The (gas) price of working from home

Since COVID-19, working from home has gained immense popularity. Research suggests that 97% of employees would like to keep working (partially) from home now that the lockdowns are over [1,2]. Employers have responded to this in large numbers: the demand for office space has decreased substantially. From the perspective of the employer, employees that work from home can be a massive cost saver: in 2021 the annual rent and maintenance costs are estimated at 600-750 euros per square meter [3]. It is not surprising that a survey of Het Financieele Dagblad (Dutch financial newspaper) among 30 large companies showed that around half of them already sold office space or did not renew some rental contracts. The general consensus is that the Covid pandemic has encouraged working from home and led to a new habit that will stay, leading to permanently lower demand for office space. If office workers permanently work from home for a few days a week, an employer does not need to have a desk for everyone all the time. But what if the demand for office space suddenly rises?

Working from home has many advantages. Forced working from home rapidly changed into a new nice habit. Travel costs and time were a problem of the past, and the first results of working from home showed content workers stayed productive or where productivity even increased [5-6]. However, the first enthusiasm seems to be overrated. A lack of social contact with colleagues, issues with concentration, and the office appliances at home seem to be downsides of the home office [7-9]. On second thought, the unanimously positive responses may have been premature [10-12]. There is a reason why the hybrid model, with a partially remote work week, is becoming more popular.

But working from home is particularly under pressure now through another factor: the high energy prices. While working from home was mainly cost-saving before (apart from some extra coffee), the historically high energy prices are now incentivizing office workers to make the commute to the office again. An office worker that works from home this winter can easily add 2 m3 in gas a day to their total use, according to MilieuCentraal [13]. If you currently have a variable energy contract in the Netherlands, that would translate to 150 euros a month [14]. Now that households are looking at ways to cut costs, this would be a relatively easy way to save money. Although the Netherlands recently announced a price ceiling for natural gas which caps the price of gas until usage of 1200, working from home could be a factor that lifts the usage of a household above this 1200 m3 threshold. Thus, the price ceiling makes the incentive to work from the office even larger: heating the home to work there is likely to be exposed to the market gas price and will thus have a large price tag in the coming winter.

From a societal perspective, working from home is also not desirable. Apart from the fact that private individuals can profit from working in the office, it could also reduce the total energy demand. The heating of a room is largely independent of the number of occupants. An office that hosts 50 employees is clearly a more efficient use of energy than heating 25 to 50 home offices where 1 or 2 people are working. In this way, we can realize more efficient use of scarce energy. In the current tight energy market, even a small reduction in total demand can have a significant effect on the energy price. Every citizen of the country will in the end profit from that.

The commercial sector is in a difficult position: they have to enter new long-term office lease contracts, with large insecurity about occupancy. Despite increased flexibility, an employer will always want to have the capacity for the maximum office demand of employees. The Covid pandemic seemed to be a structural change in the trend for the use of office space, but the current energy crisis can easily reverse this trend. Should the transition to a smaller office stock be pushed more when the negative consequences of working from home are becoming more prevalent? Anyway, given the current employee shortage, employers should accommodate the changing needs of their employees. A decision to decrease their office stock should be carefully considered.

References:

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