From Vacant Offices to Virtual Teams: Navigating the Deflating Office Work Bubble

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This article explores the evolving landscape of modern workplaces in a remote work era. It discusses the challenges companies face adapting to hybrid work models and the benefits of embracing a remote-first environment.
Published on
January 29, 2024
Updated on
April 11, 2024

Nowadays, the streets leading to skyscrapers in bustling metropolises are less crowded, and the conference rooms are less noisy. The rise of remote work has opened new horizons for employees but has left once-thriving office spaces vacant. Companies scramble to cut losses, often recalling workers to their cubicles and expecting a healthier bottom line. The outcome, however, is often the opposite. For a significant portion of the workforce in key sectors, the more companies force employees back into the office, the more they propel valuable employees out the door.

One of the indelible marks of the global shutdowns from the pandemic was giving employees a work-from-home trial they simply do not want to end. To stay in the race and keep the gears of innovation turning, forward-looking businesses are scouring the globe for talent, unhindered by geographic limits. 

While some may grapple with adapting to remote and hybrid work models, understanding the positive impacts of these options—like cost efficiency, expanded talent pools, and happier, more productive employees—can help inform company decisions.

Office building vacancy rates in major cities reflect a global trend

Office spaces in major cities like New York and San Francisco are witnessing a transformative shift in the wake of the pandemic. While the back-to-office push has tipped the scales slightly toward returning to a traditional face-to-face setting, the resistance to a complete 180 has been significant and lasting.

A recent study reveals a nuanced picture of Manhattan's office space utilization, showing nearly 60% of workers are now returning to their desks. The majority have adopted hybrid work patterns; only 12% report daily office presence, while 60% split their workweek between home and office in varying degrees. These incremental increases depict a slow return to in-person work — so slow, in fact, that it has contributed to an unprecedented office vacancy rate in major business centers like New York City. The situation in major cities reflects a national, even global trend. In fact, the Americas are lagging behind APAC and EMEA in getting people back behind their office desks. 

McKinsey put it straightforwardly: “Hybrid work is here to stay.” The undeniable, unstoppable metamorphosis of the urban economic tapestry only highlights the urgency of adaptive strategies in a world where the concept of going to work is being redefined.

A graph showing a percentage of workers returning to the office or working from home.

Forcing employees back to fill the void…

If they don't refill their offices, companies stand to lose more than what is already invested in office leases. Many tax incentives, for example, depend on employees physically being at work. Many company executives also firmly believe they see productivity, retention, and revenue increases directly related to a return to office. Companies like Google factor in employee attendance in performance reviews, and a recent survey found that nearly 30% of participants would consider firing those who do not comply with RTO mandates.

However, companies must understand that employees are willing to walk away when faced with these mandates. Nearly two-thirds of employees will find other places to work if that means keeping remote working arrangements. Companies doubling down on employees’ return to the office are met with resistance from a considerable portion of the workforce in what has become a protracted clash. Hiring and retention strategies are slowly evolving to accommodate preferences. Businesses must navigate this transitional period where employee satisfaction and operational needs must find common ground.

Employee interest in remote positions has surged during and after the pandemic. Census Bureau statistics indicate a stark increase from 6% pre-pandemic to 18%, or 28 million Americans, working remotely in 2021. Despite a cooling job market and some businesses retracting telework flexibility, half of all LinkedIn job applications are for roles promoting telecommuting — a feature offered in merely 15% of postings. Remote work has transitioned from fringe benefit to mainstream demand.

…results in companies bleeding talent

Locked into long-term leases for upscale offices, many companies looking forward to a return to bustling work environments are instead faced with employees who have embraced remote work. Understandably, some hesitate to downsize their physical footprint due to costs accrued. Some double down on classic sunk cost fallacy behavior. This is the corporate quicksand that ensnares companies, compelling them to pour more resources — time, money, and energy — into their deserted concrete jungles because of the investments they have already made. This is financial entrenchment and a strategic misstep in workforce management.

By incentivizing RTO with benefits employees don’t want or forcing an ultimatum, companies stand to bleed top talent, especially those in senior positions with higher salaries. Nearly half of this group occupies senior roles, and a third earns above $150,000 annually, indicating their company influence. This cohort strongly prefers remote work to the extent that they would rather quit or accept a substantial pay reduction to maintain their work-from-home arrangement than be bound to a five-day office schedule. Consequently, companies that ignore these preferences risk losing junior talent and pivotal senior employees who champion and can potentially enforce flexibility in work location.

The rise of remote work has also unveiled an intergenerational rift within leadership circles, where seasoned executives might advocate for traditional office attendance while younger professionals gravitate toward workplace flexibility and autonomy. The push is most profound within the 24-to-35 age bracket, where nearly two-thirds express a preference for full-time remote opportunities.

With well over half indicating readiness to switch jobs if denied telework options and many willing to accept pay cuts for permanent remote roles, it is clear that this issue transcends workplace trends.

It’s now integral to job satisfaction and life balance, particularly in fields like computers and IT, where digital connectivity supersedes physical presence.

Companies must examine the cost and benefits of office vs remote or hybrid work options and decide whether to continue funneling resources into underutilized assets out of obligation to past commitments or pivot in alignment with current preferences.

The financial burden of unsatisfied employees

The key takeaway is that employees given a taste of flexibility due to global lockdowns are unlikely to give it up easily — if at all. Companies that enforce RTO risk driving away their talent. Instead, mandates and ultimatums can foster a culture of employee dissatisfaction by eliminating the potential work-life balance that remote work can deliver, leading to symptoms that can ultimately hurt the bottom line.

Employee turnover rates with RTO mandates can be substantial, with the economic impact of high employee turnover in the United States clocking in staggering losses amounting to a trillion dollars annually. Traditional estimates suggest it takes about 33% of an employee's salary to find a replacement, yet the reality is often closer to 300% to 400% of the departed employee's wages. Turnover extends beyond mere financial costs. It erodes institutional knowledge and burdens remaining staff with increased workloads, potentially triggering an attrition spiral that leads to further resignations.

High turnover is a significant setback for any organization, and with 57% of workers ready to search for new jobs, the financial impact can be severe if remote work is not an option. To put it bluntly, even a modest reduction in turnover could mean saving up to $10,000 per employee each year. It’s a compelling reason to embrace remote work options that align with the preferences of today's workforce.

The figures are startling when comparing salaries between New York City, San Francisco, and Latin American countries within the same time zone. On average, a software engineer in Brazil earns only 45% of what their US-based counterpart takes home. The stark contrast presents an unmistakable opportunity. Companies can achieve significant cost efficiencies while maintaining high-quality standards by tapping into markets like Latin America's burgeoning tech talent pool.

The financial argument for remote near-shoring becomes undeniable when the figures are laid out. Shifting one software engineer from an on-premise role in a major city to a remote position utilizing Latin American talent can save a company up to 59.44% annually:

  • Base salary costs are slashed by half without compromising on skill or productivity.
  • Approximately $18,000 worth of desk space in cities like New York or San Francisco is eliminated.
  • The equivalent of 15% of work hours lost to commuting is saved.
  • An additional 10% in costs associated with higher turnover rates is avoided.
  • Spending only $8,000 on annual company-wide events can foster team culture and connection.

Moreover, organizations are starting to realize the potential of embracing remote work. Revelo’s 2022 Hiring Maturity Report found that over half of respondents were open to hiring remotely outside the US — and a further quarter of respondents were not entirely opposed to the prospect.

A graph showing how likely US companies are to hire remote employees outside of the US.

Tapping into a global talent market is advantageous to stay competitive

Remote global workforces confer several advantages for companies looking to stay competitive. For one, diverse teams outperform homogeneous ones, a key insight for companies aiming to enhance business performance, foster innovation, and better meet global customer needs. This diversity isn't limited to gender or race. It includes a range of factors such as age and cultural background, with research indicating that a broad spectrum of perspectives contributes to smarter decision-making and greater innovation. Additionally, global talent pools allow companies to overcome stale thinking patterns by integrating a mix of different backgrounds.

A global approach to hiring also stimulates the digital economy's potential by tailoring products to diverse user needs. Drawing from international talent resources helps companies better understand their customer base, leading to increased satisfaction and a broader skill set among employees.

Leveraging the global talent market introduces substantial economic benefits due to prevalent salary gaps. For example, software engineers in Brazil and Mexico earn roughly 45% and 53% of what their US counterparts make for similar roles and expertise. This presents an opportunity for US-based companies to realize cost efficiencies while offering competitive wages from a global standpoint. An analysis of the average salary for a US-based software engineer versus engineers in Latin America working for US companies showcases striking economic advantages. Entry-level software engineers in the US make an average annual salary of $109,000. Comparatively, the average cost of hiring an entry-level Latin America-based engineer placed through Revelo is $68,000, a 38% saving for a hiring company. Similar savings are evident across other seniority levels: Mid-level software engineers account for a 21% cost reduction while hiring companies save 27% on expenditures for senior engineers. 

Embracing remote work allows businesses to enjoy a dual advantage of access to a diverse pool of top-tier tech talent at lower relative salaries and significant savings on operational costs such as office space. However, it's important to approach this strategy with an ethical mindset, ensuring fair compensation that reflects local living standards and contributes positively to these emerging tech economies.

A graph showing hiring costs of US vs LATAM-based engineers.

If not RTO, then what?

This false dichotomy needs to be stamped out. The issue is not whether companies can make their employees return to the office. Instead, can they make the new normal work for them to maximize their gains?

According to Revelo’s 2022 Hiring Maturity Report, 74% of respondents reported hiring remotely, up from just 26% before the pandemic. Are these just lasting consequences from a global shutdown or a signal that organizations are slowly realizing there is much to be gained if only they explored the potential of the new normal?

A graph showing the percentage of companies open to hiring remotely (based on a Revelo survey).

What does it look like when companies revolutionize the traditional workplace by adopting remote work models that harness its advantages to maximize potential?

Tech giant Microsoft is an example of a company using remote work strategies to its advantage by allowing employees to work from any location. Microsoft has armed its workforce with collaboration and productivity tools like Teams, OneDrive, SharePoint, and Yammer to support this. These tools enable seamless communication and project management, dismantling the barriers imposed by physical distance.

Salesforce, recognized for its cloud computing services, has introduced a hybrid work model that empowers employees to choose their workspace, whether it’s from home or the office. Salesforce underscores this flexible work style with wellness programs and professional development opportunities. This approach boosts employee morale and caters to their individual working styles, which can lead to a more driven and focused team.

Lastly, Airbnb has adapted to become a remote-first enterprise functioning globally in 220 countries. The company views remote work as an avenue to enhance innovation and cultivate a diverse and inclusive workforce. Airbnb delivers on this by providing employees with benefits tailored to support their well-being and work-life balance, even outside the traditional office space.

The stubborn persistence to advocate RTO overshadows benefits like worker autonomy, expanded talent pools, and reduced operational costs — critical drivers in today's employment landscape. As new tools bolster remote work productivity, employees increasingly prefer flexible arrangements. This is simply at odds with companies' attempts to revert to traditional office-centric models.

In their persistence to advocate RTO, many organizations risk letting go of the competitive advantage that the tech players above clearly recognized and seized.

Hybrid and remote teams are the future of work

While traditional sectors like hedge funds and creative industries emphasize in-person collaboration, it’s becoming clear that offices are not the sole venues where innovation and productivity thrive. While physical workplaces will still hold value, they are secondary to the burgeoning culture of hybrid and remote work — a culture redefining the corporate landscape with its inherent capabilities to accommodate a rich and deep talent pool.

Working remotely offers employees more autonomy, seizing the chance to mold a work-life synergy that maximizes their well-being and output. This newfound freedom to work anywhere supports a range of work styles, heightens employee morale, and anchors a more profound, more enduring dedication to their roles.

The sweeping adoption of remote roles heralds a flourishing era of corporate agility and invigorated workforce contentment. Rather than retreating from tradition, embracing remote work is a bold move toward exploiting the expansive opportunities across our now less bounded business reality. To stay competitive, companies must move past RTO mandates and leverage the vast benefits of flexible, hybrid models — an innovative strategy that enhances employee satisfaction and provides a competitive edge in the evolving job market.

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