Air travel in the U.S. has experienced a significant boom following the pandemic, indicating that people are no longer staying at home. However, CEOs have yet to return to the office, as revealed by an analysis from Deutsche Bank.
In the early months of 2020, air travel plummeted by a staggering 95% as the pandemic gripped the nation. During this time, only essential workers were commuting to jobs outside their homes. However, with the widespread distribution of vaccines and the easing of COVID restrictions in 2021, air travel has made a remarkable comeback.
This year, U.S. air travel has consistently exceeded pre-pandemic levels, surpassing the figures from 2019. This measurement is based on Revenue Passenger Kilometers, which calculates the number of kilometers traveled by paying customers within the industry.
It is noteworthy that this surge in air travel has occurred despite a 15% increase in fares compared to the previous year. Additionally, there have been an increasing number of flight disruptions, making travel an unpleasant experience for many. Even so, shares of major airlines like Delta Air Lines Inc., American Airlines Group Inc., and United Airlines Holdings, Inc. have seen significant gains this year.
Interestingly, office buildings across the country still remain half empty. Kastle Systems’ latest back-to-work barometer report indicates that many office spaces are operating at reduced capacity. However, it is important to note that this report reflects only keycard swipes at buildings using Kastle Systems’ services and does not encompass all office properties throughout the U.S.
The Changing Landscape of Business Travel and Office Space
The pandemic has led to a significant shift in the way companies operate, with remote work becoming the norm for many employees. However, as restrictions ease and vaccinations increase, some executives are eager to bring employees back to the office. But is this desire aligned with the reality of the current business landscape?
Delta CEO Ed Bastian recently addressed the concerns of executives who are struggling to get employees back in the office. In an interview with Semafor, he boldly stated, “I know where they are – they’re on my airplanes!” This points to a potential divergence between what executives want and what employees are comfortable with.
Even if there is an increase in business travel in the second half of the year, it may not have a significant impact on the high office vacancy rates that currently exist. According to a study conducted by commercial real-estate firm CBRE, the office buildings hardest hit during the pandemic only make up about 10% of all office buildings but account for a staggering 80% of the total occupancy lost between the first quarter of 2020 and the fourth quarter of 2022.
These heavily impacted buildings are predominantly located in downtown markets and often in areas with higher crime rates and limited amenities. CBRE’s findings suggest that these factors contribute to the challenges faced by these buildings, making it more difficult to attract tenants and fill vacancies. As a result, the long-term structural vacancy rate is projected to remain elevated at 14.5% compared to its pre-pandemic rate of approximately 12%.
While some businesses have suffered during these trying times, others have thrived. The S&P 500 saw a remarkable 14.6% increase in value by Monday of this year, with the Dow Jones Equity REIT Index experiencing a minor 4% decline for the same period, according to FactSet.
It is clear that the landscape of business travel and office space has been forever altered by the pandemic. Executives must carefully consider the changing needs and preferences of their employees before making decisions about returning to the traditional office environment.
Related: ‘San Francisco is not dead’: Not everyone is shunning the city’s reeling office market.