the death of the urban office building

[John Hjorth]

Thank you for sharing, Castanza,

 

It's indeed important information.

[Guest cherzeca]

"reimagining" the urban office:  https://hbr.org/2020/08/reimagining-the-urban-office?ab=hero-subleft-1

 

interesting that WeWork's model fits well within a new urban office typology (HBS authors' word, I would have said layout)...WeWork would have been sitting in the catbird seat now if it could have managed itself without all of the vainglory

[Castanza]

Meanwhile every home builder is trading at all time highs (GRBK, MTH, PHM, DHI)

[Nomad]

This was too good not to post:

 

https://www.bloomberg.com/news/articles/2020-08-20/nyc-landlords-press-finance-bosses-to-speed-return-and-save-city

 

 

“I’ve been really pushing the CEOs to bring people back into the office,” said Jeff Blau, the head of Related Cos., the developer behind the Hudson Yards project. “I’ve been using a little bit of guilt trip and a little bit of coaxing.”

 

...

 

Blau and his peers have been taking turns getting on the horn with chief executives and their lieutenants in charge of overseeing vast tracts of offices. The group includes RXR Realty’s Scott Rechler, Rudin Management’s William Rudin and Marc Holliday of SL Green Realty, New York’s biggest office landlord. “We’re creating our own fate by not bringing people back and restarting the largest economic engine in the country,” said Rechler, whose RXR Realty controls 25.5 million square feet of commercial real estate -- roughly equivalent to 10 Empire State Buildings. “It’s as much of a civic obligation as anything else.”

 

...

 

“The CEOs of several companies I’ve talked to have mentioned that it’s a patriotic duty to have their people come back to the office,” said Rudin.

 

 

[LC]

My coworkers, particularly the NYC based ones, are sick of working from home. One individual complained to me that the types of collaboration, meetings, group work, etc...it all takes 1.5x-2x as long. 10, 12 hour workdays are becoming routine. They find it difficult to hit the "off switch" for the workday while stuck at home.

 

Just some anecdotal evidence for the thread.

[Gregmal]

My coworkers, particularly the NYC based ones, are sick of working from home. One individual complained to me that the types of collaboration, meetings, group work, etc...it all takes 1.5x-2x as long. 10, 12 hour workdays are becoming routine. They find it difficult to hit the "off switch" for the workday while stuck at home.

 

Just some anecdotal evidence for the thread.

 

Yup, my wife mentioned the same thing. Nobody respects boundaries with WFM. Emails and messages come in at all hours of the day and night. Its a disaster, especially with kids.

[K2SO]

Let me tell you what my coworkers are experiencing this week.

Widespread IT issues working remotely causing serious delays in important work.

Communications over email can be abrupt and impersonal. It's causing some tension which I'm guessing wouldn't happen if people were speaking face to face.

The longer this goes on, the less appeal it will have to most, in my opinion.

 

[fareastwarriors]

My coworkers, particularly the NYC based ones, are sick of working from home. One individual complained to me that the types of collaboration, meetings, group work, etc...it all takes 1.5x-2x as long. 10, 12 hour workdays are becoming routine. They find it difficult to hit the "off switch" for the workday while stuck at home.

 

Just some anecdotal evidence for the thread.

 

My gf and her coworkers here in the SF Bay Area are tired of working from home too. Too boring, too lonely. Sure work gets done but at what cost!

 

She's going crazy.

[Guest cherzeca]

Let me tell you what my coworkers are experiencing this week.

Widespread IT issues working remotely causing serious delays in important work.

Communications over email can be abrupt and impersonal. It's causing some tension which I'm guessing wouldn't happen if people were speaking face to face.

The longer this goes on, the less appeal it will have to most, in my opinion.

 

many home locations were not set up for WFH.  you needed broadband, obvi, but you also need to pay for the biggest pipe that is on offer, and you need a good mesh network in the home.  lots of folks I have talked to have no clue what it takes for two people to zooms in different rooms...so poetic am I.

[Spekulatius]

 

My gf and her coworkers here in the SF Bay Area are tired of working from home too. Too boring, too lonely. Sure work gets done but at what cost!

 

She's going crazy.

 

Time for you to step up. You can earn valuable brownie points now.

[rkbabang]

I still love working from home and would be extremely disappointed if I had to go back.  Everyone of my coworkers feels the same way.  Maybe we are all anti-social techies on the spectrum, but not everyone loves sitting in traffic to sit in a cubicle all day under fluorescent lights, just so we can talk about things in the break room for a few minutes.  I can call any of my coworkers and chat any time I want from home. 

 

Also the emails at all hours thing doesn't bother me.  When I'm off work, I shut down my computer and then I don't check anything until I turn it back on in the morning.  I have access on my phone too, but all notifications are disabled.  It sounds like some people are not very disciplined in separating their working life from their home life, but that isn't the fault of the people sending the messages.  I sometimes think of something and fire off a quick message to someone after hours knowing that they won't see it until morning, and people do the same to me.  If you can't pull yourself away from your work, then spending time in an office building isn't going to help you.

 

 

[Guest cherzeca]

WFH needs to go though a maturation phase.  like every new cultural/societal trend, there are fits and starts.  some teams need to work in full presence, some can work zooming.  this all needs to get sorted out.  I find that the nascent movement to satellite offices with no big HQ to be a promising trend. a hybrid that splits the difference between full HQ and full WFH.  while I find much to admire about FB and AMZN, their move to large urban office lease signings/RE buys says more to me about them and their profitability than about what I thing the overall dynamic will largely become

[Castanza]

I still love working from home and would be extremely disappointed if I had to go back.  Everyone of my coworkers feels the same way.  Maybe we are all anti-social techies on the spectrum, but not everyone loves sitting in traffic to sit in a cubicle all day under fluorescent lights, just so we can talk about things in the break room for a few minutes.  I can call any of my coworkers and chat any time I want from home. 

 

Also the emails at all hours thing doesn't bother me.  When I'm off work, I shut down my computer and then I don't check anything until I turn it back on in the morning.  I have access on my phone too, but all notifications are disabled.  It sounds like some people are not very disciplined in separating their working life from their home life, but that isn't the fault of the people sending the messages.  I sometimes think of something and fire off a quick message to someone after hours knowing that they won't see it until morning, and people do the same to me.  If you can't pull yourself away from your work, then spending time in an office building isn't going to help you.

 

I agree with this. I wasn’t too sure at first, but have really grown to like it a lot. The flexibility and schedule planning is perfect for me. Nothing like doing some early morning fly fishing before work. Or come deer season, sitting in the stand.

[Castanza]

If the remote work idea takes off and we truly do have a reduction in urban office occupancy, wouldn't it be reasonable to suggest a decrease in wages due to a reduction in cost of living? Perhaps employees would still live in the general area for lifestyle choices. Either way, I haven't seen it mentioned but it could provide some incentive for companies to push remote work with possible trade offs in productivity.

 

Thoughts?

[rkbabang]

If the remote work idea takes off and we truly do have a reduction in urban office occupancy, wouldn't it be reasonable to suggest a decrease in wages due to a reduction in cost of living? Perhaps employees would still live in the general area for lifestyle choices. Either way, I haven't seen it mentioned but it could provide some incentive for companies to push remote work with possible trade offs in productivity.

 

Thoughts?

 

Unless someone moves to a cheaper area there can be increased costs to remote work.  Increased air-conditioning/electricity costs, office/computer/networking/bandwidth costs, etc, so I'm not sure people would be happy with decreased wages.  But there is also a substantial decrease in transportation costs, so it might still be on the money saving side for most employees, I don't know.

 

[Guest cherzeca]

40 hour work week can shrink without loss of productivity, though most office folks don't punch a clock...at end of day, think about how this affects maternity/paternity leave...which need not exist (at least at full strength) with WFH

 

[Castanza]

If the remote work idea takes off and we truly do have a reduction in urban office occupancy, wouldn't it be reasonable to suggest a decrease in wages due to a reduction in cost of living? Perhaps employees would still live in the general area for lifestyle choices. Either way, I haven't seen it mentioned but it could provide some incentive for companies to push remote work with possible trade offs in productivity.

 

Thoughts?

 

Unless someone moves to a cheaper area there can be increased costs to remote work.  Increased air-conditioning/electricity costs, office/computer/networking/bandwidth costs, etc, so I'm not sure people would be happy with decreased wages.  But there is also a substantial decrease in transportation costs, so it might still be on the money saving side for most employees, I don't know.

 

Do you think WFH would change usage that much? Most people seem to run a pretty good internet plan in their house already because of all their devices and streaming. Personally I have't changed much. I have changed my A/C habits a bit, but my bill has generally been in line with the prior year. I have saved about 3-4k miles driven from this so far which probably offsets any consumption costs.

 

I guess it depends on the individual setup. 

[rkbabang]

If the remote work idea takes off and we truly do have a reduction in urban office occupancy, wouldn't it be reasonable to suggest a decrease in wages due to a reduction in cost of living? Perhaps employees would still live in the general area for lifestyle choices. Either way, I haven't seen it mentioned but it could provide some incentive for companies to push remote work with possible trade offs in productivity.

 

Thoughts?

 

Unless someone moves to a cheaper area there can be increased costs to remote work.  Increased air-conditioning/electricity costs, office/computer/networking/bandwidth costs, etc, so I'm not sure people would be happy with decreased wages.  But there is also a substantial decrease in transportation costs, so it might still be on the money saving side for most employees, I don't know.

 

Do you think WFH would change usage that much? Most people seem to run a pretty good internet plan in their house already because of all their devices and streaming. Personally I have't changed much. I have changed my A/C habits a bit, but my bill has generally been in line with the prior year. I have saved about 3-4k miles driven from this so far which probably offsets any consumption costs.

 

I guess it depends on the individual setup. 

 

I already had 600Mbps service so I didn't have to change anything, but I've talked to people who had to upgrade (2 working from home, plus kids doing remote learning and only had dsl).

 

I did notice an increase in air conditioning costs, we basically cool the house to a comfortable temperature 24/7, where we used to turn it up 5 or 6 degrees during the day.  But not doing my 30 mile each way commute makes up for that and then some.  I bought a new monitor and bought a copy of windows to run on my iMac so that I could use that as a wireless monitor as well connected to my company laptop.  Also bought an ethernet to usb-c connector to hard wire my laptop to my network.  I guess technically I could have expensed that to my company, but I didn't bother.

I also needed a new home office chair, because I found sitting all day in the one I had just wasn't working.  For me it has been a plus financially, but I can imagine if someone had increases in bills and they didn't have a long commute anyway it could go the other way.

 

[Gregmal]

Spoke with a good friend this morning; guy is part owner of a group that owns a number of very prominent NYC restaurants. Good news is that they are preparing a lawsuit demanding the ability to reopen. Its downright disgraceful what De Blasio and Cuomo are doing. After mismanaging everything in March/April...they now continue to suffocate their business operators despite the fact that there are nearly no new cases, and even more horrendously, seem to be indicating to restaurant owners that they will not even consider indoor dining until a vaccine is here. Why isn't there a desire for folks to go back to the office? Part of my theory is that the ambience of NYC is what draws people in. Not a farfetched theory. So why exactly would one want to live/work in NYC if the only things currently available are drugs, violence, and homeless people??? The politicians really need to be replaced. Hopefully the lawsuit is successful and/or the politicians relent. They have straight up commandeered the livelihoods of so many NYers.

 

Another good side question. How can cities and states demand payments of property taxes from businesses they are refusing to let operate? Specifically, taxes that are largely based on corporate/commercial tax rates and not residential or "no use" rates? If nothing else, they should suspend property taxes for any business they are refusing to let open at full capacity.

[cubsfan]

Spoke with a good friend this morning; guy is part owner of a group that owns a number of very prominent NYC restaurants. Good news is that they are preparing a lawsuit demanding the ability to reopen. Its downright disgraceful what De Blasio and Cuomo are doing. After mismanaging everything in March/April...they now continue to suffocate their business operators despite the fact that there are nearly no new cases, and even more horrendously, seem to be indicating to restaurant owners that they will not even consider indoor dining until a vaccine is here. Why isn't there a desire for folks to go back to the office? Part of my theory is that the ambience of NYC is what draws people in. Not a farfetched theory. So why exactly would one want to live/work in NYC if the only things currently available are drugs, violence, and homeless people??? The politicians really need to be replaced. Hopefully the lawsuit is successful and/or the politicians relent. They have straight up commandeered the livelihoods of so many NYers.

 

Another good side question. How can cities and states demand payments of property taxes from businesses they are refusing to let operate? Specifically, taxes that are largely based on corporate/commercial tax rates and not residential or "no use" rates? If nothing else, they should suspend property taxes for any business they are refusing to let open at full capacity.

 

So 7 Covid fatalities yesterday in NY, and none in NJ - and the State and City still locked down??

 

No, that is not politically motivated. Let's destroy more livelihoods.

[KJP]

Why isn't there a desire for folks to go back to the office? Part of my theory is that the ambience of NYC is what draws people in. Not a farfetched theory.

 

I don't think that's unique to NYC.  One of the main reasons for me to go into my downtown Philadelphia office is to network/see friends for lunch, coffee, drinks, etc.  Most of that is not currently available, so I've been to my office twice in the last six months and don't plan on going more frequently until more dining and drinking options are available and I'm comfortable going to them.  I personally don't plan to go to any indoor restaurants/bars anytime soon, so it's still the virus that's keeping me away, but I assume there are others who would return but for the drinking/dining restrictions.

[Gregmal]

Whats unfortunate is that many of these business owners have indeed been good sports about this whole thing. They haven't been overly aggressive or demanding and have up until this point, largely taken the high road. But you're now looking at these scumbag politicians having taken away their livelihood for nearly half a year! With no end in sight! You look at NYC, and despite the constant boasting about "beating the virus", the numbers dont lie. Why was NY/NJ easily the worst in terms of virus casualties during their peaks, and now despite being "on the other side", literally for months now, such an outlier in terms of any kind of rebound in economic activity? NYC has THE WORST economic outlook in the country. They've gotten the worst of both worlds, and there isn't really any other explanation than the actions of De Blasio and Cuomo. Are NYers somehow less resilient than other parts of the country...I doubt it. Both residents, and folks traveling in, such as KJP mentioned, currently have no reason to be there.

[fareastwarriors]

Many Companies Planned to Reopen Offices After Labor Day. With Coronavirus Still Around, They’re Rethinking That.

 

Companies had hoped to bring homebound workforces back in September, but employee outcry and fears over outbreaks have led bosses to change course

 

https://www.wsj.com/articles/many-companies-planned-to-reopen-offices-after-labor-day-with-coronavirus-still-around-theyre-rethinking-that-11598175001?mod=hp_lead_pos1

[LearningMachine]

I have been following this thread, and I feel folks have been taking extreme positions: (1) office building is dead, or (2) we are going back to office.

 

I think everyone will agree that what will end up happening will be somewhere on the spectrum between #1 and #2.  I wonder if we should express that point on the spectrum by what would be the vacancy rate in office?

 

Moody's is now predicting vacancy of 19.1% in 2021 and 20% in 2022: https://www.bloomberg.com/press-releases/2020-08-17/moody-s-analytics-forecasts-us-office-vacancy-rate-hitting-historic-high-of-19-9-in-2021.

 

What do folks think vacancy rate might be post-Covid in 2021-2022?  Based on what I'm hearing, I think it will probably fall between 20% and 30%.

 

I wonder if folks might be underestimating the impact on pricing from 20-30% vacancy in office and retail.  Because prices are based on incremental supply/demand, a 15% vacancy can cause 50% drop in prices.

 

In Detroit, 20% vacancy in houses caused holding banks to sell houses for $1 each to avoid paying property taxes and to avoid legal liability. 

 

Imagine you own 10 million sqft of office space, which was all rented pre-Covid and could cover your mortgage payments and property taxes. Imagine, post-Covid only 75% is rented. If you couldn’t cover mortgage payments and property taxes with the rent anymore, what will you do with the remaining 2.5 million sqft? Will you sell/rent it for whatever price you could get?  What if many such folks have to do that to survive?  Would they do it even if price is 75% off?

 

Also, what do folks think the effect of that vacancy rate will be on NYC office PSF?  What is lowest salvage PSF that would make it profitable for a developer to convert office to condo or multifamily given rental rates at the time?

 

[LC]

10%

 

Rumors of office space demise are greatly exaggerated