The ongoing battle between employees and their hard-ass line managers around increasingly authoritarian work-from-home dictates is a reminder that mankind’s march towards a tech-enabled world is not without its challenges. The snippets this writer has been privy to of late remind him of a 1980s Tears for Fears song, titled Mad World; for the ‘mad world’ phrasing rather than the dreams about dying parts.
Return to work often ill-considered
Why mad? Well, imagine the scenario where your chief executive distributes a communication saying that all prior work-from-home agreements entered into with employees are being rescinded, and that you must join your colleagues at the company’s offices from 1 January 2024 or find alternative employment. It seems regardless of whether an employee meets all of his or her key performance indicators in a work-from-home role, and regardless the nature of work being performed, the powers are upping the ante in getting employees back into the office.
If one accepts the 2020-21 COVID-19 pandemic as a catalyst for accelerated technology adoption worldwide, then one must equally concede that work-from-home was among its most tangible impacts. Vast swathes of the 21st Century workforce continued working productively from home, keeping the global economy kept ticking over, and preventing what could have been a world-ending implosion. And the outcomes were so impressive that most believed the work-from-home paradigm would become lasting too. Circa 2024, few could even imagine pandemic without connectivity, internet and video conferencing!
Remote access to critical systems and client and staff meetings on platforms like MS Teams and Zoom mean that companies in just about every industry can continue trading unchecked, even if 90% or more of their employees never set foot in the office. Of course, some industries do better than others: information technology and financial services firms took national lockdowns in their stride while firms in the airlines and hotels, restaurant and leisure sectors were practically wiped out. Focusing on South Africa, many small firms in niche industries found that work-from-home offered significant efficiencies.
More meetings, less travel
Consider a small financial or risk advice practice that employs a handful of advice professionals alongside a core administrative staff. Such businesses soon learned that they could service clients more efficiently, and at a reduced cost, by simply scheduling and conducting annual reviews and onboarding meetings online. The days of hopping into a car and driving for 45-minutes to spend 60-minutes with a client were over. Instead of servicing two or three clients per day, those who adopted the new technologies were able to ‘visit’ six or seven or more clients without leaving their desks. They did so with less risk, zero wasted time and no fuel or vehicle maintenance costs.
Larger corporations have a different take, and it seems the more complex the management structure is, the greater the perceived benefit of having all the ‘rowers’ on the proverbial boat. Pro return-to-work arguments are largely anecdotal with executives citing the value of face-to-face work interactions in boosting employee engagement and retention. There are strong arguments that attendance is necessary to establish and maintain the corporate; though bosses are clearly keen on visual confirmation of ‘bums on seats’. These same bosses believe that productivity and profitability suffer when workforces are spread between home and office, despite having little proof.
But there is a more sinister side to the return-to-work debate. The problem is that as more employees abandon their offices for a laptop at their favourite holiday location, office occupancies are plummeting. And the absence of workers is contributing to the rapid decay of surrounding metropolitan areas. Without the thousands of workers commuting into a city each day, businesses that rely on the foot traffic are forced to close up shop, and transport infrastructure lies idle. The extreme societal risks of continued work-from-home thus include accelerated urban decay, job losses and declines in municipal tax collections.
Commercial property valuations plummet
The economic and financial challenges are clear too. Many firms are still locked into multi-year leases on their office space and would prefer, all else being equal, that these expense are validated by full attendance. Of greater concern is that firms who have bought into hybrid home-and-office work arrangements are downsizing their space whenever contracts come up for renewal.
A 60 Minutes’ documentary titled ‘Hybrid work leaves offices empty and building owners reeling’ illustrates the extent of the problem, noting that more than 95 million square feet of New York office space was empty in Q4 2023, the equivalent of 30 Empire State Buildings. Commenting for the documentary, Scott Rechler, CEO of RXR said “the post-pandemic world of higher interest rates and the changing nature of how people work and live [means that] we are not going back to how we were; it is a different world, and it is going to be turbulent”.
His response to the combination of lower demand for office space and higher interest rates was to ‘give up’ on one of his prime New York properties by defaulting to his bank on a USD240 million loan. This practice will likely elevate over the coming months, conceded Stijn van Nieuwerburgh, Professor of Real Estate at Columbia Business School, also sharing insights with the 60 Minutes team.
The professor offered the up the phrases ‘urban doom loop’ and ‘trainwreck in slow motion’ to describe what was happening as large firms reassessed their leases, and commercial landlords contemplated refinancing their property loans in light of plummeting building valuations. Experts say that New York building values have fallen as much as 40% over the last three years. As one example, a nine-story 1920s building with eight empty floors changed hands for less than USD40 million in September 2023; the new owner’s pre-pandemic offer of USD80 million was simply ignored. Their simple utilisation plan: “anything but offices”.
A major societal problem
“Work-from-home is one of the biggest societal problems we are facing right now; it is bad for business, bad for cities, and it is bad for people,” said Mark Holliday, CEO of US-based SL Green Reality. His concern, voiced during the documentary, was backed by the growing list of distressed property-backed loans in New York and other US cities.
The risk is that building owners will respond to higher debt refinancing costs by abandoning their buildings rather than injecting additional capital, leaving banks to carry these wasting assets on their balance sheets. This is something that asset managers are keeping a close eye one, with Merrill Lynch singling out ‘leverage and debt refinancing in the commercial property market’ as a key risk to their overall ‘constructive’ view on bonds and equities in 2024.
According to the 60 Minutes presenter, adapting to the work-from-home paradigm requires “a sweeping new deal combining public and private money and [new] ideas for what to do with old office space”. The documentary concluded that people would have to cut the bonds with work-where-we-live, and hinted that society was at the beginning of realising the full potential of this idea. But he may have spoken too soon because entering 2024 more and more companies are adamant that employees need to return to the office.
Show up, or shove off!
So, dear reader, as insane as the request seems, you may wish to rethink your kneejerk reaction the next time your boss issues you with a ‘return to work’ order. Your choices, it seems, will be simple. Either suck up the additional costs and inconvenience involving in dragging yourself to work each day, or find another job. Show up, or shove off! As for the writer’s parting thought: There are still some firms that offer a three-day-work-week alternative; but do not be surprised if this offer dematerialises soon.
Follow the writer on
LinkedIn: https://www.linkedin.com/in/gareth-stokes-media/
Twitter: @stokesmedia
Comments
Added by Marcus Marik, 27 Jan 2024Report Abuse