Remote work threatens the foundation of the commercial real estate market. Expect a huge push to get people back into the office - especially if there is softness in the job market.
Are the incentives really there? Obviously the people with the real estate would like this, but if they were really that influential, you'd also see a huge push for private offices (=> more space per employee, more real-estate demand), which alas we don't.
I think if you see companies shying away from remote work it'll really just be because it isn't proving effective -- because companies will be losing out on huge recruiting and cost-advantages in doing so.
I've been working remote for a while, and I'm still pretty skeptical. It's definitely a lot harder to build relationships, which are super-important, I think.
Maybe a hybrid model with lots of frequent in-person work retreats could be ideal.
The biggest thing would be for those that own their premises, who would have to take impairments (write downs) on the values of their assets. Their lease liabilities also start to look exorbitant and many will be forced to act on this, cutting these leases and recognize the lease cancellation cost all at once (usually office leases require all payments for the contract term to cancel), taking a large financial knock upfront.
Basically large knocks on their profit in the very short term.
Be that as it may, why would corporations that are tenants rather than landlords make decisions on that basis? Remote work saves companies a lot of money on office space.
The C-suite of the company I worked for during lockdown fretted a lot about the lack of usage of the office space. The problem they had was that they had a long-term lease on the building. They couldn't get out of it, and it burned a lot of money.
They had a political problem with investors (why are you wasting all this money of office space that nobody is going to?) and getting people back into the office was the easiest way to take that heat off of them.
They did eventually force everyone back in the office, but I had moved on shortly before that happened.
well, as a counter point, it could be a huge win for real estate if given they could convert the office space into apartments for people which is much needed. I know these buildings aren't setup in regards to plumbing and what not, but we can adapt.
Commercial zoned real estate is typically more expensive than residential because commercial tenants have more money, so the landlords who control zoning boards arrange to keep commercial rents high by limiting the supply even more than they do for residential housing.
If demand falls off the price will decline. They might respond by rezoning some commercial into residential, which would be great for residential buyers, but the existing landlords would not be pleased by anything that makes any real estate more affordable (i.e. less valuable).
Which is, of course, good. But they're going to try to prevent it any way they can.
Does it threaten it or does it just threaten what's so far been established?
Presumably less demand for space will reduce cost of that space allowing for smaller, newer, experimental businesses to be able to buy into that space.
Commercial space can become less about being a place to work or to store a bunch of products to sell, to places where people meet and hangout, to train and collaborate, and to build synergies between businesses that benefit from sharing resources.
dilap|2 years ago
I think if you see companies shying away from remote work it'll really just be because it isn't proving effective -- because companies will be losing out on huge recruiting and cost-advantages in doing so.
I've been working remote for a while, and I'm still pretty skeptical. It's definitely a lot harder to build relationships, which are super-important, I think.
Maybe a hybrid model with lots of frequent in-person work retreats could be ideal.
theonlybutlet|2 years ago
AnthonyMouse|2 years ago
JohnFen|2 years ago
They had a political problem with investors (why are you wasting all this money of office space that nobody is going to?) and getting people back into the office was the easiest way to take that heat off of them.
They did eventually force everyone back in the office, but I had moved on shortly before that happened.
fswd|2 years ago
abawany|2 years ago
AnthonyMouse|2 years ago
If demand falls off the price will decline. They might respond by rezoning some commercial into residential, which would be great for residential buyers, but the existing landlords would not be pleased by anything that makes any real estate more affordable (i.e. less valuable).
Which is, of course, good. But they're going to try to prevent it any way they can.
fowtowmowcow|2 years ago
Presumably less demand for space will reduce cost of that space allowing for smaller, newer, experimental businesses to be able to buy into that space.
Commercial space can become less about being a place to work or to store a bunch of products to sell, to places where people meet and hangout, to train and collaborate, and to build synergies between businesses that benefit from sharing resources.
unknown|2 years ago
[deleted]
chris222|2 years ago