“offices and parking spaces are being used really inefficiently right now”

Hybrid and work-from-home options may be here to stay, and the environmental implications are emerging

Editor’s note: This article is part of a collaboration between APM Research Lab and the Ten Across initiative, housed at Arizona State University.

by RITHWIK KALALE | Oct. 12, 2023

It is no secret that COVID-19 dramatically shifted workplace culture and how we use office space. Many companies mandated work-from-home during the height of the pandemic. While several companies, such as videoconferencing company Zoom, have more recently required a return to physical offices, many have adopted a flexible or hybrid approach, alllowing workers to clock-in from home some days, while reserving office space for days when workers are in the office.

Since 2020, work-from-home or hybrid work position openings have skyrocketed, but some U.S. cities have a much higher concentration of those types of positions than others.

Certain cities, such as San Francisco and Phoenix, have higher work-from-home job posting rates than the national average and continue to trend upward, whereas cities like Houston and Jacksonville lie just below the average and plateaued after 2021.

Hybrid work’s impact on energy consumption

While hybrid work has clear benefits for employees, a more flexible work arrangement has possible environmental benefits, too, at least in theory. Hybrid work could cut carbon emissions, through reductions in commuting, as well as electricity usage in the form of lighting, heating and cooling office space. However, that theory does not always work out in practice.

According to Dan Dreiling, Manager of Customer Programs at Salt River Project, one of the primary utility providers in Arizona, energy use implications of hybrid work are entirely dependent on the employees’ schedules and company policy.

In an email Dreiling noted, “In situations where hybrid employees are coming into the building on alternating days or intermittently throughout the week, there is less of an opportunity to save as the building is being utilized more consistently where building systems cannot be modified or shutdown.”

While employees can have a hybrid work schedule, if every employee has a different schedule, the buildings that contain those employees have to operate as if everyone is still working in person five days a week.

Deborah Salon, an assistant professor at Arizona State University’s School of Geographical Sciences and Urban Planning echoed a similar sentiment.

“Offices and parking structures are being used really inefficiently right now, and that's a big problem. I think it will take some work to do. It's not like there's some main controller that can just quickly reorganize all this stuff, right? Because it's all owned by different people. Everyone's just kind of scrambling to figure out how to make best use of the real estate that they have.”

People prefer hybrid-work setups

Occasional work-from-home days were not entirely uncommon prior to the pandemic.

“The utilization (of office space) prior to COVID was 60 to 80%. But we all thought and acted as if it was five days a week,” said Phil Kirschner, senior expert and associate partner at McKinsey & Co., a strategic real estate consulting firm.

“Most people I surveyed and many others would have said they wanted a day or two of flexibility before (the pandemic) but couldn't have it largely for cultural reasons, like managerial expectations,” Kirschner continued. “COVID ripped the band-aid and showed that, shockingly, most of our companies didn't fail when forced into a fully remote context.”

Many workers prefer hybrid work arrangements. Indeed, recent surveys from Pew Research show that most people report a better work-life balance with a remote work setup.

What can companies do?

According to the Energy Information Administration, commercial buildings in the U.S. South Census Region (which includes states like Texas, Florida, Georgia, Mississippi, Alabama, Louisiana, etc.) have the most floorspace and use the most energy compared to other regions. Among different building types, office space used the most electricity, according to their latest data.

At McKinsey & Co., Kirschner believes the key to more energy- efficient buildings is to make them “smarter.” That is, buildings should attempt to integrate “smart” features into their office spaces to curb this energy overconsumption.

“We do not have enough of the kind of space that we need,” he said. “Take New York City. We have a local energy-efficiency law coming into place next year. Expect this to become more common. Buildings that fail to meet certain tests on energy efficiency will start getting charged– per ton of CO2 emissions per year. And that's gonna apply pressure to retrofit these buildings because someone's got to pay for it.”

Kirschner says that implementing features like smart thermostats or light and air conditioning controls from your phone, not only heightens the building experience for tenants, but would also consume less energy than those who might work from home in a non-smart or non-energy efficient household.

“I don't think that better building quality alone is going to get someone to commute for an hour but I think it is part of the experience,” he said. “Then, the next step is getting ...sensors. The same building that can tell me if the air quality is good in this room probably knows that I am in said room. Maybe then, it can automatically dim the lights, change the air or eventually nudge all of us onto the fourth floor to shut down the fifth floor.”

Zoning laws and floors 

While many office spaces remain vacant and under-used, many parts of the U.S. face a housing shortage. 

An intuitive solution, then, would be to somehow convert this office space into housing. However, current zoning laws and real estate contract agreements often stand in the way. 

There is also a growing trend of schools like University of Southern California, University of California, Los Angeles and George Washington University purchasing empty office buildings and re-purposing them as campus spaces. 

Herman Bulls, Vice Chairman at JLL, a Fortune 500 global real estate services company, makes the case that hybrid work may reduce greenhouse gas emissions from car commuting. However, he said that as electric vehicles grow in popularity, the difference in emissions from cars for work-from-home vs non-work-from-home employees, will also be negligible. 

“Commuting by car, that's a positive point for not going into the office,” he said. But obviously, the transition to electric vehicles will continue and 15 years from now that's going to look totally different in terms of the exhaust fumes from vehicles.” 

Bulls said that dependence on fossil fuels for our electricity use is the root issue, and that transition will be crucial to building a sustainable future.

Whether a gradual transition away from fossil fuels will eventually solve energy use issues remains to be seen. In the nearer term, given the evolving standards around working from home, companies will continue to grapple with the issue of how to most efficiently use office space--with energy consumption playing a big role in that calculation.

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