It can be multiple things.

Real estate costs that they are stuck with. For example, my employer committed to a 20 year lease shortly before the pandemic. They don't have a good exit clause so either those office towers are going to be empty or used, but either way, my employer is paying for them, might as well get use out of them.

Managers that have such a poor understanding of the work that they can't comfortably tell if the work output from their employees is good or slacking. At least being able to see them in person they feel more comfortable that the employee looks more likely to be engaged. It's still possible a slacker is conning them, but at least they aren't as obviously doing so. They may not be masochistic as much as they hired people that know more than they do, and are therefore at a severe disadvantage when evaluating an employee.

As others have pointed out, one mans annoying distraction is another employee's great help. A new hire that needed mentorship. A colleague stuck on a little thing without going out of their way to ask for help in a remote context.

Realistically, having some work from home for morale/better work life balance, and focused individual work and some in person time is probably the most productive scenario.