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It is not just about teams and people. It is political - cities are struggling when people do not come to work, and it is financial - many companies have taken
by AzzieElbab 3y ago
It is not just about teams and people. It is political - cities are struggling when people do not come to work, and it is financial - many companies have taken loans putting the real estate they own as collateral; if commercial real estate devalues, these companies are facing margin calls.
- rocgf 3y agoYes, but this is like the opposite of a tragedy of the commons scenario. Are you saying the companies do this in order to save the cities and real estate prices? That's likely not even a small factor at the bottom of the list.
- AzzieElbab 3y agoI am not reading anyone's mind. I am simply stating that there is political pressure and there are financial incentives
- BeFlatXIII 3y agoI hope the RTO push fails to cause maximum collateral damage in that case.
- RestlessMind 3y agoCan you give any specific examples of financial incentives to software companies who are forcing RTO?
- AzzieElbab 3y agoYour employer had taken a loan and put some of its assets down as collateral. What happens when the collateral loses its value?
- supertrope 3y agoTax credits linked to FTE count. If employees are no longer working downtown their income tax goes to their home city or even another state.
- jonathankoren 3y agoIt's sunk cost fallacy -- especially at the FAANGs. These companies spent billions on monuments to the company's greatness. These buildings, MPK 20 & 22, The Donut, Amazon HQ2, the Circus Tents, aren't just unsellable from the psychological sense, they're unsellable in a practical sense. The number of companies that need/want 2.8 million ft2 (262,000 m2) of nigh-undivided office space can be counted on one hand -- and all of these already have their own white elephant. Mix in monkey-see-monkey-do management of smaller firms, and of course straight up class antagonism towards workers, and you've got RTO über alles.
- rocgf 3y agoTotally agree with this, I’m just saying that few, if any, companies would make the decision to force people back in the office based on the well-being of cities or the real estate market. All companies act in their best interest and that’s kind of it.
- jonathankoren 3y agoBut this isn’t acting in their best interest. It’s acting on the personal feeling of inadequacy of the execs. That’s it.
- aleph_minus_one 3y ago> The number of companies that need/want 2.8 million ft2 (262,000 m2) of nigh-undivided office space can be counted on one hand -- and all of these already have their own white elephant. I partially disagree: if necessary, rent out various parts of this office space to multiple companies.
- jonathankoren 3y agoThese buildings aren’t designed for subdivision, and attempting to subdivide them, probably would cost 100s of millions. For instance, MPK 2x are essentially airplane hangers.
- lazystar 3y agocompanies do this to prevent a social-economic collapse. what's the point of building up a company if there's no society left to enjoy it in?
- harshalizee 3y agoReal estate is an investment. All investment vehicles comes with a potential for profit and risk of loss. They should have done their homework.
- mulmen 3y agoI mean, sure. But let's acknowledge that "global pandemic" was justifiably considered a low probability before 2020. Even today should companies price in a meteor strike? Will they be out-competed in an existential timeframe if they do?
- sgu999 3y agoRemote working was already a trend before the pandemic, it only accelerated it massively.
- mulmen 3y ago“Only” and “massively” are in conflict here. The massive effect of an unexpected event is how we got to this exceptional situation.
- tessierashpool 3y agoa) "global pandemic" was _not_ considered a low probability by epidemiologists or by governments. the US set up a pandemic office during the Obama administration for exactly this reason. partly because everybody knew climate change and globalization increased the risk of pandemics, and partly because pandemics tore through Asia and the Middle East in 2002 and 2012. b) remote work has been making office buildings obsolete for decades now. it is fundamentally absurd to say that you need people to get together in one room in order to build a distributed system. neither office buildings nor the "open plan" spaces inside have made any real logical sense for the tech industry in a very, very long time.
- mulmen 3y agoI agree with you in general but in the context of real estate investment I'm not sure the sudden normalization of WFH and effect on commercial real estate was reasonably predictable.
- dv_dt 3y agoMy experience is that companies almost never own their own buildings - at most they may have a long term lease, and even then long term is maybe 5 years.
- pydry 3y agoIt's not uncommon for companies to buy the property, especially if they become flush with cash.
- nradov 3y agoAnd then a few years later a new CFO comes in and engineers a sale and lease-back transaction to make the financial report metrics look better.
- AzzieElbab 3y agoCommercial real estate is a highly complex beast. Some companies build offices and sell them to an affiliated REIT while guaranteeing occupancy rates, banks build their office towers and go through great length to turn them into cash assets. It is very different from state to state due to taxes and regulations.
- dv_dt 3y agoMy experience is certainly limited. Seems to me, for a bank to enter into that kind of arrangement aligns much more with the core skill set vs tech companies in the typical HN community. But even then I could see the FANG companies with a lot of guaranteed cashflow owning, but at some way down the scale to smaller companies, I would think it strongly becomes to something to avoid for tech companies.
- akomtu 3y agoI bet that many of the execs and board members have ties to commerce around offices: the overpriced rental complexes, restaurants, cafes and so on. Who wouldn't want to pay employees and simultaneously set the rent prices where those employees have to live?