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The Return to Offices in LATAM: Decline of Remote Work and Its Impact on Commercial Real Estate

More than 20 multinational companies with operations in Latin America, including Amazon, Google, and BlackRock, have begun implementing return-to-office policies, reigniting the debate about the reversibility of remote work and its effects on the labor and real estate markets.

During the pandemic, remote work peaked at 40% in LATAM but has since fallen between 10% and 20%, driving a gradual recovery in the office market, where vacancy rates have yet to reach pre-pandemic levels.

Pedro Huerta is Amazon Mexico's Country Manager. The global company plans for employees to return to the office in 2025. Photo: SiiLA.

By: SiiLA News

10/03/2024

The return to offices following the remote work boom during the pandemic is now an inescapable reality for many workers across Latin America. Over the past two years, more than 20 multinational companies with a presence in the region, including tech giants such as Amazon, Google, and Meta, as well as large conglomerates like BlackRock, Disney, and Salesforce, have required their employees to return to the office, at least partially. This has raised key questions: How significant is the adoption of remote work in Latin America, and how is its reduction affecting the commercial real estate market? How smooth will the return to offices be, and why is it so crucial for these and other companies to return to physical workspaces?

Data from the World Bank, the Inter-American Development Bank, Deloitte, and JLL show that before the pandemic, between 10% and 15% of workers capable of remote work did so. That number surged to 35% or 40% at the height of the pandemic. However, by mid-2023, there had been a slowdown, and currently, only 10% to 20% of employees in Latin America still work from home. While these figures are lower than in Asia, Europe, or North America, the region has shown a stronger preference toward hybrid work models.

In the past two years, data has revealed a 10% to 30% drop in home office workers in countries such as Argentina, Brazil, Colombia, Mexico, and Peru. This decline overlaps with improved vacancy rates in major office markets across Latin America, though they have not yet reached pre-pandemic levels, according to SiiLA statistics.

In Mexico, for example, office vacancy rates began to slow in mid-2022 due to a reduction in new inventory and increased absorption of corporate spaces. This was driven by the demand for furnished offices and the growing adoption of flexible work models, including coworking.

A similar trend occurred in Colombia, where an over-demand for corporate spaces has kept the market balanced. Factors such as project delays, large spaces occupied by their owners, the predominance of smaller, easier-to-rent spaces, and closing prices often lower than initial asking prices have facilitated absorption.

Like Mexico and Colombia, office demand in Brazil is focused on modern, well-equipped spaces, which has driven absorption in business-heavy cities like São Paulo, Rio de Janeiro, and Curitiba. Since early 2022, there has been a gradual decline in vacancy rates, despite new inventory, thanks to strong demand for Class A+ and A spaces, largely absorbed by tech and financial companies returning to offices.

The Return to Offices: Challenges and Perspectives

Graph created with SiiLA Market Analytics data.

Decisions about where employees work have become strategically important in an increasingly competitive business environment. For many companies, returning to physical spaces is not just an operational issue but a key factor in facing post-pandemic challenges. Amazon, BlackRock, IBM, and Uber executives have highlighted several reasons for returning to the office.

First, they argue that in-person work boosts productivity by facilitating collaboration and direct team interaction. They also believe face-to-face interaction is essential for professional development, as it allows for spontaneous learning and idea exchange, which is challenging to replicate remotely. Additionally, they claim that being in the office accelerates career growth by offering more opportunities for promotion and advancement. Finally, they point out that returning to offices can help rebuild business relationships that were affected during the remote work period.

However, this return is not uniform across all countries, and local regulations have played—and will continue to play—a crucial role in the transition. In Latin America, legislation on remote work and its reversibility varies. Still, there is a common approach: the return to offices must be a mutual agreement between employer and employee, ensuring safe and suitable working conditions.

In Mexico, for example, the reversibility of remote work is regulated by Article 330-G of the Federal Labor Law and NOM-037-STPS-2023. These laws require that any shift to in-person work be documented and mutually agreed upon with at least 20 days' notice, except in urgent situations like domestic violence, where the return can be immediate. Additionally, the employer must ensure that the workspace meets necessary safety and health conditions.

In Brazil, Law No. 14.442/2022 and Executive Decree No. 1.108/22 allow the reversal of remote work to in-person work through mutual agreement or under the terms of the contract. If the employee works from a location other than that stipulated, the employer is not required to cover the costs of returning to the office unless otherwise agreed.

In Colombia, Law 1221 of 2008 and various regulations—such as Decree 0884 of 2012, Decree 1072 of 2015, and Circular 0027 of 2019 from the Ministry of Labor—stipulate that remote work is voluntary for both employers and employees. Those who opt for this modality can request to return to in-person work at any time, and if the company decides that staff must return, it must modify the previous agreement while respecting existing labor rights.

The return to offices in Latin America is not simply a return to pre-pandemic normalcy. Companies and workers now face a new balance between the advantages of remote work and the undeniable need for in-person interaction. While local regulations aim to offer flexibility, companies must find ways to integrate the productivity and professional development achieved in offices with the autonomy and comfort that remote work provides. What is clear is that the future of work will be hybrid, and ultimately, those companies that can adapt to this new paradigm will lead the way in an increasingly competitive business world.

To learn more about trends shaping the commercial real estate market, visit SiiLA REsource or contact us at contacto@siila.com.mx.

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