What in the world is happening with Return to Office Mandates?
A lot of employees who enjoyed their work-from-home lifestyle aren’t thrilled about them.
What about investors? Are government and corporate Return to Office Mandates a sign of profitable futures for California’s commercial real estate scene, specifically the office space market?
In recent months, the tide has begun to turn. After several years of remote work dominance, a growing number of employers, ranging from tech giants to state and federal government agencies, are issuing formal Return To Office (RTO) mandates. These shifts are having a ripple effect across California’s commercial real estate (CRE) landscape, reshaping demand, revaluing space types, and inviting both investors and landlords to rethink strategy.
For commercial property owners and investors in California, the big question is: What does this mean for office, retail, and mixed-use assets, and what’s the best way to position a portfolio to thrive in this evolving environment?
At Bell Properties Commercial Real Estate, we love diving into this data and helping owners make good choices when it comes to their commercial investments. Join us as we take a deep dive into how RTO mandates are reshaping California’s CRE market, what sectors are seeing the biggest impact, and what smart owners should be doing now.
Quick Overview:
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The New Reality: Return-to-Office Is No Longer Optional for Many
Ever since early 2024, major companies like Google, Meta, Salesforce, Wells Fargo, Disney, and Amazon began requiring employees to return to the office at least three days per week, with some adopting even stricter hybrid or in-person requirements. The federal government has followed suit, pushing agencies to reduce telework and increase physical presence.
These mandates are largely driven by:
A perception of declining productivity in some sectors
Concerns over company culture and collaboration
A desire to maximize investments in real estate
Shifting employee dynamics in a cooling labor market
California’s major metros are welcoming more people back into their office spaces now, and that’s had an impact in the commercial rental market and the way that property owners are renting out their spaces.
It looks like there’s a full return to work underway, but the reality is more nuanced. And for many of the commercial property owners we’ve been talking to, it's a bit more challenging.
California’s Office Market: Stabilizing, But Not Fully Recovered
Of course there’s opportunity here.
That’s what we love about commercial real estate in California. Any investors looking for a strategy around the return-to-work trend should contact us at Bell Properties Commercial Real Estate.
It’s good news for office space owners, but flexible thinking is required. That’s because despite the upward trend in office attendance, many tenants are rethinking space utilization, consolidating footprints, or seeking higher-quality space in better locations. This flight to quality is reshaping where demand is going and what types of assets will thrive.
We’re not measuring success by pre-COVID demand patterns. Instead, we’re embracing a new hybrid model where location, amenities, and flexibility matter more than ever. Workers may be coming back to offices, but those offices will not look the same as they did five years ago.
The Winners: What Types of Properties Are Benefiting in California Commercial Real Estate
There are a few property types that are especially well-positioned for success with the way the market is trending.
Class A, Amenity-Rich Buildings
Premium buildings in desirable California locations are attracting tenants looking to lure employees back with better spaces. Features like outdoor work areas, wellness facilities, modern HVAC, and upgraded tech infrastructure are now essential.
Suburban and Satellite Offices
No one missed commuting when work-from-home was the norm. Companies are adopting hub-and-spoke models, retaining a central HQ while offering smaller regional offices closer to where employees live. This is boosting demand in areas that are outside of major city centers. Walnut Creek (East Bay), Irvine and Newport Beach (Orange County), and Roseville (outside Sacramento) are examples of areas where this idea is really taking off.
Flex and Co-working Spaces
This is a big one. The demand for flexible workspace is on the rise, particularly from mid-sized companies unwilling to commit to long leases, remote-first firms seeking anchor days for their employees and contractors, and teams that need temporary collaboration space.
Operators like Industrious, WeWork (post-bankruptcy reboot), and smaller boutique co-working providers are seeing increased inquiries, especially in well-located suburban markets.
RTO Impact Beyond the Office: Retail, Transit, and Multifamily
The return to the office doesn’t just affect commercial office space. It’s influencing entire ecosystems around urban and suburban work hubs. Here’s what we can tell you:
1. Retail Foot Traffic is Recovering
In places like Downtown Los Angeles, San Francisco’s Financial District, and San Jose, increased office attendance is breathing life back into cafés and quick-service restaurants, fitness centers and wellness studios, and after-work bars and social venues for happy hours and coffees.
Retail tenants who previously downsized or deferred leases are now revisiting expansion plans, but with a focus on high-traffic corridors near reactivated office clusters.
2. Transit-Oriented Developments Are Gaining Momentum
Return To Office Mandates are also reviving interest in transit-accessible properties, especially those along BART (Bay Area), Metro Rail (Los Angeles), and Caltrain (Peninsula corridor). This renewed interest could stabilize transit-oriented developments (TODs) that struggled when remote work was at its peak.
Challenges That Remain for CRE Owners
While the trend is a positive signal, it’s not without its challenges. Owners and investors should be aware of several key friction points.
Space Efficiency = Smaller Footprints
Many companies returning to the office are taking less space than they had pre-pandemic. They’re reconfiguring layouts, embracing hoteling, and shifting from private offices to collaborative zones. Expect more tenants, but smaller square footage per lease.
Longer Lease Negotiations
Tenants are being more cautious and strategic in signing long-term leases. Negotiation timelines are longer, and many require tenant improvement allowances, early termination clauses, and expansion/contraction flexibility.
Obsolescence Risk
Older buildings without modern systems, amenities, or flexible floor plans are increasingly functionally obsolete, even if they are well-located. Landlords must consider capital improvements or repositioning strategies to stay competitive.
Needing creative ways to work around these challenges? Contact us at Bell Properties Commercial Real Estate.
Opportunities for Commercial Real Estate Investors
Despite the lingering volatility, this trend has opened several smart plays for investors looking at California CRE.
Value-Add Acquisitions
Distressed or underperforming office assets in quality locations can be acquired at significant discounts. With the right upgrades and repositioning, these buildings can attract returning tenants, bring in above-market rents, and increase asset value quickly. As an investor, we recommend focusing on properties near transit and mid-sized buildings with flexible floorplates. Look for assets with potential for mixed-use conversion.
Redevelopment and Repositioning
In some markets, converting obsolete office buildings into residential units, educational properties or buildings designed for medical use can generate impressive returns.
California’s state and local governments are increasingly supportive of adaptive reuse. They’re providing grants, density bonuses, or zoning incentives.
Investing in Flex and Co-working Partnerships
Partnering with or leasing to flexible workspace providers can reduce vacancy risk, diversify tenant mix, and offer a buffer against changing tenant needs. Consider allocating space in a property for shared amenities, private suites, and short-term licenses.
What Commercial Property Owners in California Should Do Now
Anyone who owns or manages commercial property in California should reassess their strategy in light of ongoing RTO trends. Here’s a quick action plan:
Reevaluate Your Tenant Mix
Who’s still remote, hybrid, or returning?
Are you serving the right industries?
Which leases are at risk of downsizing or exiting?
Modernize Your Offering
Upgrade HVAC, Wi-Fi, lighting, and access systems
Create shared amenities (conference rooms, lounges)
Rebrand outdated properties to attract today’s tenants
Introduce Flexible Leasing Models
Offer short-term or rolling leases
Include expansion/termination rights
Partner with co-working operators or furnish select units
Return to Office Mandates are undeniably reshaping California’s commercial real estate landscape, but we caution investors not to see them as a cure-all for the sector’s challenges. Investors and owners who recognize the opportunity behind the headlines and take proactive steps to evolve will be best positioned for success in the coming cycle.
Make sure you’re not waiting for things to get back to normal. There is no normal. The market is always shifting and the only way to succeed is to shift with it.
Let’s talk about repositioning your commercial asset in response to return-to-office trends. Contact us at Bell Properties Commercial Real Estate.
