This is the real reason for companies wanting people back to the office.
All this talk about collaboration and team spirit is just the publicly given reason for wanting people back to the office.
The real reason is that now the owners of the buildings are losing money.
Cry me a river.
This is the best summary I could come up with:
Employees sent to work from home at the start of the pandemic have not fully returned, a situation that, combined with high interest rates, is wiping out value in a major class of commercial real estate.
The past week brought a taste of the brewing problems when New York Community Bank’s stock plunged after the lender disclosed unexpected losses on real estate loans tied to both office and apartment buildings.
When a string of banks failed last spring — partly because of rising interest rates that had reduced the value of their assets — analysts fretted that commercial real estate could trigger a wider set of problems.
In other cases, banks are using short-term extensions rather than taking over struggling buildings or renewing now-unworkable leases — hoping that interest rates will come down, which would help lift property values, and that workers will return.
The value of bank assets has taken a beating amid higher Fed rates, Mr. Piskorski and Ms. Jiang found in their paper, which means that mounting commercial real estate losses could leave many institutions in bad shape.
“Commercial real estate is an area that we’ve long been aware could create financial stability risks or losses in the banking system, and this is something that requires careful supervisory attention,” Treasury Secretary Janet L. Yellen said during congressional testimony this week.
The original article contains 1,246 words, the summary contains 223 words. Saved 82%. I’m a bot and I’m open source!
If they can’t afford to lose money, they should stop being poor.
So, I’ve thought about it and we have a housing shortage and an excess of offices. Seems like a solid solution. Takes a lot of work to make an office into a home, but it’s more profitable than leaving them empty.
But no, that would help people, and the cruelty is the point.
Yep, Ive been saying this for years now as well.
We have giant mostly empty office buildings which could be converted into mostly apartments, with even make shift permitted commercial zones for basically street vendor / convention booth style shops every 10 floors.
Instead it apparently makes more sense to not do this because it makes more sense to keep them empty, heated and lit 24/7, as basically a way to prop up the retail property market.
Capitalism is a farce, and it has already doomed us all: we have now breached the 1.5 C warming barrier, even more rapidly than most of the worst case scenarios predicted. Permafrost in Siberia and Northern Canada is already thawing and releasing methane.
Enjoy the collapse of human civilization in your own lifetime as people and governments continue to squabble and combat each other over scarcer and scarcer resources as our entire way of life becomes too expensive to maintain.
It’s a solid solution only if someone ponies up the money to pay for the incredible effort it takes to convert an office building into residences. Waving your hands in the air and telling someone else to pay for it is not a good argument.
This is a good post, but I’m not sure it belongs in technology. Hmm.
The connection is mostly that tech companies have been wanting people back to offices for years now, so it kind of made sense to place this also in tech. But I know what you mean.
That doesn’t make sense. The companies that want people to come back to the office are the ones paying rent. That rent doesn’t get better or worse if people come back to the office.
Yes, thank you! I hate this constant narrative that back-to-office is always tied to commercial real-estate investments, or that there’s some magical tax incentive.
Usually what you have is: bank lends money to a commercial real estate company that owns the building. Commercial real estate company leases out office space to one or many companies. When those companies reduce or terminate their leases, the commercial real estate company struggles to pay their mortgage and defaults. Commercial real estate loses. Bank loses. And if commercial real estate had pooled investments to fund the building (along with bank loan), then those investors lose as well.
There are some large companies that own their own buildings, but that’s more of an exception.
These companies tend to own or have long term leases, so either they are stuck paying rent and have to justify the expense or they own an asset that is depreciating in value and they could stop that from happening by spending no money to force their employees back into the office. You have to think about the big money, too. Real estate is a cornerstone asset for big money, many banks and real estate empires hold these enormous office buildings and society trending towards WFH means those buildings are rapidly losing their value.
Justifying the rental expense doesn’t really make sense, because they end up paying more in utilities in addition to the rent. If you’re still on the hook for a lease and have most employees WFH, just downsize when the lease ends or move everything remote if possible.
Seems like banks are worried about the loan holders defaulting and are pushing companies to bring employees back to bring up demand for commercial real estate?
I just hope something can be done with the empty structures. Turning them into housing is easier said than done for many buildings.
It’s easier said than done, but it’s not that difficult. It’s mostly reconfiguration of plumbing and zone controls on HVAC. The electrical is easier to distribute.
If you commit to doing it the right way, and tear it down to the structure (but leave the facade alone), it’s not terribly difficult.
The problem is that the building owners want to do it cheap, and it won’t be cheap. It will be more economical in the long run than fully vacant building though.
