have engaged in more robust conversations with tenants regarding their return to the office,” says Robert Six, BOMA Fellow, CEO of Chicago-based Zeller, which manages a 9.5-million-square-foot office portfolio. Zeller’s occupancy in its Chicago office properties jumped from 10 percent in early 2021 to 30 percent by July.

“However, then the delta variant reared its ugly head in mid-July,” Six says. “My perspective is, because of the rise in case numbers with the delta variant, tenants who were planning a return to the office after Labor Day have tentatively put a pause on their return. Some suggest mid-October, and others are saying ‘to be determined’ based on case numbers hopefully declining in the near future.”

Companies aren’t abandoning back-to-work plans altogether, but rather delaying them as they evaluate the trends in case numbers and contemplate options from masks to vaccine mandates. Experts say the “office” isn’t going away, just continuing to evolve. The pandemic has changed how companies think about office space, but it’s clear that a majority of tenant decision-makers continue to see the unique benefits of the in-person workplace—in fact, the Q2 2021 BOMA International COVID-19 Commercial Real Estate Impact Study found that 78 percent of respondents recognize the necessity of the office, saying in-person workplaces are “vital” to operating their businesses.

“Some companies have the ability to go remote, but how do you create culture?” Six asks. “How do you create that stickiness when people work remotely?”

“The longer people stay out of the office, the more it creates an independent contractor mentality, rather than a cohesive company culture,” adds Gregory Grainger, BOMA Fellow, CCIM, CPM, RPA, and president of Younger Partners Property Services.

Six notes the “office building business is alive and well and will be back stronger than ever as we adapt to the changes that COVID-19 has brought upon us. We’ve been adapting for 17 months and will continue to adapt for the benefit of everyone.”

That adaptation for building owners includes implementing more stringent cleaning protocols, creating social distancing plans, decreasing density, reducing touch points, improving HVAC and mechanical systems and extending building hours to accommodate tenants’ needs.

This extra effort on the part of building owners and managers also won’t end with the pandemic, according to BOMA International’s COVID-19 impact study. The research shows that 64 percent of surveyed tenant decision-makers want to see additional investments that go above and beyond health and wellness measures put in place during COVID-19. This includes either infrastructure and technology to mitigate future health emergencies or amenities, programming and platforms that support tenants’ efforts to increase organizational culture, connectivity, productivity and well-being.

Leasing Activity

Office building owners are primarily seeing lease renewals and shorter-term leases as tenants want flexible terms until they figure out their “new normal.” Many tenants are putting off long-term space decisions until they’re back in the office, and some are seeking flex space.

But there are also signs that the office market recovery will be geographic, as some markets have outperformed in leasing activity and getting employees back in the office. That includes markets like Dallas-Fort Worth, which has had fewer COVID-19 restrictions than some other parts of the country. Younger Partners, which leases and manages more than 11.5 million square feet in Northeast Texas, reported an average tenant occupancy for its office properties of more than 75 percent.

“In this market, if you’re already back in the office conducting business, the delta variant hasn’t changed those parameters,” Grainger explains. “They’re still in the office and have protocols in place. That employee base has worked amid COVID for some time, so the delta variant is simply another iteration of what they went through.”

However, Grainger says tenants who aren’t back in the office yet haven’t had that same experience, so the delta variant is another barrier to their reopenings.

2022: A Bright Spot?

Cushman & Wakefield CEO Brett White recently told CNBC that he’s seeing positive signs for the office market, and the “single largest determinant” of return-to-office plans and the health of the office market is vaccines. Notably, the research conducted by BOMA International in May revealed that nearly 8-in-10 surveyed tenant decision-makers say they are personally comfortable receiving the COVID-19 vaccine, but only 67 percent say their colleagues are comfortable receiving the vaccine. With office return rates slowing down and concerns over more contagious variants of the disease, some building owners might even be considering vaccine requirements for staff and/or tenants—which is a generally complicated pursuit, according to legal experts who first wrote about this topic for BOMA International back in March 2021. Nonetheless, White anticipates a “full recovery” of office employment by mid-2022, which should translate positively for building occupancy rates.

“The pandemic has taught us that we can work less tethered to office space, at least partially, but we still need the anchor of the physical office,” Grainger notes.

Indeed, the case for the office—a collaborative hub where culture and innovation flourish—remains strong. While many companies are expected to embrace some level of remote work even after return-to-office plans are implemented, building owners and managers are hopeful that the clear benefits of the in-office experience will drive workers back to their buildings in due time. After all, “not yet” does not mean “never again.”


Liz Wolf is a Twin Cities-based freelance writer with 30-plus years of business and commercial real estate reporting experience. She previously served as editor of the Minnesota Real Estate Journal.