Post Covid, the office was doomed. One of the biggest fears of investors is the volume of commercial real estate loans on the books of banks. With no cash flow, how do they get paid? City governments enjoy taxing the offices of businesses. It’s one of their favorite personal piggy banks. They always assure citizens that the personal property taxes won’t go up much, but boy, they will sock it to the businesses. Sounds great and urban voters eat that stuff up because they think there is a free lunch or two in there for them. Greedy corporations should pay!
What happens when there are no businesses and they don’t pay?
In board meetings of both private and public companies across the world, there are discussions occurring about the office, the role of the office, and the expense of the office.
I don’t have answers, but I have questions. I have some gut feel, which might be right or might be incorrect. It is a tough time to be a CEO. Employees got used to not coming into the office, and are resistant to come back. They like the freedom of being at home and all that comes with it.
If you are a new company, how do you build a corporate culture without an office? I think that companies who established a strong corporate culture pre-Covid, or long-time established companies that already had a corporate culture instilled into their DNA have an easier time post-Covid with getting rid of office space than brand new companies.
How do you recruit and teach new employees without an office?
How do you instill a mission into your workforce without an office?
How do you mentor existing employees without an office in businesses that are mentorship businesses like consulting, accounting, and law?
How do you build your team morale without daily physical interaction? Retreats are nice but they are not the same.
How do you create the “happy randomness innovation” that can occur only in an office? That doesn’t occur on Zoom meetings since those are planned.
I do know that many board members always want to embrace the current thing. They want to look hip. Many of them understand the numbers really well but they don’t understand the soft human resources skill that it takes to build a company. They don’t want the fight with employees for bringing them back to the office and would rather argue about accounting numbers.
They feel confident about accounting. They don’t feel confident about human resources.
I started investing in co-working back in 2012. To be honest, it hasn’t really worked out for me. One company went belly-up. One is surviving. I passed on a bunch of other companies but I am familiar with the space.
Co-working got crushed during Covid too and in fact, because it’s less rigid than a regular office it might be harder to get people into co-working spaces than it is an established company office with norms and general order.
Of course, left unsaid is that many centralized office spaces are in downtowns. Many downtowns are not safe due to the Marxists that are running the cities. Chicago is about to become a very cold San Francisco. Here is a description from John Kass News
The Loop looks ugly (dirty diapers dot Adams and Wabash) rubbish everywhere and knots of angry looking young men dominate the Divvy racks. This is a place to avoid. Chicago is done. We left Symphony Center after the wonderful show, locked the doors and made our way to The Ike and on to Forest Park. The next day I needed to return to Michigan City and deposit my tuxedo from Louie’s Tux.
On Saturday, I heard of and later watched news coverage of the teen takeover of Millennium Park and Michigan Avenue. The young people were savages. Obviously, Chicago Public Schools have created a latter-day Red Guard to pummel the middle class. Riot where the money is. Right out of the Bill Ayers playbook! Give him his props. He did more to mesmerize our teachers than old Horace Mann.
Do you want to commute to that?
Here is a Twitter link to an incident on the NY Subway. In SF, naked people walk onto platforms. Traffic in LA has always sucked and it still does and it’s not better in NYC or Washington DC or Atlanta. In Chicago, people get assaulted on the subway. You could drive and sit in traffic looking forward to paying for parking along with high city parking taxes and potentially getting assaulted in the parking garage. If you live in the city, you could take your life into your hands by riding your bike to work and the odds are good the bike could get stolen while you work. You could take an urban bicycle provided by a company, but see the italicized paragraph above.
By the way, Governor Abbott, keep up your bussing program. Democrats loved bussing in the 1970s and making them feel the pain of their love of a no-borders society is fantastic.
CEOs that operate businesses that lease space in harmless suburban areas are having similar issues to the urban ones though. In addition, criminals from the city aren’t satisfied with terrorizing urban residents and are getting in their cars and heading to the burbs. The pickings are easy there too, although they might find that the wheels of justice turn a bit differently.
There are not a lot of academic peer-reviewed studies but the few that I have seen show that mentorship is down. One-on-one meetings with superiors are down. Casual conversation is way down and the casual relationships and social networks that offices create are shattered.
It makes going to work for a company more of a commodity than a job.
Someone is going to re-create this space. The office will not be a relic of the past. However, it probably won’t happen in places that have city governments that do not value the safety of their citizens.
Interesting that neither Space X nor Tesla are 'work from home' organizations. Musk believes in the value of his engineers talking to one another. My guess at the future is while the big city office is doomed, companies with workplaces of some form will outperform companies that attempt to do mostly work from home. It is also possible I'm biased from a 40+ year engineering career where successes came from teams that worked closely together.
Very good article about Chicago. As a lifelong resident and daily commuter to the loop, I agree heartily. Downtown Chicago is where I worked and socialized my whole life. I’m in sho k when I go there now. A vibrant economic center is now deserted. The lunchtime crowds, the after work, and the evening crowds are gone. The commodity exchanges have gone electronic , so all the support businesses have also left. To stay in the loop after dark, is risky. Public transportation is dangerous, as are the crazy drivers on all the expressways. The mayor blames big corporations. He wants to tax the exchanges on each transaction. The exchanges will leave and so will big corporations. Walmart is just the beginning of an exodus. I live my city, but the facts are the facts