Rate of employees returning to the office higher due to AI surge
In this DML Report…
Return-to-office (RTO) trends are accelerating, with nearly 60% of tech sector tenants seeking to expand their footprints and 70% of tenants touring office spaces across the U.S. looking for the same or larger square footage. Tech firms and startups, including companies just two or three years old, are committing to over 100,000 square feet of space. AI is reshaping corporate strategy by boosting productivity per employee, enabling new business creation, and positioning the office as essential infrastructure for AI-driven work. Reasons for mandating returns include facilitating learning through osmosis and spontaneous hallway encounters, which are not replicable remotely, such as in basements via Zoom. JPMorgan Chase CEO Jamie Dimon emphasized that the apprentice system works best in person, where being in the room is crucial for innovation and problem-solving.
Benefits of RTO include strengthened tenant demand, enhanced in-person collaboration for innovation, and support for re-skilling workers in AI to handle new roles. Challenges arise from ineffective mandates, as most people resist them beyond childhood; instead, companies should prioritize purpose and trust to address larger issues. The impact on employees and productivity involves AI's role in increasing output while in-person settings enable learning and innovation, though hybrid models may fall short of full benefits. AI allows firms to solve bigger problems collaboratively in physical spaces.
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Specific company actions include Paramount's new CEO David Ellison issuing an ultimatum for full-time office returns or departure, and ServiceNow committing to a major build-out in West Palm Beach as an AI innovation hub with hundreds of hires and up to 200,000 square feet. Future outlook points to continued strengthening of tenant demand as technology firms expand and AI-driven enterprises emerge, fueling growth in major markets like San Francisco and New York City, as well as emerging ones like Palm Beach, Florida.