Many employees have returned to the in-person daily grind more than two years after the pandemic reshaped public life, but economic impacts will be “pretty significant” if even a fraction of the workforce continues to embrace hybrid or remote models, Gov. Charlie Baker said on Thursday.

Linking an evolution in work patterns to the future of downtown spaces and to the “existential threat” posed by a broken housing market, Baker, during remarks to business leaders, made his latest pitch for the passage of a series of spending packages he said would help Massachusetts navigate a changing employment landscape.

Baker opened his remarks at a New England Council event with optimism, saying the state has done a good job “bouncing back” from the worst stretches of unemployment during the public health crisis.

But soaring inflation and “churn” in the labor market will continue to pose challenges for employers as well as policymakers, Baker said. He pointed in particular to working from home, arguing that even a small subset of employees opting against commutes would represent a critical mass.

“They don’t have to be half of what everybody does,” Baker said. “They don’t even have to be a third, but if it’s 25 percent of what everybody does, the consequences of that are pretty significant in a lot of ways.”

Employees who have access to remote options may see significant upsides in that model, such as more flexibility for family care or reduced travel expenses.

Fear for Urban Centers

Baker said he worries the trend could also hamstring urban spaces, cutting into the flow of workday patrons at restaurants, shops and other establishments in downtown spaces that were once highly traveled.

“They schedule breakfasts, they go out to lunch, they pick up their dry cleaning, they shop in these stores, they go out to dinner. They’re a big part of what I call the vitality of downtowns,” Baker told reporters after Thursday’s event. “If that’s not going to be the case, if most people are going to move to some sort of hybrid-type environment where people are working two or three days a week remotely and then two or three days a week in the office, that’s a lot of foot traffic that goes away.”

The issue has been top of mind for many business leaders and for workers themselves. Next week, the Greater Boston Chamber of Commerce will host its third “Future of Work” discussion of the year, this time focused on downtown revitalization in Boston.

A new Boston Business Journal and Seven Letter Insight poll of 209 Boston-area professionals published Thursday found many employees expect their offices’ physical footprints to shrink in the near future, even though that trend so far has not come to pass.

About 45 percent of respondents said their company has increased in space or size over the past two years, 43 percent more said their company has stayed in the same space or size and 12 percent said their company shrunk over the past two years.

Looking forward, that distribution is effectively inverted: 43 percent said they expect their company to downscale office space when their lease is up, compared to 42 percent who expect to stay in the same amount of space and 15 percent who anticipate a physical growth.

“The results of this poll have significant implications for the commercial real estate market,” BBJ Executive Editor Doug Banks said in a statement alongside the poll results. “Should businesses pursue smaller office spaces as their current leases expire, we could see a softening of real estate costs.”

Baker Pushes Housing

Baker in April filed a $3.5 billion economic development bill (H.4270) that he and his team said would spur new investments in downtown spaces and steer hundreds of millions of dollars toward housing production, transit-oriented development and public housing needs.

Housing has long been a challenge in Massachusetts, where production has been slow for decades despite population growth and the boom of new industries, and Baker said Thursday the crisis is “probably more acute now” than it was before the pandemic.

With seven months left before he leaves office, Baker said he thinks of housing as his number-one worry, warning that swaths of young adults are at risk of being priced out of a future in the Bay State if they have not been already.

Like the suite of other legislative priorities Baker highlighted at Thursday’s event – including his $9.7 billion infrastructure bond bill (H.4561), a tax relief package (H.4361), a push to make it easier to detain some criminal defendants deemed a risk to the community (H.4290), and health care funding reforms (S.2774) – his jobs and downtowns bill remains bottled up in committee.