Submitted 1 year ago by HandwovenConsensus@lemm.ee to [deleted]
A lot of times, when people discuss the phenomenon of employers ending work-from-home and try to make their employees come back to the office, people say that the motivation is to raise real estate prices.
I don’t follow the logic at all. How would doing this benefit an employer in any way?
What you’re seeing is the incestuous relationship between government and private enterprise that is characteristic of late stage american capitalism. Everything depends on people spending money, so businesses get tax breaks and other incentives from metropolitan areas for operating in those metropolitan areas. Imagine you have a company that employs 400 people in an office building downtown. Those 400 people will need to park their cars, they’ll buy coffees in the morning, they’ll buy lunch, they’ll go out to happy hour with their coworkers on fridays. Every one of those transactions benefits business owners in the city, and for every one of those transactions the city takes a cut. Now imagine that company goes full, permanent WFH. The office is vacant. The diner down the street closes. That parking garage that was built to meet a demand that simply isn’t there anymore is simply useless. Tax income drops for the city. Everyone whose livelihood depended on the manufactured demand created by colocation is in a lot of trouble now. The only people who aren’t getting smashed are employees, who now no longer have to pay to park, can make their own coffee the way that everyone has been telling them to for years now, can eat their own food at home or order delivery from the places closest to them rather than the place closest to the office, zoom happy hours mean they’re not spending money at the bar after work, this entire microeconomy that popped up to serve the needs of employees who had no choice but to all be in one place at one time starts to collapse. So you’re right to be suspicious that companies that pay rent are invested in keeping the rent high, but there are a lot of knock-on costs associated with a business district collapsing and there’s also a lot of carrot-and-stick from local/state governments in an effort to keep people in the office and keep them spending money near the office.
In my city a few old office buildings got turned into condos and apartments and those areas are flourishing but with slightly different businesses. Vacuums tend to get filled. If you pivot correctly you can even take advantage of it. The times they are a-changin’.
Oh thats the thing, yeah. There’s definitely something to transition to and given the way demand and prices have skyrocketed that thing is probably housing. The problem is that capitalism handles transitions as gracefully as evolution does. That is to say, the things that are wrong die screaming and make room for something that fits better.
I think something like that requires some kind of decent leadership in the community rather than someone trying to stick to the same old plan. That’s awesome to hear it’s working there. I hope it catches on. I’d love to go downtown for fun instead of work. I love the architecture
Sounds like capitalism running its course
The more a building is useful, the more the surrounding area is worth. If nobody is at the office, no one will rent the store fronts in the building. No renters, lower real estate price.
I suspect the real estate prices is a fantasy. I suspect the real reason is management addiction to close supervision and their lack of trust.
That’s not really a fantasy at all. It works exactly the same way as the US health insurance practices.
Picture this. You break your leg, go to a hospital, but thankfully you have insurance. So they fix you up, then give you a paper with a number that says 140k$ (I wish I were kidding, this is real) on it. You sit there, completely fucking flabbergasted, but then it all makes sense. This number doesn’t even have to be what your leg operation is worth. This 140k$ is what they pulled out of their ass on that specific day, and then negotiated to get that money from your insurance company. The day goes by, you feel like garbage, the hospital has made a ton of money, and your insurance isn’t even mad, because they make orders of magnitude more, to the point where this is pocket change to them.
This is practically the same. A business would overpay you to sit in the office, your boss pays for the office, and that arbitrary amount of money goes to whoever owns the building. Issue is, they can keep cranking up the prices on non-residential buildings endlessly, because people keep paying them. Especially when it comes to hot locations like NYC, or anything similar, you know that someone’s either already paid for that office for 5 years ahead of time, and needs to justify the absurd cost, or the office floor is sitting empty, because the landlord is delusional
This thesis lacks logic. If a company already paid the office, people going into it or not changes absolutely nothing. And if the rent is going to end, you can save buttloads of money by forcing everyone at home.
I believe it’s more about CEOs seeing the investor trend of making people go back to the office raising the company stock price. Simple as that there’s no need for logic when following a trend nets you several millions extra valuation
I think this is it too. A lot of big business is just a game of follow-the-leader. My small company recently instituted a return-to-office program when before they were encouraging employees to work remotely if they wanted since our jobs can be done from anywhere. When I asked about why they were doing this move now during my performance review, the answer I got was “A lot of other companies are making the same request of their employees.”. When I asked why those companies were doing it, they couldn’t give me a good answer.
It’s pretty infuriating that it took a global pandemic to finally prove to these corporate whip-crackers that you can indeed work from home and still be productive, and now they are trying to claw that back away from us a day or two at a time until we’re right back where we were.
I’d put a finer point on it: they’re trying to control their worker’s lives. They have an interest in workers having little to no free time and energy. You will obey.
Ding ding ding ding! 1000% this. It’s not about money, property or “collaboration.” It’s about control and the fear you’re off not working when at home.
This is the middle management problem. The upper management problem is the cost of a building.
Imagine you’re a CEO had signed a 10 year lease on an office building in 2019. You’re likely stuck paying for that building regardless of it you use it or not. If you feel like working in office improves productivity (not saying it does, this is just perspective a CEO might hold) how would you rationalize to yourself and the shareholders that you’re paying thousands (or millions) for something that you could be utilizing to benefit the company and leaving it empty.
Much of commerical real estate is actually leased, these companies are contractually obligated to pay for the property regardless of if they have people in office or not. They might not be able to exit these leases for years.
Giant sunk cost fallacy. Plus old school thinking plus desire for control.
Pretty much this. A surprising amount of executives are like"we already paid for it so we should use it" with no regard for the actual bottom line impact of forcing people back to work.
You made an unfortunate investment, don’t make it worse with your boomer corporate ideology
But the other way also exists, my employer is pushing hybrid work with flex desk, so they can do a building renovation without renting one more building.
But indeed before that came on the table many top managers didn’t liked the flexible work. But it was already in place as a concession to thc unions (cheaper than a raise)
Out of all the responses here, this is the only one that takes into account the actual psychological forces motivating the decision-makers.
The CEOs cannot justify their real estate expenses to their boards when employees are not filling those seats, and they likewise are contractually obligated to pay millions, hundreds of millions, or billions of dollars (depending on the company) for years to those lessors or lenders. There is a simpler motivation than “industrywide collusion and conspiracy to profit” - it is the motivation of these individual CEOs to appear competent and intentional despite that boulder they’ve placed around the company’s neck.
It isn’t a cross-company conspiracy. It’s each CEO’s personal but widely-shared motive to avoid embarrassment and their inability to adapt. Whether consciously or not, this is all those CEOs need to look at the “data” selectively and post-hoc rationalize RTO with platitudes like “increased collaboration and productivity” while ignoring the decreased morale, lost productivity from 2 hours of daily commute time, etc. It maintains the status quo that they assumed when committing to their property leases, and resolves any cognitive dissonance in the way most flattering to themselves (at the cost of their employee’s time, mental health, and personal freedom).
I have seen this happen first hand. My friend works for a company headed by a founder CEO who is famously progressive. In the hight of the pandemic they even stated that they’d go WFH indefinitely. Past forward a couple of years they have finished constructing a shiny big new office building at the heart of the city. Now every one is being asked to come to the office 5 days a week.
Funny how they ask us to go to the office but keep building their offices where none of their employees can afford to live
But hey, if you aren’t burning many gallons of fuel per day and stuck in traffic for hours while being very stressed, for a job you could’ve done from home, are you even an adult?
There’s a lot of dumb answers here.
people say that the motivation is to raise real estate prices
It’s not the sole motivation and it’s not even “a” motivation for some businesses.
Basically, wealthy people generally are going to have all sorts of investments. If you own any commercial property then you’re going to exercise whatever influence you have to support people continuing to work on premise. That influence is often in the form of shareholders putting pressure on management.
Why would the shareholders of a company want them to take on additional unnecessary expenses like leasing office space?
Or rather, why do real estate company shareholders have such ridiculous levels of influence compared to other groups who would logically prefer more wfh?
Because if you move up the ladder far enough, they’re all the same group. Mister X sits at the board for companies a, b and c, but he also has a real estate portfolio. He’s not the one spending the money for these companies to return to office but he has a vested interest in people returning to office in general, so he lobbies for it wherever he can. Simplified example but you get the gist.
It’s insidious.
It’s not influence as in “let’s have a logical and transparent discussion about wfh vs on premise”.
It’s rumours, back channel favours, manipulating numbers, etcetera.
Bear in mind not all companies are publicly traded. Plenty of closely held companies were started by grand dad and run on rumour and here say.
As far as I understand it, there are political interests too. Not just the obvious, ie a city council wanting to see economic movement within the city. Any regular person with a pension likely has money tied up in real estate. Ensuring those pensions maintain value is a concern for governments.
That’s true, but I didn’t go into that because OP didn’t ask.
Here in Aus local council revenue is a function of property value.
Ok I’ll try to explain it. Imagine before if your company had 100 people and they all needed offices so you rent a place that has 100 offices.
Now you switch to work from home and let’s say only 20 people really need office space since the other 80 can just work from home.
Why would you continue to rent the building with 100 offices? You wouldn’t. Instead you find a place with maybe 30 max. And you’re not the only company doing this too.
So now nobody really wants or needs huge office spaces and the people who own these have trouble finding new tenants, demand isn’t very high so they’ll have to lower prices. That’s what people refer to, since the value of these buildings is partially based on the income they can produce. If that goes down then so does the overall value of the building.
It doesn’t hurt the employer unless they themselves just spent A TON of money building their own huge building. Then it would be mostly empty and a huge waste of money so it would look bad.
In addition to that companies make deals with cities for tax breaks based on the number of just they create in each location. Usually there is a rule about how many people need to be working in your offices.
I also heard a city mayor on NPR recently talking about how we need to get workers back down town because the smaller businesses like restaurants are doing poorly in those areas now as well. So I assume they are putting pressure on these companies as well. Instead of finding a new more innovative use for the spaces.
Idk how much of this is true but I had read that in certain cases the companies got what is called sweetheart deals from cities for establishing their office in that city, what the city wants from these companies is tax paying citizens and usage of city businesses, again to create more tax paying citizens.
Now wfh means employees can move to a city which is cheaper for them or far away from the city for a more rural lifestyle (not exactly rural in many cases), so cities are unhappy and are ready to charge businesses for that and so businesses are trying to call back employees to keep their deals going
This certainly is part of it. I worked for a company that got huge tax breaks because they promised to hire x number of employees. Then they put in a hiring freeze and the city had to fight them for the taxes they now owed.
This was long before the pandemic but I’m sure this happened a lot
It’s simple: the board and major shareholders also invest in office properties and trying to reduce loss of their investments.
It is a great one size fits all reason that includes the various banks and your CEO conspiring together to make your life worse.
Some bank executives and local government officials have been the first to push for going back to the office, so a lot of people are putting the blame on them.
Big businesses often get incentives from municipalities for being headquartered there. The city wants employees in offices who might financially support other local businesses while they commute to/from work.
If the local economy is happy and office space remains in demand, coupled with savings they receive from incentives, property values rise. The property of a business is an asset, so the more valuable the property becomes, the more value the company owns.
Ok, so it’s about responding to local government incentives. I feel like that’s an important piece of the puzzle that’s overlooked when people say it’s about real estate prices.
Not only that, but many of these companies have huge fuckoff buildings and only occupy a portion of it. Tenants fill up the rest, and occupancy drops so does the rent. Pushing for a return to office pressures the smaller companies (who are run by sociopaths with very specific risk adversities) to do the same, lest they look like they don't want to be like Big Daddy Fortune 500 up in the top floors.
I think it’s because there just isn’t any sensible explanation so people are trying to come up with something.
The tech companies do have massive real estate footprints, but I think it doesn’t make sense at all, those are a cost center for them.
If there is no need for office block then there will inevitably be a drop off in the need to hire the space to work in, which in turn will lead to lower prices. Employers do not request higher costs.
In the UK, the government are pushing for return to work because of pressure from newspaper media. People buy papers on their way to work. The are no cost basis arguments with forced return work. There is an obvious case for net zero benefits.
In my country they are actually hiding the fact its about property value and pretending its to support the small and local businesses in the city, like cafés
The ones that were largely left to fail during COVID?
Won’t someone think of the cappuccinos!?
I think you’re getting a lot of bullshit answers here and your first instinct was correct. This is a nonsense fable that someone came up with when they were high and then told to some friends, who believed it because they don’t know shit.
It’s not exactly nonsense. Commercial real estate is leveraged by corporate investors are reliable equity. There are a lot of cards balancing on top of commercial real estate investments, and a crash would cause a domino effect similar to 2008, although probably not nearly as bad.
Banks desperately want commercial spaces to maintain some value, and there are a lot of long-term leases expiring over the next few years. Businesses that stay remote may be owned by stakeholders who also invest in commercial real estate.
So it’s possible somebody somewhere is motivated to get people back into the office because they are worried about the economic fallout of another crash. Those people are far outnumbered by the Six Sigma Laser Lotus Middle Managers who have metrics showing people don’t take naps or jerk off as much in the office as they do working from home (if you’re wondering how they get those KPIs, ask yourself if you have a cover for the cam on your company-issued laptop).
TLDR The push to return to office is almost entirely about control and conformity. It’s likely some decision makers are also worried about real estate values, but there is no grand conspiracy.
Yes if we’re verrry clever we can think of some plausible link but even then it’s very loosely gossey and purely theoretical. Just because we can draw a dotted line, however thin, doesn’t mean it’s actually real. Jar Jar Binks is a Sith Lord, etc.
As you say, this is something less than a tertiary factor, perhaps a thought that has crossed a few peoples’ minds. But if it’s even given any weight at all, it is outweighed by other considerations, vastly so, every time.
You mean to tell us that the same CEOs’ reports that mentions productivity has gone up after going remote was a lie? Record breaking profits after going remote is a lie?
Why are the CEOs lying? One of the explanations is that the profit margin is 15% and the city is theatening to end the 15% tax break.
You mean to tell us that the same CEOs’ reports that mention productivity has gone up after going remote was a lie? Record breaking profits after going remote is a lie?
Why the fuck would you think that’s what he’s trying to say?
Well it is… And besides that office space is a huge drain on cities… Not only parking infrastructure, but also traffic… You’re really much better off housing people than having more offices
Wow someone is intensely misinformed
I can’t tell if this is a case of name fits or not. Hmm.
“The way world has ALWAYS worked.”
Need I remind you that people worked from hom for hundreds of thousands of years? In minority of cases they walked a few minutes to their place of work. You are seriously trying to tout a post-war phenomenon as something that always worked? Get a grip on man, what are you? A middle level manager or a real state owner? Or at the very least, ignorant of your history.
Many jobs involve talking with people. At what time in history was it possible to talk with someone without being physically close to them?
JFC, does no one in this thread understand the sunk costs fallacy?
It’s simple supply and demand. If lots of white collar workers are WFH, then hiring new people doesn’t require more office space. If you can grow your company without leasing office space, or by leasing a smaller office, demand for office space goes down.
Office space owners who use that for income suddenly don’t have (as much) income. So maybe they lower lease rates to attract new tenants. Well, now tenants stuck in higher rate leases start doing the math on penalties for breaking their existing lease vs the new prices.
If remote work stays popular or grows (hint: it’s growing), this CAN result in a race to the bottom on commercial real estate leases, which makes them less valuable investments, which could lead to a massive sell off.
All of this makes CEOs itchy. So they try to justify return to office policies. This just chases their best people into the arms of competitors who will support WFH (and naive pay more without high office space leases to pay).
I think the era of regular office work for white collar workers is over. Maybe a couple days a week for client meetings. But why not just go to the client site?
Office work was killed by COVID. Good riddance.
So maybe they lower lease rates to attract new tenants.
The golden rule of commercial leasing is that you never, ever, reduce the lease cost because the value of the property is calculated directly from lease value. Reduced lease cost is reduced property value. In valuing a commercial property the lack of a tenant is not important.
tenants stuck in higher rate leases start doing the math on penalties for breaking their existing lease vs the new prices.
Generally with a commercial lease your only real options to exit are to find someone to take on your lease. If lease prices have dropped then no one will want to take on your dud lease.
All of this makes CEOs itchy.
Why? Not all CEOs are in the same industry. Why should the CEO of Google give a fuck what the CEO of Boston Properties thinks? Google is just leasing a space from them. You would think the CEO of Google would be happy for an excuse to offload some real estate expenses.
Considering that the Muskrat can apparently be the full time CEO of 3 companies simultaneously you might be surprised.
CEOs think they’re different from us normies, and have a lot in common with other superstars CEOs such that their interests seem more shared.
It’s complex, for sure, but yes to some extent the “back to office” CEOs care that the commercial property market stays “healthy.”
Unfortunately nearly every job posting I see (software developer in the US) is either in office or hybrid 3 days a week. I wish the in-office era was over but I don’t see that as a reality just yet, at least not for people with less than 10 years of experience
there is a lot of full remote software dev jobs in the US, but they advertise them here in South America and India, for 20% to 50% of what they pay for americans
Because they’re grasping at straws in their attempt to rule over the working class.
This doesn’t actually answer the question.
Well, it partially does. Things can just have more than one motivation.
I think all answers so far are wrong/only rationalizations after the fact. I’m pretty sure the real reason to get people back is a feeling of control and superiority.
It’s harder to do something else than work when you’re at the office. So they want to at least be able to look over the shoulder of their employees, which gives them a feeling of being in control.
The other is superiority, how are managers going to feel superior, like their higher status means something, if there is no one there that’s deferring to them? “Wfh superiority” does not feel as real as seeing real people react to your presence in some way.
Achieving high social status is one of the base desires of being human, and it’s being applied to the workplace majorly. Even if technically nothing changes for bosses regarding status with wfh, it still feels like status is lost because the effects are not as visible, which has to be avoided at almost all costs.
This is correct. Real estate prices don’t mean anything to the vast majority of companies since most of them are not in the real estate business and likely even lease their office spaces. It could have a minor impact to the balance sheet if deemed impaired but it doesn’t amount to something that matters in valuation which cares more about P&L, cash flow, and working capital.
Business leaders are human, they don’t know what the fuck is going on, or how to “increase shareholder value”. So for lack of better ideas they can just tell employees to go back to the office.
Basically, if you don’t know how to stop a ship from sinking, you can at least change the curtains on the windows so you look busy on the way down.
They first, make the decision to go back to the office, second, they tell their team to go find reasons to rationalize the decision. There isn’t a nuanced logic to arriving at the conclusion, they make these calls off-hand on gut feelings. The thinking comes in later from the direct reports trying to fill in the logical gaps, even if the decision wasn’t a logical one to begin with.
I’m pretty sure a lot of these reasons you discard are actual reasons that in some way make sense, they’re just not the main ones. Behavior is rarely dictated by just a single reason, it’s always some kind of combination.
It doesn’t. It is a bit of a silly argument and not a factor in any real degree. There are valid arguments for work from home but this is not one of them. Quite the opposite actually.
surewhynotlem@lemmy.world 1 year ago
It benefits the owners of commercial real estate. Which is primarily banks and investment firms.
Companies need to stay on the good side of banks and investment firms. Otherwise they don’t get loans.
But also, some of these companies own those buildings. If they’re not in use, their value in the market drops.
Also, there’s external pressure from cities and townships who give tax incentives to companies to bring their employees in to spend money in the city. For example, a company might get a tax break if they create a thousand jobs. That’s only a good deal for the city if those thousand people are in the city and spending their money and generating taxes.
HandwovenConsensus@lemm.ee 1 year ago
I see, so the idea is that they’re responding to external pressure from governments and financial institutions? I guess I could see that, though it shouldn’t be hard to prove by pointing to specific policies and loan conditions.
How does that work? Why would a buyer care if the seller was using the building? If anything, I would think using them would depreciate their value due to wear and tear.
fuckwit_mcbumcrumble@lemmy.world 1 year ago
If nobody is using any buildings then there’s an indefinety supply and no demand.
trustnoone@lemmy.sdf.org 1 year ago
A big thing in my country, business buildings are expensive because of location and what’s around them. But if employees aren’t in the office, restaurants, cafes public transport corner shops etc lower in demand or even close entirely. This makes the building itself less in demand and harder to rent out at a higher price.
A lot of these buildings are owned by banks, CEO’s and financial institutions who have the money to push for changes like government to make people come into office and can use any reason like “think of all the failing cafes!”.
Endorkend@kbin.social 1 year ago
WFH makes it so there isn't a buyer or very few interested.
So if you want to shift the property, you're going to have a bad time.
squiblet@kbin.social 1 year ago
A buyer is only interested if they have a use for the building. If work from home becomes the default way, then who would need to buy an office building?