Peak Office – Why Return-to-Office mandates will fail and their role in the Trillion-Dollar Real Estate Debt Crisis

6 comments

1. Look who the consistent shareholders are for companies pushing the return to office and you might be surprised what you find

2. This is what bothers me. If global warming is as imminent of a threat the western government proclaims, why are we rushing to get people back into offices? When I miss my window before rush hour, my 20 minute commute easily takes over an hour. Just think about all that carbon..

3. Some people are not good at remote work and need the structure and access to other people. That being said with a housing shortage, they should consider converting office space to apartments.

4. For the local government, I think it’s less about literally being invested in the commercial real estate itself and more about the property tax revenue they generate and would have to take instead from residential owners, which they won’t be happy about. Also, workers in downtown means more activity in restaurants and stores, which means sales tax revenue (and again property tax revenue because those businesses exist as opposed to being shut down).

5. There’s no one reason. Instead there are multiple allied reasons, which include:

   * CBD municipal governments facing down severe budget problems if their core economy declines

   * Small businesses which supply the CBD (ie. small restaurants, bars, etc) and their associations facing severe budget problems and probably closure if their customer base shrinks

   * Managers who grew up in the workforce prior to remote work being a good option (really prior to, say, 2010-ish when video chat became reliable and cheap) not having adapted

   * People at companies which never figured out the necessary technical choices to do WFH well. Often related to bad VPN decisions

   * Executives whose jobs are harder when done remotely because those jobs are intrinsically about communicating emotionally with people

   * Extroverts who don’t have friends outside work

   * People with terrible WFH environments, like a studio apartment working on their kitchen table or bed, but who don’t want to move into a space with room for a home office (often leaving whatever city they are in)

   * People who need more work-home separation than a door to avoid getting sucked into entertainment options, but who also don’t want to consider a WeWork-ish local, non-corporate office

   * Facilities and some IT people who are fighting for their jobs which would be eliminated along with the office. Importantly this includes a big reporting structure which is used to extracting, explicitly or implicitly, a lot of rent from each other team

   * Some is real estate investors not wanting to devalue their assets, but these people don’t really have much impact

   The cost savings of remote work are just too large to be held back in the long term. Managers will spin whatever narrative they want, but when each seat in an the office costs $2000 per month or more (I’ve heard $4000/month for one place) and staffing costs might be lower (even if the take-home after taxes and commuting costs is higher!), the bottom line argument for remote work is hard to defeat.

6. I am glad office landlords are getting taken to the woodshed.
   They were building more and more office space in places with existing housing shortages with zero concern about where the employees filling those buildings were going to live or how long they were going to spend sitting in traffic.