Five years after the pandemic normalized remote work, companies are still wrestling with the pros and cons of requiring employees to return to offices. For CFOs, a strategic approach to office space and RTO goes hand in hand with prudent budgeting. 

That’s because, for many companies, office real estate remains the second-largest expense, following payroll, whether “it’s being used or it’s not,” Andrew Farah, CEO of workplace analytics company Density said. It’s up to a company’s leaders to make the tough decision to either use it or lose it — in order to avoid shelling out for empty space.

“The main question is, should you try to get your employees back into an office, or should you let your physical space go?” Farah said in an interview. For CFOs, who tend to consider real estate in terms of numbers, answering the RTO question can come down to the simple question of utilization: “if you have a real estate portfolio that's not being used, get rid of the buildings or require people to come back,” Farah said.

Utilization refers to how often and effectively employees are making use of a space: a good meeting room utilization rate, for example, is between 40% to 60%, according to a 2024 post by workplace software firm Envoy.

The San Francisco, California-based company provides workplace analytics software and sensors aimed at enabling companies to gain insight into how their real estate is being utilized, according to its website. Farah has served as Density’s CEO since May 2014, and previously served as a managing partner for software development agency Rounded, according to his LinkedIn profile.

The ‘de facto’ remote pitfall

The office space question has continued to loom large in the minds of CFOs and other C-suite leaders, as many high-profile companies — as well as the federal government under President Donald Trump — have begun to issue return to office mandates.

Many of the RTO policies that have been enacted this year have triggered pushback from both company employees and even executives, some of whom themselves prefer hybrid or remote work, CFO Dive previously reported.

That could be partially due to wishy-washy guidance from top-line leadership: many C-suite leaders are unwilling to be strict about RTO policies “for fear of attrition or the inability to recruit, Farah said, “so what they do is they just choose not to have a policy,” he said. “Or they say we're hybrid, which actually means many things. Hybrid is a terrible term. It's imprecise, it's vague,” and Farah said it’s often left to managers to execute.

In such cases, “hybrid” companies often turn into “de facto” remote companies, he said — with the business still footing the cost of real estate.

Fixing the ‘movie theater’ problem

As well as unclear guidance, many executives can often have a murky idea regarding exactly how the office spaces they do have are really being used by their employees — a question distinct from occupancy. For CFOs as the stewards of finance, figuring out if the space is being put to effective use is a critical factor in determining an RTO policy, especially in the midst of rising cost pressures.

Businesses that are implementing RTO policies have also found themselves facing both logistical and financial challenges, such as pricey office refurbishments to entice employees that can strain an already tight budget or a shortage of necessary supplies such as desks and WiFi access, March reports by Raconteur and NPR found.

Underutilized buildings tend to have what Farah calls the “movie theater problem,” where, entering into an empty theater, patrons “naturally spread out,” he said. “They don’t sit next to each other.” A similar pattern emerges in underutilized offices, where, lacking critical mass, employees will fill the space they’re in, but “for a CFO, it's just dollars being spent on space that's not being used,” Farah said.

As such, many “CFOs are turning to their heads of real estate and expecting hard data on utilization,” Farah said. Finding out key numbers — such as exactly how much the business is spending per head — can help finance chiefs make targeted decisions regarding if “you're going to grow some places [or] you're going to consolidate [in] others,” he said.