Talk About Your Sophie’s Choice
We are getting controversial today, y’all! We’re covering one of the hottest topics in the news. It’s a subject that everybody has an opinion on, from your grandma to your grandbaby to everyone in between, even if it doesn’t directly impact them.
That’s right, today we’re going to break down whether it’s time to return to the office.
The pandemic sure did let Pandora out of her box in regard to remote work. Suddenly, wearing hard pants became optional and the average commute plummeted from twenty-seven minutes to the time it takes to shut the guest room door. All over the world, employees finally discovered what they’d do with their lives when they were given back those five commuting hours each week. (Spoiler alert: they learned to bake sourdough bread.)
On the one hand, the sudden yen for a bigger living space was a boon for us residential real estate agents… on the other, it didn’t go so hot for our commercial brethren (and no one needs that many carbs).
So, why don’t we work our way through this issue and see what side we all come up on?
THE REALITY OF REAL ESTATE
But All the Cool Kids Are Doing It
More and more companies are demanding their employees return to the office, with dictates coming down from everybody from Disney to Goldman Sachs to, ironically, Zoom.
Earlier this year, Elon Musk went so far as to say that he found remote work to be “morally wrong,” which begs the question on what some of his employees were doing when working from home. (Doesn’t sound like baking bread.) He added that employees expecting to work from home are, “living in La La Land,” which is some bold chatter from a guy who wiped out something like $20 billion in brand value. Ahem.
Anyway, employers are running the gamut of trying to get people to come back to the office, offering everything from perks like free food, entertainment, and charitable donations to the employees’ favorite causes to taking a more draconian approach, with reprimands and terminations.
Is the best approach somewhere in the middle? Is the hybrid situation the way for everyone to win? What do y’all think?
While I’m not yet weighing in with an opinion, I will say this about the workplace: I believe it is not here for your amusement.
ONCE UPON A TIME WITH GLENNDA
I’m of Two Minds Here
This is gonna be less of a story time and more of a philosophical conversation, so I hope y’all will indulge me because I find this fascinating… and potentially terrifying. The problem here is there’s so dang much conflicting information and I swear to you, my head is spinning around because of it.
First, we’ve got the Harvard Business Review saying that remote workers are more productive than their onsite coworkers. Surveys and employee monitoring software show that productivity increased during the shift to working from home during the pandemic. That seems like a good thing, yes?
On top of that, those remote employees say their work/life balance is better and they’re saving just a ton of money by not commuting and paying for all that drycleaning and childcare. They report upticks in physical and mental health, so I’d say that is a powerful argument.
But here’s where the problems come in—perception. The numbers are one thing, but a whole big swath of corporate management doesn’t believe that people are more productive or doing their best work when they’re not in a traditional office, regardless of what the numbers say. This is leading to them having to employ more monitoring software and that’s leading to employees who are losing faith in their employers. Less than half of those surveyed say they trust their employer. Not ideal.
As for the downside of working from home, there are plenty of concerns. On the micro level, workers can feel isolated and distracted because they’re not removed from their home environment, where there’s always something hollering for our attention, be it a toddler or a temperamental dishwasher. Also, it’s real easy to overwork when you’re doing your job from home, because there’s no clear and defined line between work and play anymore. Plus, you lose out on the free exchange of ideas when you’re not with your peers, and we don’t have a clear indication on how this impacts creativity and problem-solving. If you’re not together, you’re not getting that chance to build relationships and trust with your colleagues and that’s such a missed opportunity.
On a macro level, what is far more troubling is what can happen within the CRE sector if there aren’t butts in seats in buildings. Occupancy is at 50% of what it was prior to the pandemic and that is not good for anyone. A commercial real estate crisis could easily lead to banks collapsing when looking at all the outstanding debt, because so much of what’s on their books is commercial lending. Oh, my stars and stripes, there is so much debt out there about to mature it makes my heart palpitate.
We are watching commercial property values decline while maturing debt rises. There is a $1.5 trillion-dollar CMBS debt heading our way between now and 2025, with a whole lot of defaults on the horizon. (As y’all know, this is because the loan maturation on commercial properties is more like a 5 to 10-year term, unlike the typical 30-year term of a home mortgage.) When this happens, banks will pull far back on lending and it’s going to have a ripple effect through our economy. It’s already happening, and it’s going on in our backyards. Here in Atlanta, the Starwood Capital Group just defaulted on a $212 million mortgage when its loan matured in July.
However, the news isn’t all bleak, largely because there are plenty of creative minds in the commercial space. I have faith this is a situation we’ll be able to think our way out of. For example, Blackstone and major property owner Vornado have just announced a partnership to create the first Manhattan film and TV studio on a Hudson Pier. They break ground later this year and intend to have it up and running by 2025.
My hope is that we can come up with other new solutions to take what we’ve got and pair it with what we need by, say, converting these empty commercial buildings into residential units and we can not only avoid disaster, but revitalize downtown areas.
So, I guess when we look at the situation in these terms, and the lasting impact on the world’s economy, it really could be argued that it’s morally wrong not to return to the office.
Also, do I need to apologize to Mr. Musk now?
A BRIEF RESPITE
Do Y’all Need a Minute?
I know the last section was a little bit doom and gloom, so I have just what the doctor ordered—a much needed laugh with a unique, weird, and wild new real estate newsletter from my friends at Estate Media.
And oh, my stars, this name says it all—Zillowtastrophes!
“Chasing the approval of others is an impossible finish line to cross.”Glennda Baker