A lot of times, when people discuss the phenomenon of employers ending work-from-home and try to make their employees come back to the office, people say that the motivation is to raise real estate prices.
I don’t follow the logic at all. How would doing this benefit an employer in any way?
It benefits the owners of commercial real estate. Which is primarily banks and investment firms.
Companies need to stay on the good side of banks and investment firms. Otherwise they don’t get loans.
But also, some of these companies own those buildings. If they’re not in use, their value in the market drops.
Also, there’s external pressure from cities and townships who give tax incentives to companies to bring their employees in to spend money in the city. For example, a company might get a tax break if they create a thousand jobs. That’s only a good deal for the city if those thousand people are in the city and spending their money and generating taxes.
I see, so the idea is that they’re responding to external pressure from governments and financial institutions? I guess I could see that, though it shouldn’t be hard to prove by pointing to specific policies and loan conditions.
But also, some of these companies own those buildings. If they’re not in use, their value in the market drops.
How does that work? Why would a buyer care if the seller was using the building? If anything, I would think using them would depreciate their value due to wear and tear.
A buyer is only interested if they have a use for the building. If work from home becomes the default way, then who would need to buy an office building?
WFH makes it so there isn’t a buyer or very few interested.
So if you want to shift the property, you’re going to have a bad time.
If nobody is using any buildings then there’s an indefinety supply and no demand.
Buying something to create artificial demand usually isn’t a good investment strategy. A “pump-and-dump” can work if you can set off a buying frenzy and sell before it wears off, but it’s not a long-term strategy.
Besides, if that was the plan, leaving the buildings vacant would be just as effective as using them.
I’m speaking from experience in CA;
Quite a few of these markets were moved on pre pandemic. Now it’s a question of how to offload. My prior company had a very nice multi story building in SoCal before they tried calling back. That was before covid, even then they had trouble securing a purchaser or renter. The market has only gotten worse.
There’s some sunk-cost fallacy; where you’ve already paid for the space, if you make the whole team drive 1hr+ to meet it’ll have been worth it.
What about modern business makes you think they have a long term strategy? All of them have been making only short term gain decisions for a while now.
Who cares if the company could be more successful in the future if I can make a lot now by sending it into bankruptcy today?
isn’t a good investment strategy…
long-term
It’s CEOs doing this, they don’t necessarily have to make things work out long-term as long as it doesn’t look like they messed up.
Some years ago the average tenure of a CEO was 18 months and it’s probably not changed that much since, so they really have no reason to worry about what’s going to happen in a 5+ year horizon: they will be long gone, bonus in the pocket and stock options fully vested and cashed.
A big thing in my country, business buildings are expensive because of location and what’s around them. But if employees aren’t in the office, restaurants, cafes public transport corner shops etc lower in demand or even close entirely. This makes the building itself less in demand and harder to rent out at a higher price.
A lot of these buildings are owned by banks, CEO’s and financial institutions who have the money to push for changes like government to make people come into office and can use any reason like “think of all the failing cafes!”.
Ah, hm… I guess that makes sense. Bringing people to the office raises the value of surrounding retail, which in turn raises the value of the office. Thanks, that explanation clears it up.
Don’t forget if the company outright owns the building, any market price drop negatively affect there books, in asset/net worth section.
Big businesses often get incentives from municipalities for being headquartered there. The city wants employees in offices who might financially support other local businesses while they commute to/from work.
If the local economy is happy and office space remains in demand, coupled with savings they receive from incentives, property values rise. The property of a business is an asset, so the more valuable the property becomes, the more value the company owns.
Ok, so it’s about responding to local government incentives? I feel like that’s an important piece of the puzzle that’s overlooked when people say it’s about real estate prices.
Not only that, but many of these companies have huge fuckoff buildings and only occupy a portion of it. Tenants fill up the rest, and occupancy drops so does the rent. Pushing for a return to office pressures the smaller companies (who are run by sociopaths with very specific risk adversities) to do the same, lest they look like they don’t want to be like Big Daddy Fortune 500 up in the top floors.
Well it is… And besides that office space is a huge drain on cities… Not only parking infrastructure, but also traffic… You’re really much better off housing people than having more offices
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There’s a lot of dumb answers here.
people say that the motivation is to raise real estate prices
It’s not the sole motivation and it’s not even “a” motivation for some businesses.
Basically, wealthy people generally are going to have all sorts of investments. If you own any commercial property then you’re going to exercise whatever influence you have to support people continuing to work on premise. That influence is often in the form of shareholders putting pressure on management.
As far as I understand it, there are political interests too. Not just the obvious, ie a city council wanting to see economic movement within the city. Any regular person with a pension likely has money tied up in real estate. Ensuring those pensions maintain value is a concern for governments.
That’s true, but I didn’t go into that because OP didn’t ask.
Here in Aus local council revenue is a function of property value.
Why would the shareholders of a company want them to take on additional unnecessary expenses like leasing office space?
Or rather, why do real estate company shareholders have such ridiculous levels of influence compared to other groups who would logically prefer more wfh?
It’s insidious.
It’s not influence as in “let’s have a logical and transparent discussion about wfh vs on premise”.
It’s rumours, back channel favours, manipulating numbers, etcetera.
Bear in mind not all companies are publicly traded. Plenty of closely held companies were started by grand dad and run on rumour and here say.
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Because if you move up the ladder far enough, they’re all the same group. Mister X sits at the board for companies a, b and c, but he also has a real estate portfolio. He’s not the one spending the money for these companies to return to office but he has a vested interest in people returning to office in general, so he lobbies for it wherever he can. Simplified example but you get the gist.
That’s really not how it works. In the same industry sure. But not across vastly different industries like tech, legal, government, etc and real estate.
I would suggest you to check out warren buffets portfolio
Warren Buffett is not directing resources from his position in one company to enrich himself in another company that he may have large personal holdings. That is one of the few ways shareholders can get around the safety of a corporation and sue a director.
More to the point, the board of directors are going to be extremely interested in the actions of Buffett if they think he is trying to enrich himself at the cost to their company.
Using him as an example that is.
Warren Buffet is not typical of CEOs. He’s an icon for a reason.
I think all answers so far are either wrong, only rationalizations after the fact, or just minor contributors. I’m pretty sure the real main reason to get people back is a feeling of control and superiority.
It’s harder to do something else than work when you’re at the office. So they want to at least be able to look over the shoulder of their employees, which gives them a feeling of being in control.
The other is superiority, how are managers going to feel superior, like their higher status means something, if there is no one there that’s deferring to them? “Wfh superiority” does not feel as real as seeing real people react to your presence in some way.
Achieving high social status is one of the base desires of being human, and it’s being applied to the workplace majorly. Even if technically nothing changes for bosses regarding status with wfh, it still feels like status is lost because the effects are not as visible, which has to be avoided at almost all costs.
This is correct. Real estate prices don’t mean anything to the vast majority of companies since most of them are not in the real estate business and likely even lease their office spaces. It could have a minor impact to the balance sheet if deemed impaired but it doesn’t amount to something that matters in valuation which cares more about P&L, cash flow, and working capital.
Business leaders are human, they don’t know what the fuck is going on, or how to “increase shareholder value”. So for lack of better ideas they can just tell employees to go back to the office.
Basically, if you don’t know how to stop a ship from sinking, you can at least change the curtains on the windows so you look busy on the way down.
They first, make the decision to go back to the office, second, they tell their team to go find reasons to rationalize the decision. There isn’t a nuanced logic to arriving at the conclusion, they make these calls off-hand on gut feelings. The thinking comes in later from the direct reports trying to fill in the logical gaps, even if the decision wasn’t a logical one to begin with.
I’m pretty sure a lot of these reasons you discard are actual reasons that in some way make sense, they’re just not the main ones. Behavior is rarely dictated by just a single reason, it’s always some kind of combination.
It doesn’t. It is a bit of a silly argument and not a factor in any real degree. There are valid arguments for work from home but this is not one of them. Quite the opposite actually.
It is a great one size fits all reason that includes the various banks and your CEO conspiring together to make your life worse.
Some bank executives and local government officials have been the first to push for going back to the office, so a lot of people are putting the blame on them.
It’s simple: the board and major shareholders also invest in office properties and trying to reduce loss of their investments.
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“The way world has ALWAYS worked.”
Need I remind you that people worked from home for hundreds of thousands of years? In minority of cases they walked a few minutes to their place of work. You are seriously trying to tout a post-industrialisation, post-war phenomenon as something that always worked? Get a grip on man, what are you? A middle level manager, a real estate owner or a car salesman? Or at the very least, ignorant of your history.
Many jobs involve talking with people. At what time in history was it possible to talk with someone without being physically close to them?
What’s your point here? What are you trying to say?
I’m responding to your assertion that people historically always worked from home until relatively recently.
And people didn’t have cars to commute to work either. What point are you trying to bring into the WFH or WFO debate?
What do cars have to do with whether you should meet your coworkers in person?
I can ask whether meeting with your co workers has anything to with how it’s “always been done”. We can go on and on forever. And this will not make any meaningful contribution to the topic whatsoever. Ok, so I’ll backup a few steps and try to answer all questions asked in this thread.
The original commentor mentioned that working at your employer’s place (mind you this is the original context of ths post) has always been how it’s done amd people advocating for WFH are just a bunch of whiners. My response was that it’s factually untrue and therefore has no bearing in the topic.
Then you argued that physical presence has always been the norm. That’s true (mostly) but it’s also very close to the WFH model. For example you meet the blacksmith and state your requirements, then the blacksmith toils away and does not have contact with the buyer until the work is done and the contract is to be fulfilled. Therefore you asking if they were able to meet other than physically is moot. They didn’t meet at all during the contract. If we were to follow this model for an accountant for example, they would get a task to prepare some financial reports along with raw data, they would work from home until the task is done and then meet the employer with the final report? I said that physical meeting was MOSTLY true because there was instances of contracts being made via mail, especially between kings. The messengers would deliver the message(internet/chat in the modern context?).
Finally you ask what’s cars have anything to do with the discussion. That’s how a lot of people get to their workplace. This is also a modern invention and a lot of people would loose their jobs if they didn’t have access to them. I raised this point to raise that a lot of these problems are modern problems. Cowering behind “that’s how it’s always being done” is not good enough. There were no software engineering jobs, social marketing jobs in the past. How is past norms relevant here? If we are so keen to cling on to the past you’d observe that whatever got the job done was the preferred method. In this current context of inflation, climate change, air pollution and twiddling middle class buying power, why are we forcing people to give up WFH who have that option? Therefore I’m advocating for WFH and believe who force people to come to the office are either ignorant of cold facts or have an ulterior motive.
So I’m asking again, are you for or against WFH and why?
Wow someone is intensely misinformed
I can’t tell if this is a case of name fits or not. Hmm.
I’m a furry lmao. The name is a joke
In Australia they are actually hiding the fact its about property value and pretending its to support the small and local businesses in the city, like cafés
The ones that were largely left to fail during COVID?
Won’t someone think of the cappuccinos!?
It’s simple supply and demand. If lots of white collar workers are WFH, then hiring new people doesn’t require more office space. If you can grow your company without leasing office space, or by leasing a smaller office, demand for office space goes down.
Office space owners who use that for income suddenly don’t have (as much) income. So maybe they lower lease rates to attract new tenants. Well, now tenants stuck in higher rate leases start doing the math on penalties for breaking their existing lease vs the new prices.
If remote work stays popular or grows (hint: it’s growing), this CAN result in a race to the bottom on commercial real estate leases, which makes them less valuable investments, which could lead to a massive sell off.
All of this makes CEOs itchy. So they try to justify return to office policies. This just chases their best people into the arms of competitors who will support WFH (and naive pay more without high office space leases to pay).
I think the era of regular office work for white collar workers is over. Maybe a couple days a week for client meetings. But why not just go to the client site?
Office work was killed by COVID. Good riddance.
All of this makes CEOs itchy.
Why? Not all CEOs are in the same industry. Why should the CEO of Google give a fuck what the CEO of Boston Properties thinks? Google is just leasing a space from them. You would think the CEO of Google would be happy for an excuse to offload some real estate expenses.
Considering that the Muskrat can apparently be the full time CEO of 3 companies simultaneously you might be surprised.
CEOs think they’re different from us normies, and have a lot in common with other
superstarsCEOs such that their interests seem more shared.It’s complex, for sure, but yes to some extent the “back to office” CEOs care that the commercial property market stays “healthy.”
Muskrat is not the typical CEO.
So maybe they lower lease rates to attract new tenants.
The golden rule of commercial leasing is that you never, ever, reduce the lease cost because the value of the property is calculated directly from lease value. Reduced lease cost is reduced property value. In valuing a commercial property the lack of a tenant is not important.
tenants stuck in higher rate leases start doing the math on penalties for breaking their existing lease vs the new prices.
Generally with a commercial lease your only real options to exit are to find someone to take on your lease. If lease prices have dropped then no one will want to take on your dud lease.
Unfortunately nearly every job posting I see (software developer in the US) is either in office or hybrid 3 days a week. I wish the in-office era was over but I don’t see that as a reality just yet, at least not for people with less than 10 years of experience
there is a lot of full remote software dev jobs in the US, but they advertise them here in South America and India, for 20% to 50% of what they pay for americans
Ok I’ll try to explain it. Imagine before if your company had 100 people and they all needed offices so you rent a place that has 100 offices.
Now you switch to work from home and let’s say only 20 people really need office space since the other 80 can just work from home.
Why would you continue to rent the building with 100 offices? You wouldn’t. Instead you find a place with maybe 30 max. And you’re not the only company doing this too.
So now nobody really wants or needs huge office spaces and the people who own these have trouble finding new tenants, demand isn’t very high so they’ll have to lower prices. That’s what people refer to, since the value of these buildings is partially based on the income they can produce. If that goes down then so does the overall value of the building.
It doesn’t hurt the employer unless they themselves just spent A TON of money building their own huge building. Then it would be mostly empty and a huge waste of money so it would look bad.
In addition to that companies make deals with cities for tax breaks based on the number of just they create in each location. Usually there is a rule about how many people need to be working in your offices.
I also heard a city mayor on NPR recently talking about how we need to get workers back down town because the smaller businesses like restaurants are doing poorly in those areas now as well. So I assume they are putting pressure on these companies as well. Instead of finding a new more innovative use for the spaces.
I think it’s because there just isn’t any sensible explanation so people are trying to come up with something.
The tech companies do have massive real estate footprints, but I think it doesn’t make sense at all, those are a cost center for them.
If there is no need for office block then there will inevitably be a drop off in the need to hire the space to work in, which in turn will lead to lower prices. Employers do not request higher costs.
In the UK, the government are pushing for return to work because of pressure from newspaper media. People buy papers on their way to work. The are no cost basis arguments with forced returns to work. There is an obvious case for net zero benefits.
