5 ms·

The problem is that WFH decreases the workforce’s participation in commercial real estate.

by teeray 3y ago

DiggyJohnson 3y ago
I genuinely don’t understand why this perspective is so compelling. CRE is a big deal, but I don’t think companies are so incentivized to optimize CRE value. They’re trying to succeed in their business.
- eli_gottlieb 3y ago
  Your average productive firm is not incentivized to optimize CRE value. However, they are often renting commercial real-estate on a fixed-term lease and need to get what value from the remainder of their lease that they can.
  - jedberg 3y ago
    That's the sunk cost fallacy. They're gonna pay it regardless, it doesn't matter if people show up or not. It's still cheaper to not have folks show up because then you don't have to pay for all the ongoing incidental charges.
    - thrtythreeforty 3y ago
      I've been hearing this a lot, and I actually think you have the company's logic backward. (For what it's worth, I'm pro-WFH, and I think a lot of circles don't square with the rhetoric from my company regarding RTO, but hear me out.) The lease is locked in. From the company's perspective, the building is now free, except for marginal costs per employee that shows up. So the only remaining math for the company to consider is, are the benefits that the company gains from an onsite employee greater than the $2/day it costs to provide coffee and toilet paper? Remember, the company is happy to outsource the cost of commuting to employees, and only cares about the value of the building if they own it. And they have great institutional difficulty in weighing intangible employee satisfaction against other perceived gains for the company. Under this logic, I think it's easy to see why management, acting in the company's best interest, is pushing RTO so hard. If it costs employees $10/day but makes the company $3, that's free money.
      - hn_throwaway_99 3y ago
        So as soon as the lease is up and needs to be renewed, you're proposing exec management is going to be like "Yeah, you know how we had this major brouhaha forcing everyone to RTO that sometimes it felt like the majority of our internal comms were on this topic? We changed our mind, we're all going to WFH from now on." The mental gymnastics folks go through to support one side or the other in this debate is just mind boggling to me, especially since their are much simpler and more likely pros/cons for both WFH and RTO.
    - whateveracct 3y ago
      Nobody said management is inherently rational.
- jedberg 3y ago
  They don't directly care about CRE. But their wealthy friends (and most likely most F500 CEOs) own or are invested in CRE. By convincing all their CEO friends to force RTO, they can boost the CRE. Also some of biggest companies are effectively invested in CRE because they built huge campuses and while those are technically owned by others, they are in super long term leases which require them to have a certain number of people there every day, as well as local tax breaks that they get for having a certain attendance.
  - buffington 3y ago
    Can you link to an example of a lease that requires a certain number of people be there every day? I used to have a business that needed office space, and of the several buildings we used over the course of about 10 years, not a single lease ever cared about how many people would show up every day. The closest thing to that would be related to max occupancy and parking spaces. The leases would always have to specify how many people could be in the building at most for fire code compliance, and that number determined the number of accessible and normal parking spaces. Regarding tax breaks, I never saw any, but that was pre-pandemic. That makes more sense to me, but leases requiring minimum attendance counts seems like it could be an oft-repeated myth.
- rickydroll 3y ago
  it's not all about the CRE value, it's also about the businesses that would not survive without the daily influx of commuters. Parking garages, lunch shops, drycleaners, etc.
convolvatron 3y ago
isn't this what the free market is supposed to be about? people don't want that product as much anymore.
- yoyohello13 3y ago
  The free market argument only works when it’s just poor people being impacted. If the rich are losing money then the free market people are suspiciously silent.
lusus_naturae 3y ago
Repurpose that real estate to housing.
- wenebego 3y ago
  Lack of housing is a feature not a bug to the land owning class
  - lusus_naturae 3y ago
    Besides the point, though. Land owning class (or any class, really) wants to enrich itself, and renting repurposed housing is a viable option.
  - therealdrag0 3y ago
    There are different classes of land owners. Plenty of land owners want to build more housing and are faced with an uphill battle.
bko 3y ago
What does this mean? This is such a low quality meme. Most businesses don't own their buildings. So what's the rationale? 1. Company leases expensive office 2. Realizes that no one has to work from the office anymore so they're wasting money on this office 3. Inconveniences everyone by making everyone return to the office 4. Profit? The lease is a sunk cost. They can try to sublease it out or pay some penalty to get out of it. Even if they owned it, why would they force people to come into the office and not just sell it? If it's worthless to them, then again what they paid for it is a sunk cost and they may as well just sell it. And why wouldn't they try to greatly expand their application pool to non-local workers if WFH is just as good. It's insane. I've never heard a reasonable explanation as to why managers are so invested in commercial real estate prices that they'll collectively organize and forsake their interests to keep up the mirage. The more reasonable explanation is that a lot of people work bullshit jobs or can skate by doing very little. These people are harder to control and less visibility by WFH makes it very obvious and managers don't feel good about it.
- derefr 3y ago
  I believe the idea is that the same investors that invest in VC firms that in turn invest in companies, also invest in commercial real-estate, and that these investors can apply pressure to "their" VC-firm executives, to ensure that "their" commercial real-estate is getting used.
  - hn_throwaway_99 3y ago
    Come on, let's get real. Sure, perhaps this can happen in limited individual instances, but the idea that a major rationale for execs pushing RTO is that they're feeling pressure from investors in their VC firms to spend more money to keep the commercial real estate market afloat is just plain silly. Even if I believed it all, it's not a conspiracy theory that even makes sense because the incentives it proposes are just dumb - business execs may care about a lot of things and may have to do a lot of juggling, but worrying about the other investments of their VC's investors is not exactly high on the list. It's like my favorite meme of "Anyone who believes in conspiracy theories has never been a project manager." The RTO/WFH debate can be so infuriating because there is so much dishonesty on both sides. Yes, WFH has huge benefits in terms of flexibility, reduced commuting, better supporting those with disabilities, etc., but it also has downsides in terms of less in-person motivation/support, loss of in-person mentorship for younger/newer employees, worries about building knowledge networks, loss of serendipitous interactions, and more difficulty managing performance for remote workers. Simultaneously, while I can understand the corporate desire for RTO, the reality of the work world has changed, so I see these stories of these execs pushing for RTO, then everyone gets to the office and is on Zoom 80% of the time because their colleagues are spread all over the place. Just wish there could be more of an honest debate about the pros/cons of BOTH WFH and RTO, and to see how some/either/combo may work better for different employees/companies, without resorting to silliness like "business execs are feeling a ton of pressure to save the corp real estate market".

The problem is that WFH decreases the workforce’s participation in commercial real estate.

by teeray 3y ago

The problem is that WFH decreases the workforce’s participation in commercial real estate.

I genuinely don’t understand why this perspective is so compelling. CRE is a big deal, but I don’t think companies are so incentivized to optimize CRE value. They’re trying to succeed in their business.

eli_gottlieb 3y ago
Your average productive firm is not incentivized to optimize CRE value. However, they are often renting commercial real-estate on a fixed-term lease and need to get what value from the remainder of their lease that they can.
- jedberg 3y ago
  That's the sunk cost fallacy. They're gonna pay it regardless, it doesn't matter if people show up or not. It's still cheaper to not have folks show up because then you don't have to pay for all the ongoing incidental charges.
  - thrtythreeforty 3y ago
    I've been hearing this a lot, and I actually think you have the company's logic backward. (For what it's worth, I'm pro-WFH, and I think a lot of circles don't square with the rhetoric from my company regarding RTO, but hear me out.) The lease is locked in. From the company's perspective, the building is now free, except for marginal costs per employee that shows up. So the only remaining math for the company to consider is, are the benefits that the company gains from an onsite employee greater than the $2/day it costs to provide coffee and toilet paper? Remember, the company is happy to outsource the cost of commuting to employees, and only cares about the value of the building if they own it. And they have great institutional difficulty in weighing intangible employee satisfaction against other perceived gains for the company. Under this logic, I think it's easy to see why management, acting in the company's best interest, is pushing RTO so hard. If it costs employees $10/day but makes the company $3, that's free money.
    - hn_throwaway_99 3y ago
      So as soon as the lease is up and needs to be renewed, you're proposing exec management is going to be like "Yeah, you know how we had this major brouhaha forcing everyone to RTO that sometimes it felt like the majority of our internal comms were on this topic? We changed our mind, we're all going to WFH from now on." The mental gymnastics folks go through to support one side or the other in this debate is just mind boggling to me, especially since their are much simpler and more likely pros/cons for both WFH and RTO.
  - whateveracct 3y ago
    Nobody said management is inherently rational.
jedberg 3y ago
They don't directly care about CRE. But their wealthy friends (and most likely most F500 CEOs) own or are invested in CRE. By convincing all their CEO friends to force RTO, they can boost the CRE. Also some of biggest companies are effectively invested in CRE because they built huge campuses and while those are technically owned by others, they are in super long term leases which require them to have a certain number of people there every day, as well as local tax breaks that they get for having a certain attendance.
- buffington 3y ago
  Can you link to an example of a lease that requires a certain number of people be there every day? I used to have a business that needed office space, and of the several buildings we used over the course of about 10 years, not a single lease ever cared about how many people would show up every day. The closest thing to that would be related to max occupancy and parking spaces. The leases would always have to specify how many people could be in the building at most for fire code compliance, and that number determined the number of accessible and normal parking spaces. Regarding tax breaks, I never saw any, but that was pre-pandemic. That makes more sense to me, but leases requiring minimum attendance counts seems like it could be an oft-repeated myth.
rickydroll 3y ago
it's not all about the CRE value, it's also about the businesses that would not survive without the daily influx of commuters. Parking garages, lunch shops, drycleaners, etc.

convolvatron 3y ago

isn't this what the free market is supposed to be about? people don't want that product as much anymore.

yoyohello13 3y ago
The free market argument only works when it’s just poor people being impacted. If the rich are losing money then the free market people are suspiciously silent.

lusus_naturae 3y ago

Repurpose that real estate to housing.

wenebego 3y ago
Lack of housing is a feature not a bug to the land owning class
- lusus_naturae 3y ago
  Besides the point, though. Land owning class (or any class, really) wants to enrich itself, and renting repurposed housing is a viable option.
- therealdrag0 3y ago
  There are different classes of land owners. Plenty of land owners want to build more housing and are faced with an uphill battle.

bko 3y ago

What does this mean? This is such a low quality meme. Most businesses don't own their buildings. So what's the rationale? 1. Company leases expensive office 2. Realizes that no one has to work from the office anymore so they're wasting money on this office 3. Inconveniences everyone by making everyone return to the office 4. Profit? The lease is a sunk cost. They can try to sublease it out or pay some penalty to get out of it. Even if they owned it, why would they force people to come into the office and not just sell it? If it's worthless to them, then again what they paid for it is a sunk cost and they may as well just sell it. And why wouldn't they try to greatly expand their application pool to non-local workers if WFH is just as good. It's insane. I've never heard a reasonable explanation as to why managers are so invested in commercial real estate prices that they'll collectively organize and forsake their interests to keep up the mirage. The more reasonable explanation is that a lot of people work bullshit jobs or can skate by doing very little. These people are harder to control and less visibility by WFH makes it very obvious and managers don't feel good about it.

derefr 3y ago
I believe the idea is that the same investors that invest in VC firms that in turn invest in companies, also invest in commercial real-estate, and that these investors can apply pressure to "their" VC-firm executives, to ensure that "their" commercial real-estate is getting used.
- hn_throwaway_99 3y ago
  Come on, let's get real. Sure, perhaps this can happen in limited individual instances, but the idea that a major rationale for execs pushing RTO is that they're feeling pressure from investors in their VC firms to spend more money to keep the commercial real estate market afloat is just plain silly. Even if I believed it all, it's not a conspiracy theory that even makes sense because the incentives it proposes are just dumb - business execs may care about a lot of things and may have to do a lot of juggling, but worrying about the other investments of their VC's investors is not exactly high on the list. It's like my favorite meme of "Anyone who believes in conspiracy theories has never been a project manager." The RTO/WFH debate can be so infuriating because there is so much dishonesty on both sides. Yes, WFH has huge benefits in terms of flexibility, reduced commuting, better supporting those with disabilities, etc., but it also has downsides in terms of less in-person motivation/support, loss of in-person mentorship for younger/newer employees, worries about building knowledge networks, loss of serendipitous interactions, and more difficulty managing performance for remote workers. Simultaneously, while I can understand the corporate desire for RTO, the reality of the work world has changed, so I see these stories of these execs pushing for RTO, then everyone gets to the office and is on Zoom 80% of the time because their colleagues are spread all over the place. Just wish there could be more of an honest debate about the pros/cons of BOTH WFH and RTO, and to see how some/either/combo may work better for different employees/companies, without resorting to silliness like "business execs are feeling a ton of pressure to save the corp real estate market".