CHICAGO – While at-home work and a shift away from city centers was widely embraced during the throes of the pandemic, recent data points suggest the “Great Return” is in motion. City centers have historically served as the cultural and commercial heart of cities and as William Shakespeare once said, “What is the city but the people?” This statement resonates now more than ever as cities are being reawakened and re-embraced by the workers, students and companies that call them home.
As of April, many big tech and financial corporations have called employees back to the office and that should have a trickle effect for medium size and small firms to follow suit. Recent badge scans indicate a nearly 42% average occupancy by month-end. This is up markedly over last April, when national office occupancy hovered around 26%, and April 2020, when the U.S. was only at 8% occupancy. Sun Belt markets are leading the way, with cities such as Austin and Houston already crossing the 50% occupancy mark. Re-entry is likely to continue its steady rise in the coming months.
“We are continuing to see momentum mount across multiple sectors and in both gateway and secondary markets as pandemic restrictions ease,” said John Gates, CEO, JLL Americas. “We believe the office is central to the work experience and in creating company culture – promoting innovation, collaboration, networking, learning and professional development, which is hard to replicate in a remote environment.”
As office occupancy rises, urban hotel and group room demand has risen in lockstep. In the last week of April, group demand reached 6.2M room nights, the highest total since the onset of the pandemic. Additionally, urban hotel RevPAR outperformed other hotel segments in March with a 119% increase compared to the March 2021 pandemic trough. This improving demand has translated to renewed investor optimism as urban hotel liquidity reached a six-year high in February 2022 (on a trailing 12-month basis), with a 12% increase in transaction volume relative to pre-pandemic levels.
“With fears around Omicron receding, we’re seeing an uptick in business transient and group demand, which is translating into stronger investor interest in urban hotels,” said Kevin Davis, CEO Americas, JLL’s Hotels & Hospitality Group. “As these demand trends crystallize over the balance of the year, coupled with an improved outlook for international visitation to the U.S., we expect a meaningful increase in sales of city center hotels.”
Large gateway cities such as New York have lifted most of the remaining COVID restrictions, which has resulted in an uptick of metrics across the board, including increased subway ridership, the return to full in-person schooling, a hot home sale and rental market and an almost full recovery to pre-pandemic restaurant reservation bookings. The New York City Recovery Index shows the city’s economic recovery is four-fifths of the way back to early March 2020 levels.
On a wider basis, JLL Research recently analyzed more than 100 cities globally to identify the most attractive cities for people, business and capital. Not surprisingly, gateway cities such as San Francisco, Boston and New York all rank in the top markets for innovation and talent, both of which are noted to be key drivers of the next cycle of urban renewal.
The road ahead may still present some headwinds but the myriad of positive indictors surrounding return to office, return to travel and the resiliency of gateway cities should not be overlooked.
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JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 98,000 as of December 31, 2021. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com. For further information, visit jll.com.