Comment by tehnub
Comment by tehnub 4 days ago
Would you mind explaining what these commercial real estate interests are? How does a company or the government benefit from having "butts in seats", all else e.g. productivity, equal?
Comment by tehnub 4 days ago
Would you mind explaining what these commercial real estate interests are? How does a company or the government benefit from having "butts in seats", all else e.g. productivity, equal?
I work in Finance and we recently decided to sell our building and just rent office space catered toward meeting rooms since hybrid has worked so well for us. I think it just depends on the company's culture and the pragmatism of its leadership.
Even if it's set up with the "right" incentives, internal cost allocation can cause bad unintended side effects at the firm level. I worked at at large bank during the financial crisis. Individual teams got charged an implied rent for the space they occupied to their P&L - sensible because it means you can get a better idea of how profitable they really are. However, they went further and the rent was also higher for "nicer" parts of the building (which the firm owned and did not sublet to anyone). So when lots of space became available as large numbers of people were let go, teams moved themselves to empty space which was "less desirable" so had a lower internal rent. The space they left was left unoccupied, so this didn't save the firm any money. Worse, an external contractor was used to move the stuff between desks so it actually cost the firm money while "saving" the team money.
> it actually cost the firm money while "saving" the team money.
Only in the short term. It left the desirable parts of the building empty. It might be possible to rent out this space. That's what happened when the company I worked for downsized the factory; they just partitioned the building and rented out the empty space.
> Where I work, RTO is partially Finance driven, bean counters just don't like seeing seats they paid for go empty
Same here. Leaders up the chain get a "use it or leave it" mail for office space and suddenly everyone is asked to keep those seats warm by coming in x days a week.
If you buy 2 machines but only use them at 50% capacity, the only you might as well just buy one machine.
Problem is office space doesn't work like that when the entire team is in on 'office' days to collaborate, you need the all seats. If you right size down to 60% seats (3 days office, 2 home) and have people rotate, you lose the 3 in-office collaborative days because everyday it's likely 30% of people are dialling in from home. You save 40% rent but it's closer to full remote in terms of collaboration.
I guess those bean counters forgot all about the sunk cost fallacy.
Because the real estates as well as all of the other business services that manage, maintain and cater to the office spaces and the commuters are owned by the same mega corporations that own a large stake in your business.
You buy land, buildings, out have a contract for these types of things. When there nobody at these locations it makes it appear that these were bad decisions rather than the fact that there was a black swan event that caused a paradigm shift. Some walnut will try to say that the writing was on the walls about covid or about the benefits of remote work but that's mostly contingent on post hoc analysis rather than is situ. And as they say: hindsight is 20/20...
Tldr: fear of looking bad because metrics are more important than actual results
Some responses approached the reason, but they are essentially the behemoth financial interests of the various pension funds of essentially all the state governments and corporations, high net worth family funds, institutional money like university endowments and REITs/IRA/401ks, even many foreign sovereign and pension funds like the Scandinavians, Dutch, Germans, etc.
As you may be surmising, this not only carries rather major domestic risks if pension and other domestic funds start crumbling, but it also has massive implications for foreign countries’ domestic financiers and social stability, but it also has geopolitical implications from it.
During the post housing fraud period, a rather understated change was implemented to encourage accounting to not mark real estate to market value, i.e., record what the market is willing to pay, but rather keep real estate on the books for whatever value one would like to keep it at by various methods and practices.
What that essentially affected was a cooking of the books to prevent on book from showing losses. It is essentially still going on, but especially in commercial real estate since the COVID happenings.
You now still have massive buildings essentially still totally empty, all still valued at full occupation valuation even though they are, e.g., only taking in barely enough to cover operating costs in a freeze state, i.e., minimal services.
This is where things like property taxes come in, as the properties are still assessed at fabricated values, and property taxes are used to fund the local governments, everyone with financial interests in commercial real estate (many, because it was considered very safe) are now crying for mom. It gets a bit off topic here, but I think you get the gist.
To keep property prices high across the board. If one part breaks, the whole front collapses. Meaning that the banks who own the government and own the population will loose their grip on power.
One is near retail and footfall, coffeeshops, restaurants etc. But it's the government that cares about that and I don't think there are many place where gov has meaningfully intervened in private company policy
I don't see how real estate companies can influence companies/tenants, they don't hold much power here since everyone is shrinking or cancelling their leases
Where I work, RTO is partially Finance driven, bean counters just don't like seeing seats they paid for go empty