Corporate executives say their outlook is brightening now that workers are returning to the office.
(Bloomberg) — Businesses ranging from office supplies retailers to childcare providers have cited major employers’ push to get workers back to offices as a tailwind during third-quarter earnings calls — or at least a reason to be hopeful.
That’s a shift from last quarter, when disappointments were blamed on the stubborn persistence of work-from-home preferences. Many executives were encouraged by September’s small, but in some cases significant, post-Labor Day bump in office occupancy, though some were hoping for a quicker pace.
“I thought after Labor Day, we would get a quick read on what the story was going to be about work-from-home versus work in return to office,” said Brian Harris, chief executive officer of Ladder Capital Corp., a real estate investment trust, on the company’s earnings call. New York is “winning” in the move back to the workplace, he said.
The office market won’t be affected too much if workers never return to a five-day commute, he said. But if employees take Fridays as a work-from-home day, that will have a much bigger impact on city-center restaurants.
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But even some restaurant operators are upbeat. “I spent last Friday going around to a bunch of Shacks and just trying to think about and understand kind of what is Friday going to look like in cities,” said Shake Shack Inc.’s CEO Randy Garutti. “And I was pretty encouraged about what I saw, even in Midtown Manhattan on that day.”
Shake Shack reported strong performance in city-center locations driven by workers heading back to their desks and stopping by for weekday lunches or dinners — especially after Labor Day. “We remain cautiously optimistic on urban trends long term as new patterns emerge, but it’s good to see the momentum in the right direction,” Garutti said.
Though it’s not all sunshine: The company’s recovery would’ve been even more robust if return-to-office trends were stronger, according to Chief Financial Officer Katie Fogertey. While the trends were encouraging, she said, “we’re still on the road to recovery.”
Many companies are expecting the favorable winds to continue into next year. ODP Corp., which owns Office Depot, said that its ODP Business Solutions, which sells a range of office products and technology services, saw solid revenue growth as return-to-office trends gained more traction. “The return-to-office trend is a tailwind for these teams that we expect to continue through 2023,” said David Centrella, president of ODP Business Solutions.
Others have profited off of what’s often a bumpy transition. Bright Horizons Family Solutions Inc., the largest provider of employer-sponsored childcare in the US, reported strong demand as companies look for ways to support their employees as they shift back to working in-person. “I think that the core services that we are offering are very much in the interest of employers as they continue to see stressors as it relates to their own workforce and their own return-to-office plans,” said CEO Stephen Kramer. “So, overall, feeling really good going into 2023.”
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And Essex Property Trust, a real estate investment trust that invests primarily in West Coast apartments, said it has seen rental requests pick up as employees that were hired remotely relocate closer to offices to return to in-person work.
To be sure, the pace of workers’ return was not as lively as many companies would’ve liked.
Xerox Holdings Corp. saw its “page volume” — in other words, how much printing users do, which it says is strongly correlated with return-to-office trends — grow from last quarter. But still, the company was frustrated. “This just reflects some of the challenges a lot of firms are currently facing in bringing employees back to the office,” said Xavier Heiss, Xerox’s CFO.
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