As Americans Work From Home, Europeans and Asians Head Back to the Office
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As Americans Work From Home, Europeans and Asians Head Back to the Office

Return-to-office rates in Paris and Tokyo have climbed to over 75%, while U.S. often sits around half

By KONRAD PUTZIER
Wed, Mar 1, 2023 8:45amGrey Clock 4 min

While U.S. offices are half empty three years into the Covid-19 pandemic, workplaces in Europe and Asia are bustling again.

Americans have embraced remote work and turned their backs on offices with greater regularity than their counterparts overseas. U.S. office occupancy stands at 40% to 60% of prepandemic levels, varying within that range by month and by city. That compares with a 70%-to-90% rate in Europe and the Middle East, according to JLL, a property-services firm that manages 4.6 billion square feet of real estate globally.

Return to office was even more common in Asia, JLL said, where rates ranged from 80% to 110%—meaning that in some cities more people are in the office nowadays than before the pandemic.

Bigger homes, longer commutes and a tighter labor market help explain why Americans spend less time in the office than Europeans and Asians, workplace consultants say.

This divergence in return-to-office habits not only benefits overseas landlords more than their U.S. peers. It has a direct impact on how quickly metro areas rebound from the pandemic’s economic shock. Cities in Europe and Asia have bounced back relatively well. But empty office buildings and missing commuters have undermined recoveries in U.S. cities such as New York and San Francisco, where local restaurants, shops and other businesses that rely on office workers as their primary customers have suffered.

The number of unemployed in New York City increased by 83,500 between early 2020 and the third quarter of 2022 as the city’s unemployment rate surged far above the national average, according to a report by the New School Center for New York City Affairs. Many of those who lost their jobs worked in Manhattan in face-to-face industries such as retail, accommodation and food services.

While Manhattan has been particularly hard hit because of its dependence on office commuters, other U.S. central business districts are also struggling. Falling office values are threatening to hit city budgets that depend on property taxes. Lower transit ridership is weighing on the finances of public-transportation authorities. Adding more apartments can help revitalise central business districts, but that will take time.

Several overseas capitals experienced periods where more than 75% of their workers were back at their desks in 2021 and 2022, JLL said. That includes Tokyo, Seoul and Singapore in Asia. Paris regularly topped the list of workers back in the office in Europe. Stockholm wasn’t far behind with several months at a more-than-75% return-to-office rate.

No major U.S. city tracked by JLL achieved that high a return rate during the period.

“The U.S. has borne the brunt of this,” said Phil Ryan, director of city futures at JLL.

Living arrangements are one reason for the difference in work habits. Americans are more likely to live in spacious suburban houses. That makes it easier to set up a home office away from distractions. Hong Kong’s small apartments, for example, often house multiple generations, making working from home less appealing.

Suburban sprawl means many Americans have longer, more tedious commutes plagued by worsening traffic jams—another reason to stay home. While a number of European cities also have long average commutes, New York and Chicago are unmatched, according to mobility-services company Moovit Inc. Public-transit systems in Europe and Asia are often more reliable and less prone to delays, making it easier to get to work.

“We have high-density cities with effective public-transport systems,” said Caroline Pontifex, London-based director of workplace experience at consulting firm KKS Savills. “That makes a difference.”

Another explanation for America’s office exceptionalism is its labor market. At 3.4%, the U.S. unemployment rate is barely more than half the European Union’s unemployment rate of 6.1%. While Europe is also facing labor shortages, U.S. companies have been particularly hard hit, said JLL’s Mr. Ryan.

That has forced them to look farther afield for employees and hire remotely. Tech firms, which account for a particularly high share of employment in some big U.S. cities, have long been more tolerant of remote work.

Co-working companies are also reporting lower occupancy in some U.S. cities. WeWork Inc. said 72% of its desks in New York were leased as of the fourth quarter of 2022, compared with 80% in Paris, 81% in London and 82% in Singapore.

Workplace consultants say they expect the office-use gap between the U.S. and the rest of the world to persist.

It doesn’t help that U.S. offices were emptier long before the pandemic. A construction glut led to high vacancy rates, and even within leased offices companies tended to put fewer people on each floor than their European and Asian peers.

All that empty space is now creating a negative reinforcing cycle, said Phil Kirschner, an associate partner at business consulting company McKinsey & Co. Americans sitting in big, mostly empty offices find the experience depressing, making them more likely to stay at home in the first place. “It feels less energetic,” he said.



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AI agents like Muse can already find you the cheapest hotel room in Paris. But they can’t locate a cheaper version of that Catskills cabin you’ve been eyeing, because it might only be available on Airbnb ABNB -1.43%decrease.

Investors should pay attention to that distinction. When Meta Platforms META 3.38%increase launched its Muse agent last month, travel stocks including Booking Holdings BKNG -1.19%decrease, Expedia and Airbnb all fell sharply.

Airbnb, though, has a real chance to emerge as a winner from the upheaval. The catch: Its stock already reflects above-industry growth. To justify its valuation, Airbnb will need to turn repeat customers into loyal ones.

Online travel companies make much of their money by simplifying search and collecting fees on bookings. AI agents threaten that model.

But not all travel marketplaces are equally exposed. Booking and Expedia largely sell hotel rooms that travelers can also book directly or through competing sites. If an agent can find the same room elsewhere, it has little reason to favor either Booking or Expedia.

Booking and Expedia also sell sponsored listings that steer travelers toward particular properties. Wells Fargo estimates those will account for about 8% of Expedia’s revenue and a much higher percentage of profit next year.

Airbnb has more ways to adapt. More than half its listings are available only on its platform, and more than 90% of its traffic comes directly to its app or website.

The customer relationship doesn’t end after booking, either. Bernstein analyst Richard Clarke notes that 90% of Airbnb guests go on to message their hosts about arrival times, keys or local taxes, giving Airbnb a connection to both sides of the transaction.

How the companies have responded to the possible agentic future is telling.

Expedia quickly signed on as a Muse partner. Airbnb hasn’t, and Chief Executive Brian Chesky says AI chatbots have so far been a boon, sending customers to Airbnb’s website.

Chatbots might work for buying paper towels, he quipped at a Skift conference last month, but people enjoy planning trips. He argued that browsing dozens of homes isn’t something a text-based chatbot is well suited for.

Still, the AI jitters arrived just as Airbnb was persuading investors it deserved its pricey multiple. For years after its 2020 initial public offering, the stock—which trades around 25 to 30 times forward earnings—went nowhere. Investors saw a mature operator trading at a growth premium.

This year, Airbnb growth seems to be accelerating. The stock jumped in August after the company raised its full-year revenue-growth guidance with its second-quarter results. Wells Fargo analyst Ken Gawrelski credits a run of product improvements under a revamped leadership team.

Among the changes: letting guests reserve now and pay later, adding hotels, and a redesigned home page and app. Investors were also betting on what comes next, including thousands more hotels, car rentals and, eventually, advertising.

The irony is that some of those growth drivers push Airbnb closer to the kind of business Booking and Expedia run—the kind of business AI agents could threaten. Even if AI agents capture a large share of travel planning and booking, Airbnb would capture the demand. But it and others would slowly lose control over how customers find and choose properties.

That would undermine the advertising opportunity investors are counting on. The bigger point for Airbnb and other marketplaces is that losing control of customer acquisition could mean surrendering some of their pricing power and margins.

To bulletproof itself, Airbnb might look to another e-commerce giant that has so far kept AI agents at arm’s length: Amazon.

Like Amazon, Airbnb has a loyal customer base and hard-to-match supply. But it has nothing like Prime membership to make customers think twice before taking their business elsewhere.

That is where loyalty comes in. Business travelers stick with Hilton or Marriott because enough nights earn them perks. Leisure travelers rarely accumulate stays with one chain. Airbnb has millions of listings and plenty of repeat customers, but no broad rewards program. It has begun experimenting with credits on hotel stays, but it should make loyalty a priority, not just a promotion.

Airbnb also plans to launch its own AI agent next year. But travelers using an agent might still want it to search Airbnb, Vrbo, Booking and hotel websites alike, rather than limit itself to one company’s inventory.

Eventually, Airbnb might have to strike deals with agent makers, using its unique homes as leverage to negotiate favorable terms, says Gawrelski. Such deals, along with rewards for loyal guests, could over the long term eat into the company’s roughly 13% take rate, he adds. But if they bring in enough additional bookings, the trade-off could be worthwhile.

History offers a reason not to panic. The shift from desktop to mobile unsettled investors in Alphabet and Amazon, but both emerged as major beneficiaries. Companies with valuable assets can come out of a platform shift stronger, if they adapt quickly enough.

Airbnb has homes the bots can’t easily replace. Now it needs to give guests a reason to insist on booking them there.

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