“Return to office!”
Why?
“Because otherwise these buildings we bought are worthless!”
Ok, hard pass.
“In that case, with our new-found leverage, we’d like to formally request a 40% pay increase and a 4-day work week to compensate for the inconvenience of propping up your failed real estate ventures. We look forward to your affirmative response.”
That’d be a lot easier with some sort of collective group that could make such a deal.
You want to bargain collectively? Presenting a united front? What would you even call such a thing?
I just realized something. Making people work in expensive office buildings is how the rich extract more wealth from the working class.
How can I get more money? Start a business! Perfect. Now how can I get more money from that? Well … If I owned an office building, then I could rent office space to the business. But what is the business going to do with an office building? Ohhhh, the business, that I own, or am the majority shareholder in, the business in which I make all the decisions, could decide that employees have to come into the office. That I rent to the business, because I own the office building.
There’s also the businesses nearby that serve the workers in the office building. Supposedly one of the reasons Amazon has pushed so hard on RTO is a lot of their executives have personal investments in those businesses and without Amazon workers in the area they were taking in way less money. When you happen to own the restaurant across the street it’s in your interest to force your coworkers back into the office.
Interest rates were so low for so long, people tried to find other ways to grow their money.
Hey you want to borrow what is essentially free money to buy a building in charge tenants? It’s a safe investment, right, there’s no reason why businesses would stop needing office space, right,…right right.
And of course it goes deeper than that too. Even if a company doesn’t have any real skin in the game as far as owning The real estate, shutting down the offices makes for some colossal problems. If your stuff’s not already in the cloud you need to migrate everything. It changes secure networks, where do you meet with clients, when you don’t have that huge beautiful branded space with a magnificent mahogany table in your conference room how do you impress your clients? Where do you have your new hardware shipped? Does your IT team now just store hundreds of thousands of dollars of hardware in their house? How much are you going to lose when you auction off all the furniture?
This of course can all be overcome and answered but it’s not easy. It’s also not easily reversible.
Most of management cares a lot less that people are working from home and cares a lot more about having to decommission the actual offices because it’s strategic and financial nightmare fuel.
The company I work for reduced our office space from 3 floors of the building to 1, started leasing out the other two, and now maintains only a few conference rooms for client meetings and similar functions, the server rooms and IT space, and a very small set of communal workspaces for people who want or need to work from the office.
Point being, there’re always options less extreme than “Sell the entire building!”.
Because it is paid for with labor value that was stolen from the working class.
it raises the productivity requirements of the business to exist without actually returning any of the same money to the pockets of workers. Its similar to your boss owning your apartment and billing you for rent. You work harder, make less money and your boss makes more.
Its why there should be limits on the creation of shell companies and real estate trusts.
Because they have to spend a fortune on rent and/or commuting to earn a living where all the jobs are.
Not forgetting that is is bosses who make the location decisions and they can afford to buy in those hugely expensive cities while the forced influx of workers pushes the price of housing up.
Companies should be taxed based on the in-work benefits required to make their location viable, regardless of their own wage structure.
My current employer did just that – sold the space, sold the desks, and then enshrined remote work in the union contract.
Since they weren’t tied to an office, people could work from anywhere the privacy and security regs allowed. That’s the entire country. Turn-over is incredibly slow, but we can now pull from a national talent pool for a 100%WFH job. Competition is gonna heat up.
Commercial real estate loans are interest only? I had never heard of that before, but it makes sense with the buried lede:
borrowers prefer handing the property keys over to creditors over putting good money after bad
Which is what happens whenever a company has an asset they don’t own and no longer want. Shrug and handover the keys. Seems to me like the lenders are going to be the ones taking the haircut, despite what the article asserts.
Yep and it will end in massive public giveaway in free loan money to retrofit buildings to something useful, like residential(yes I know of the challenges but there is no better option). Even progressive cities are fucked because their downtown cores that they sold gladly sold out or allowed to be developed out from under their constituents have almost all their tax dollars coming from CRE so they are levered to pro up CRE.
I hope they’ll do retrofits. I wonder what that would do to the housing market. If it actually made housing affordable a huge chunk of investors and home owners would be royally pissed. Great way to decrease homelessness, and I might be able to afford a house, but I doubt they’ll do it for that and previous reasons.
There is at least one other option: Vertical Farming. I saw one of these in San Francisco go up, but there’s quite a few cities trying it out:
They’re called balloon loans. They’re pretty common for mortgages anywhere outside the US. Instead of paying principal plus interest each period, you only pay the interest. At the end of the term, you pay the principal itself.
They also can’t just hand the keys back unless it’s in the original contract or the bank agrees. If a lot of companies are choosing to ditch their properties, the banks will choose to refuse this option.
🎻
Time to stop eating all that avocado toast!
