According to a WSJ report, the zeal for a new definition of the traditional office is driven in part by the shrinking economy, as companies look for new ways to cut costs during a downturn that is expected to be the worst since the Great Depression. Many executives also point to the success of an unprecedented work-from-home experiment, and how little productivity appears to have been impacted after millions of employees in technology, media, finance and other industries have been forced to work remotely for months.
“I mean, if you’d said three months ago that 90% of our employees will be working from home and the firm would be functioning fine, I’d say that is a test I’m not prepared to take because the downside of being wrong on that is massive,” said Morgan Stanley Chief Executive James Gorman in mid-April on the bank’s earnings call.
The biggest loser in the rise of a reimagined office could be the commercial real-estate market and the big institutional investors that have invested heavily in it. Pension funds, insurance companies and other institutions have spent billions of dollars to buy big city office towers in cities. They are depending on continued tenant demand that now looks poised to slow.
This doesn’t mean urban offices are disappearing anytime soon. Leases are hard to tear up, and few companies want to ditch the office altogether. There were also other periods where the end of the center-city office building was wrongly predicted, beginning in the latter half of the 20th century as some companies decamped to suburban office parks and following the shock of 9/11. Each time the centralized office building proved to be surprisingly resilient.
Many who are attached to the real-estate industry still say there is no substitute to having all employees under one roof. “One of the most important aspects of American business over the last couple of decades has been the establishment of firmwide cultures—the idea that having the right firmwide culture can make your company successful,” said Will Silverman, a managing director at real-estate investment banking firm Eastdil Secured LLC. “I just don’t know how you establish a culture among people who are only together a few days a week.”
What do you think?
SG Reits with commercial tenants reaching the end of the road?
“I mean, if you’d said three months ago that 90% of our employees will be working from home and the firm would be functioning fine, I’d say that is a test I’m not prepared to take because the downside of being wrong on that is massive,” said Morgan Stanley Chief Executive James Gorman in mid-April on the bank’s earnings call.
The biggest loser in the rise of a reimagined office could be the commercial real-estate market and the big institutional investors that have invested heavily in it. Pension funds, insurance companies and other institutions have spent billions of dollars to buy big city office towers in cities. They are depending on continued tenant demand that now looks poised to slow.
This doesn’t mean urban offices are disappearing anytime soon. Leases are hard to tear up, and few companies want to ditch the office altogether. There were also other periods where the end of the center-city office building was wrongly predicted, beginning in the latter half of the 20th century as some companies decamped to suburban office parks and following the shock of 9/11. Each time the centralized office building proved to be surprisingly resilient.
Many who are attached to the real-estate industry still say there is no substitute to having all employees under one roof. “One of the most important aspects of American business over the last couple of decades has been the establishment of firmwide cultures—the idea that having the right firmwide culture can make your company successful,” said Will Silverman, a managing director at real-estate investment banking firm Eastdil Secured LLC. “I just don’t know how you establish a culture among people who are only together a few days a week.”
What do you think?
SG Reits with commercial tenants reaching the end of the road?
