this post was submitted on 15 Aug 2023
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I suspect they were ‘advised’ by the Banks and perhaps the government, to put the brakes on.
Every Corporation would be delighted to dump expensive city real estate, and “externalise facilities costs” to the workforce. ( which is what working from home is, from a balance sheet point of view). It’s what they teach at business school.
However, it would only take a handful of big players to to do this in succession to collapse the real estate market in most cities.
The knock on effect would likely include some large defaults by landlords and developers and who knows where that ends.
A secondary effect is house prices. certainly in London, where people pay a 2-5x premium to live within an hour of they high paying job.
If people no longer need to live near the office, why would they spend so much on crappy housing ? It would likely trigger an exodus away from the capital, collapsing the housing market.
In the UK if the housing market collapses, the economy follows it down the tube in massive way.
Hence the half hearted ‘push’ to get people back in the office .
When my previous employer announced RTO they literally sent us an infographic explaining why they chose their "hubs" and Denver was "$7 million in tax breaks". It's a multi billion dollar company but 7 million dollars is 7 million dollars, I guess. I don't think they even had a major office there before, they were opening one.
Thanks, that's a very good point! A physical office is a great bargaining chip for a large company. I remember a few years back when several cities and states engaged ina kind of auction to host the next Amazon HQ. It probably also works at the international level, where I imagine it will be easier to enter a market (from the perspective of local laws and permits) and sell your product there if you also open an office and create thousands of new jobs there.
It's not just real estate. We've already seen over the pandemic the collapse of some businesses that depend on office workers. Many of the places I used to hit for lunch are gone now.
And by sending people back to the office it's the business outside downtown that are suffering instead.
Decentralize businesses!
Is it tho? It's exceptionally rare for me to eat it for lunch when I'm working from home. When I was in the office it was regularly once it twice a week.
You're still buying food from somewhere, you just make it yourself.
Sure. But WFH or in the office doesn't effect where I grocery shop. Whereas it does effect where and how often I'm eating out.
You're still buying more food from the grocery than you would otherwise and you can make the effort to buy from specialists (like directly from a butcher) instead of going to whole food or similar chains.
You are probably correct, but eating at home is way more efficient/cost effective at home than out. I make a little more to have leftovers or I buy an extra lb of cold cuts for the week.
Yeah but I don't. 😆
Just to be clear I wasn't making an argument for forcing people back into the office. I'm squarely against it for most jobs that can be performed remotely. I was just pointing out that it's not just landlords and lazy managers who were effected. I know of at least a couple shops who's primary business was the lunch crowd that are now closed due to the pandemic.
Thanks. I can see this happening for very large companies that do active lobbying and have to be closer to the government. This might explain Amazon, for instance. I read they are pushing hard for workers to be in office although as a business they should not be otherwise impacted negatively if everyone else was WFH.
Some companies might also fear the impact of this knock on effect you're describing. Either directly, like travel agencies who specialize in business travel or indirectly because of the general turbulence in the economy.
I think you are right. I had originally underestimated this because I couldn't imagine a company looking at the cost of their big office in a premium location in London and going "nah, I can't close it, it's for the greater good!".
But the knock on effect could be a more existential threat for a company.