Work From Home
Leads To Less Productivity. Moral, Buy Commercial Real Estate
I have watched the whole work-from-home (WFH) debate develop over time. Companies, and individual consultants, were forced by world governments to find a way to work from home as governments panicked unnecessarily over Covid.
Every day now we see some bank call a loan on commercial real estate or some building get sold for a fraction of what it was previously worth. Unlike many, I think the crash in CRE is so telegraphed that while it might be a bump in the road, it’s not going to cause a market crash or worldwide depression. I think there are a lot of diamonds that can be had cheaply if you are smart about buying. One way to make a lot of money is to find a good CRE broker, put some syndicates together, and have a thesis about what kind of buildings to buy.
Everyone is bearish on CRE. I am not. Here is why.
I invested in the “future of work” back in 2012. I had two startup investments. One was based in California and competed head-to-head with outfits like We Work. It was called Nextspace and one reason I invested in it was California always seems to be ahead of trends. Nextspace went bankrupt before We Work did and it didn’t have the star power trajectory either. I lost 100% of my investment. The company is operating but after a total reconstitution of the balance sheet and equity structure.
I invested in Deskpass as well. Deskpass is still in business. It’s gone through several iterations as the company has struggled to find product market fit after 11 years. You’d think a worldwide government effort to shut businesses down and replace them with government would have provided a tailwind to Deskpass. Deskpass was hurt by the shutdown since it services co-working spaces that were shuttered during Covid.
I have read and heard the shouts about how “productive” you can be at home since you don’t have the commute times. I heard those same refrains during pitches. When CEOs like Jamie Dimon said to get back in the office he was met with scorn. Mr. Dimon is right.
A former friend of mine did an economic study on the effects of work from home and productivity. Here is a link to the working paper. In it, they found people got their work done but were far less productive. It took a lot more more time. I have read the study through several times.
My personal experience with WFH has also helped me form an opinion on it.
At this stage in my life, I am semi-retired. I have some ongoing investments that I do some work for, and I manage my investments. For the last several months, we have had our daughter, son-in-law, grandson, and their dog living with us as they transitioned out of the People’s Republic of California.
You might have noticed that since the end of September, my blogging has been less frequent. I haven’t submitted an article to the Epoch Times in a while either.
With all that goes on under our roof, I find it extremely hard to get anything meaningful done. It is hard to concentrate, even read a couple of articles when things are humming. It’s hard to even blog.
It is no wonder an entire generation is penalized by not being able to attend school thanks to Covid policy and the Teacher’s Union which deliberately and actively shut kids out. I also think that the generation that was in the lower echelons of management will see their career path delayed by Covid policy. One interesting economic fact is that the generation that survived the 1930s Depression had permanent and stubbornly lower incomes for the rest of their lives compared to the prior or next generation. It’s not hard to draw a parallel to the Covid generation.
I am very grateful for the extended quality time with my one-year-old grandson and for getting to know my son-in-law better. Their time with us is ending soon as they have found a place to land. My home will be significantly quieter.
I do not know how parents did it during Covid. I am surprised anything got done at all. My son-in-law’s entire company workforce is WFH. The company is profitable and growing. They seem to have figured it out. He is in finance and strategy. One hack that works is putting on sound-deadening headphones. Without them, you’d be distracted for sure. This is especially true in our house which is an open floorplan with a lot of hard surfaces. It’s great for two, but not as conducive for 5. Especially when one is pretty busy at all times he is awake. : )
Based on the peer-reviewed academic evidence I linked to above, and my personal experiences, I think WFH has a shelf life. It’s singular (and rare) companies that will be able to embed WFH as the primary way of “working” in their culture. The coming crash of commercial real estate might happen but I think I’d be a buyer.
If I look at micromarkets, cities like San Francisco and Chicago are seeing CRE prices tumble but I think it has more to do with the fact that their city governments are so corrupt and put in place terrible policies than it does with the WFH movement. Who wants to put up with a commute when you have to deal with what’s going on in those cities?
There are some isolated occupations where some WFH makes sense. But, they are few and far between. Many occupations that don’t seem like they require a mentorship component do. It’s just that because of interpersonal body language cues we might not notice them.
I do think that commutes wear on people and I am empathetic to that argument. I moved from Geneva, IL to downtown Chicago because my commute time went from 45 minutes to double that each way. Co-working might have something to say about that. However, it’s really hard to scale and there are no “network effects”. It’s just renting space and anyone can do it. There might be a good franchising opportunity here if someone wants to spend the money to put it together. It’s not a multi-billion-dollar opportunity though.
That would lead one to form a thesis that suburban office buildings and suburban shopping malls might be good investments. Converting shopping malls to a combination of work sites and private schools might be a tremendous idea. The school choice movement that is sweeping the country might give you some tailwind. Even the worst performing shopping malls have great access to expressways, are easily secured, have restaurants built in, and have plenty of indoor space to roam around in when the weather outside is inclement.
Suburban commuter trains now have some connectivity, and you can always use your phone so it is possible to get some minor tasks done if you have safe transportation. Buses and subways are impossible to do more than listen to a podcast and make sure no one physically assaults you. Airplanes have woefully bad internet and I have given up on them. When I fly, I read an old-fashioned book or listen to previously downloaded podcasts.
An office gives you separation both physically and psychologically from your home life. I don’t think that’s a bad thing. Mentally, it is easier to check out when you leave the office. When you are home, you can concentrate on home. We spend so much time talking about mental health and work-life balance these days that I wonder when some genius will wake up and discover that going to the office benefits your mental health and work/life balance.
There is only one way that I see to get stuff done in a reasonable amount of time if you work from home. You need noise-cancelling headphones. You need a room of your own where you cannot be seen, heard, or interrupted. Even doing this blog post, the dogs were barking outside, and when I let them inside they were whimpering like crazy to get out of my bedroom where I was typing.
Our company is on a hybrid schedule, where folks work from home M/F and come into the office T/W/Th. I choose to come into the office every day. But I find I'm not as productive when no one else is in the office. It's too quiet. But at home, I'd be in the fridge every 10 minutes, or looking out the window at the goats and pondering what to have for dinner.
Also, WeWork was destined to fail, for the same reason the S&Ls failed. They had a severe lease duration mismatch (S&Ls, on the other hand, lent long and borrowed short.) WeWork was leasing space for 20yrs at a time and effectively subleasing it for as little as 6 mos. They signed most of their leases during the market's heyday, when lease rates were astronomical. They're not anymore. Not sure how you overcome that mismatch.
I'm with David Foster (and w/ KP, partially): very happy with my WFH.
For almost 3yrs starting in 2020 it was 100% remote, now we're required to come to the office min one day, and that is the worse day in my week. Since projects are all over the region and team meetings go on schedule, a lot of coworkers tune in - they cut off outside noise w/ headphones, but we are hearing their loud comments during the digital meetings. We no longer have an assigned desk but required to book any available one a day in advance, so I have no reference material around me, just a sanitized empty surfaces. It makes no sense to commute (in terrible NY crime atmosphere) to downtown - just to link to digital meetings on my laptop, the same way I do from my home office, to same project teams. That's for meetings and so called cooperation - now, for concentrated work, which is solitary by definition, office - even half-empty office - is a huge distraction. Beside, people come to chat - they are happy to see you in person, and you can't refuse out of politeness. Lunch is definitely unpleasant, what w/ the quality of bought food, and expensive like hell.
I can self-organize at home much better, as I can shift things w/o anyone's permission or control, and achieve much better productivity. It is laughable, to hear from micro-managing employers how distraught they are of lost control over our lives, and especially insinuations of getting people to the desk farms so they will "perform" better - as if we are circus animals. I never stopped working! The spring and summer of 2020 was the worst - I worked 60hrs weeks, and had to constantly refuse demands on my time from managers requesting endless reports.
As long as IT is doing their job and I have an uninterrupted access to network, I'd cling to my WFH for as long as possible, thank you very much.