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Somewhere behind the scenes I strongly suspect commercial real estate interests are doing their best to stop WFH. Trillions of dollars worth of commercial real

Somewhere behind the scenes I strongly suspect commercial real estate interests are doing their best to stop WFH. Trillions of dollars worth of commercial real estate would be worthless if WFH was the norm.

ryandrake 2y ago
The "commercial real estate conspiracy" angle always strikes me a little like the tail wagging the dog. The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings and making the decisions? Not sure I buy it.
- mulmen 2y ago
  Don’t these companies have investments in commercial real estate? I would expect Dell to own their HQ buildings.
  - ryandrake 2y ago
    We can check their balance sheet. Dell doesn't even report "Land and Improvements" anymore. The last time they did in 2021, it accounted for ~3.8% of their total assets--a tiny drop in the bucket. Take Apple, who just built their spaceship campus: Land and Improvements is ~6.6% of their assets. Google, who own most of Mountain view are ~18% real estate. So, I suppose maybe that tail is wagging the dog... For some companies?
- riahi 2y ago
  The argument I’ve seen is that management of these companies is heavily invested in commercial real estate themselves, so corporate management has a conflict of interest in RTO in that it benefits their personal investments rather than the company.
  - derf_ 2y ago
    Management is usually heavily compensated via the stock of the company they are managing, precisely to align incentives and overcome conflicts of interest like that.
    - cyanydeez 2y ago
      But it's pretty clear these CEOs leverage their assets to invest in things they can directly use to make liquid. They can't sell their stock options but they can take out loans and get real estate.
- simoncion 2y ago
  > The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings... a) The business districts of many cities become much smaller or (in some cases) effectively nonexistent if they don't have folks coming into the city's office buildings and going out for meals and entertainment throughout the day. This makes for a substantial reduction in sales tax revenue due to the reduced sales, and (for places that aren't like California and have the ability to actually make meaningful increases in property tax income over the years) property tax revenue as the on-paper value of those commercial properties plummet because there's neither people willing to put their asses into leased seats, nor foot traffic to feed those businesses anymore. This makes cities DESPERATE to get asses in seats and willing to threaten or bribe businesses with local offices to make it happen. b) Market cap is a handy proxy to get an idea of what the size of a business might be. Given that nVidia is currently the biggest publicly-traded company in the world according to this metric, one should notice that it's a metric that really needs to be evaluated in concert with others to get a full and accurate picture of what's going on with a particular business. (It's particularly instructive to notice that if a company were to sell all of its publicly-traded stock, it would receive WAY less for the sale than the "Wow, look at that market cap!" numbers would indicate it should.)
- alephnerd 2y ago
  I work closely with some people who make these kinds of decisions and ime it's not commercial real estate (though I'm sure there might be isolated cases of this happening - Washington DC's city government is a notable example of this) Based on my network, their reasoning is a mix of: - communication breakdowns due to the difficulty of building an async communication model (remember that most people are not as text/writing and async driven as Internet commenters on a tech forum), and operational work like quarterly planning, QBRs, product line prioritizations, etc can be done much faster in person instead of over 10-15 Zoom calls over 3-5 weeks. - situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations) - the occasional case where a major security incident occurs due to lack of in-person verification (eg. The recent North Korea remote worker scandal, the ongoing Snowflake break) - Justify US headcount. One of the portfolio companies I was an observer for went public a couple years ago. When they switched to remote during the pandemic, they realized they could cut down their entire US engineering presence and overhire in Eastern Europe, Israel, and India and drastically reduce margins. Most larger institutional investors are clamoring for this now, and they have a point to a certain extent. IBM, Google, Crowdstrike, and Amazon have unofficially started this, and I'm not surprised if other companies are doing the same There are ways to change an organization to resolve these issues, but they are hard, expensive, and not scalable for large organizations.
  - salawat 2y ago
    >- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations) This right here is entirely a result of government leveraging employers as a social control mechanism, that hitherto hasn't been so much of an issue; but with things like the Internet and computers, has now become highly disruptive to comply with. The answer to "who gets the tax revenue?" has previously been "the jurisdiction of record for the employee". Anything more fine grained than that starts to become indistinguishable from serfdom, and reels of government overreach.
    - 2y ago
- JumpCrisscross 2y ago
  Same with it all being about middle managers' egos. Like, senior management is more than willing to throw out middle management, especially in tech.
barbazoo 2y ago
How though? How would real estate interests influence tech companies' decisions?
- elzbardico 2y ago
  Maybe the people in the board also have a stake on real estate?
  - rchaud 2y ago
    Rich people have RE holdings, it's part of a diversified portfolio. Why would it have to be just the board? Why not the many, many well-heeled execs at the companies themselves?
    - barbazoo 2y ago
      Wouldn't that require a concerted effort since rich people probably don't have a stake in the buildings they're forcing their employees to return to.
      - dgeiser13 2y ago
        You don't think rich people do things for their rich buddies?
        barbazoo 2y ago
        They totally do. We all do things for people in our peer group. I just can't imagine someone being involved in the decision making for WFH/RTO thinking how good that would be for their buddies that are invested in commercial RE unless there's a direct link between their company and the RE they're returning to. Unlikely that someone makes decisions at Dell thinking it might influence the decisions of other companies doing the same which in turn might benefit one of their buddies. If there was an investment company holding both big chunks of commercial RE and the companies that occupy said RE I'd think this was more likely.
      - 2y ago
photonbeam 2y ago
What mechanism would you guess they are using to exert this influence?
- me_me_me 2y ago
  "hey your portfolio will look shaky if all that real estate business went under" influance
  - cyanydeez 2y ago
    Hey, without your business lease, the other leases will go down and your overall Rich Man rating goes down.
    - me_me_me 2y ago
      but the line must go up! So to the offices sheeplings!
sharkweek 2y ago
Agreed, I'm convinced there are two forces at work here (a little tinfoil hatty maybe, I'll admit): - Local (city/state) governments who want to bring people into downtown areas to spend money are threatening to revoke tax breaks companies receive for having an office in their city/state. - CRE lobbyists convincing city governments to do the above, threatening with a dystopian outlook of a downtown core riddled with abandoned buildings.
- inamberclad 2y ago
  It's been frustrating to see how the past decades of focus on the office and the suburb have left American cities so vulnerable to this kind of dilemma. There's a simple solution: create a pleasant, walkable downtown that people will want to actually live in.
  - cyanydeez 2y ago
    The problem is most office spaces are not easily converted to liveable spaces. They basically need all kinds of plumbing and wiring and structural work.
    - dvfjsdhgfv 2y ago
      > most office spaces most open plan office space
      - cyanydeez 2y ago
        Nah, the plan doesn't matter. It's things like limited plumbing through the core, elevators taking up excess space, structural supports limiting layouts. It doesn't really matter where you run the facades, it's all the other stuff people want like bathrooms that require significant reworking.
    - elzbardico 2y ago
      Yes. It takes work and money. But it is perfectly doable in a cost effective way. The biggest obstacle is that in some cities the building codes contain some arbitrary and irrational provisions to intentionally make it harder
tmaly 2y ago
This is going to the be case for big banks. They make the loans, so they are incentivized to bring people back in the office 5 days a week. https://www.finra.org/media-center/newsreleases/2024/finra-statement-correct-misinformation-about-new-residential https://www.finra.org/media-center/newsreleases/2024/finra-s...
- rchaud 2y ago
  FINRA is not a bank, its regulatory purview doesn't include the banking sector either.
  - tmaly 2y ago
    The FINRA response was because banks blamed FINRA rules for RTO 5 days
JumpCrisscross 2y ago
> behind the scenes I strongly suspect commercial real estate interests are doing their best to stop WFH There is a lot of money to be made in WFH, in particular around tooling and residential real estate. The simpler answer is we're still figuring out in which roles and cultures which work modes work best.
cyanydeez 2y ago
Not just commercial interests, cities are losing tax dollars as companies pull out, then knock on effects to retail stores. Then there's Americans penchant for slavemasters aka, middle managers who's only real job is head count and stealing productivity counts.
stranded22 2y ago
Yup, most definitely.

ryandrake 2y ago

The "commercial real estate conspiracy" angle always strikes me a little like the tail wagging the dog. The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings and making the decisions? Not sure I buy it.

mulmen 2y ago
Don’t these companies have investments in commercial real estate? I would expect Dell to own their HQ buildings.
- ryandrake 2y ago
  We can check their balance sheet. Dell doesn't even report "Land and Improvements" anymore. The last time they did in 2021, it accounted for ~3.8% of their total assets--a tiny drop in the bucket. Take Apple, who just built their spaceship campus: Land and Improvements is ~6.6% of their assets. Google, who own most of Mountain view are ~18% real estate. So, I suppose maybe that tail is wagging the dog... For some companies?
riahi 2y ago
The argument I’ve seen is that management of these companies is heavily invested in commercial real estate themselves, so corporate management has a conflict of interest in RTO in that it benefits their personal investments rather than the company.
- derf_ 2y ago
  Management is usually heavily compensated via the stock of the company they are managing, precisely to align incentives and overcome conflicts of interest like that.
  - cyanydeez 2y ago
    But it's pretty clear these CEOs leverage their assets to invest in things they can directly use to make liquid. They can't sell their stock options but they can take out loans and get real estate.
simoncion 2y ago
> The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings... a) The business districts of many cities become much smaller or (in some cases) effectively nonexistent if they don't have folks coming into the city's office buildings and going out for meals and entertainment throughout the day. This makes for a substantial reduction in sales tax revenue due to the reduced sales, and (for places that aren't like California and have the ability to actually make meaningful increases in property tax income over the years) property tax revenue as the on-paper value of those commercial properties plummet because there's neither people willing to put their asses into leased seats, nor foot traffic to feed those businesses anymore. This makes cities DESPERATE to get asses in seats and willing to threaten or bribe businesses with local offices to make it happen. b) Market cap is a handy proxy to get an idea of what the size of a business might be. Given that nVidia is currently the biggest publicly-traded company in the world according to this metric, one should notice that it's a metric that really needs to be evaluated in concert with others to get a full and accurate picture of what's going on with a particular business. (It's particularly instructive to notice that if a company were to sell all of its publicly-traded stock, it would receive WAY less for the sale than the "Wow, look at that market cap!" numbers would indicate it should.)
alephnerd 2y ago
I work closely with some people who make these kinds of decisions and ime it's not commercial real estate (though I'm sure there might be isolated cases of this happening - Washington DC's city government is a notable example of this) Based on my network, their reasoning is a mix of: - communication breakdowns due to the difficulty of building an async communication model (remember that most people are not as text/writing and async driven as Internet commenters on a tech forum), and operational work like quarterly planning, QBRs, product line prioritizations, etc can be done much faster in person instead of over 10-15 Zoom calls over 3-5 weeks. - situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations) - the occasional case where a major security incident occurs due to lack of in-person verification (eg. The recent North Korea remote worker scandal, the ongoing Snowflake break) - Justify US headcount. One of the portfolio companies I was an observer for went public a couple years ago. When they switched to remote during the pandemic, they realized they could cut down their entire US engineering presence and overhire in Eastern Europe, Israel, and India and drastically reduce margins. Most larger institutional investors are clamoring for this now, and they have a point to a certain extent. IBM, Google, Crowdstrike, and Amazon have unofficially started this, and I'm not surprised if other companies are doing the same There are ways to change an organization to resolve these issues, but they are hard, expensive, and not scalable for large organizations.
- salawat 2y ago
  >- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations) This right here is entirely a result of government leveraging employers as a social control mechanism, that hitherto hasn't been so much of an issue; but with things like the Internet and computers, has now become highly disruptive to comply with. The answer to "who gets the tax revenue?" has previously been "the jurisdiction of record for the employee". Anything more fine grained than that starts to become indistinguishable from serfdom, and reels of government overreach.
  - 2y ago
JumpCrisscross 2y ago
Same with it all being about middle managers' egos. Like, senior management is more than willing to throw out middle management, especially in tech.

barbazoo 2y ago

How though? How would real estate interests influence tech companies' decisions?

elzbardico 2y ago
Maybe the people in the board also have a stake on real estate?
- rchaud 2y ago
  Rich people have RE holdings, it's part of a diversified portfolio. Why would it have to be just the board? Why not the many, many well-heeled execs at the companies themselves?
  - barbazoo 2y ago
    Wouldn't that require a concerted effort since rich people probably don't have a stake in the buildings they're forcing their employees to return to.
    - dgeiser13 2y ago
      You don't think rich people do things for their rich buddies?
      - barbazoo 2y ago
        They totally do. We all do things for people in our peer group. I just can't imagine someone being involved in the decision making for WFH/RTO thinking how good that would be for their buddies that are invested in commercial RE unless there's a direct link between their company and the RE they're returning to. Unlikely that someone makes decisions at Dell thinking it might influence the decisions of other companies doing the same which in turn might benefit one of their buddies. If there was an investment company holding both big chunks of commercial RE and the companies that occupy said RE I'd think this was more likely.
    - 2y ago

photonbeam 2y ago

What mechanism would you guess they are using to exert this influence?

me_me_me 2y ago
"hey your portfolio will look shaky if all that real estate business went under" influance
- cyanydeez 2y ago
  Hey, without your business lease, the other leases will go down and your overall Rich Man rating goes down.
  - me_me_me 2y ago
    but the line must go up! So to the offices sheeplings!

sharkweek 2y ago

Agreed, I'm convinced there are two forces at work here (a little tinfoil hatty maybe, I'll admit): - Local (city/state) governments who want to bring people into downtown areas to spend money are threatening to revoke tax breaks companies receive for having an office in their city/state. - CRE lobbyists convincing city governments to do the above, threatening with a dystopian outlook of a downtown core riddled with abandoned buildings.

inamberclad 2y ago
It's been frustrating to see how the past decades of focus on the office and the suburb have left American cities so vulnerable to this kind of dilemma. There's a simple solution: create a pleasant, walkable downtown that people will want to actually live in.
- cyanydeez 2y ago
  The problem is most office spaces are not easily converted to liveable spaces. They basically need all kinds of plumbing and wiring and structural work.
  - dvfjsdhgfv 2y ago
    > most office spaces most open plan office space
    - cyanydeez 2y ago
      Nah, the plan doesn't matter. It's things like limited plumbing through the core, elevators taking up excess space, structural supports limiting layouts. It doesn't really matter where you run the facades, it's all the other stuff people want like bathrooms that require significant reworking.
  - elzbardico 2y ago
    Yes. It takes work and money. But it is perfectly doable in a cost effective way. The biggest obstacle is that in some cities the building codes contain some arbitrary and irrational provisions to intentionally make it harder

tmaly 2y ago

This is going to the be case for big banks. They make the loans, so they are incentivized to bring people back in the office 5 days a week. https://www.finra.org/media-center/newsreleases/2024/finra-statement-correct-misinformation-about-new-residential https://www.finra.org/media-center/newsreleases/2024/finra-s...

rchaud 2y ago
FINRA is not a bank, its regulatory purview doesn't include the banking sector either.
- tmaly 2y ago
  The FINRA response was because banks blamed FINRA rules for RTO 5 days

JumpCrisscross 2y ago

> behind the scenes I strongly suspect commercial real estate interests are doing their best to stop WFH There is a lot of money to be made in WFH, in particular around tooling and residential real estate. The simpler answer is we're still figuring out in which roles and cultures which work modes work best.

cyanydeez 2y ago

Not just commercial interests, cities are losing tax dollars as companies pull out, then knock on effects to retail stores. Then there's Americans penchant for slavemasters aka, middle managers who's only real job is head count and stealing productivity counts.

stranded22 2y ago

Yup, most definitely.