WFH's impact on the office sector- A data point
Got some intel that one of two GSA's will have large portion of their workforce come to the office only 2 days a week. It is my understanding it will be the same 2 days for everybody and this is being seen as a permanent offering and not a trial run. And this applies to CRE lending folks as well.
This got me thinking. The GSA's are not tech companies where WFH is being embraced. GSA's and similar organizations are the embodiment of corporate inertia. If they are embracing WFH and only requiring people to come to the office 2 days (which imo is the bare minimum for the "hybrid" work model), it is pretty radical. Office as an asset class is not going anywhere but a reduction (not total elimination) in need for office space is going to have an impact across the board. If anyone dialed into the Hines lender update call yesterday, it was interesting that Omar Thowfeek mentioned that there was a point not long ago that retail was the hot asset class like how industrial is now and those two asset classes have completely flipped today. Wonder how the office sector will evolve. Personally I think you just dont come to the office for 8-12 hours a day and crank a spreadsheet . You can do that just fine at home. However, you also just dont be a remote only company depending on your field. You still come to the office a day or two every week but it has to be productive- R&D, strategy, etc. A fine balance there will be helpful I think.
When was retail a hot asset class? Like 2000?
genuinely curious. I haven’t been in the biz that long
Retail was super hot before the 2008 GFC, Amazon didn't even look like a threat until early '10s.
Power center era
Lifestyle center era
One of two GSA's, wth does that mean!?
Freddie Mac and Fannie Mae
Think they meant GSE? Not sure what else he could mean.
If everyone is coming to the office the same days, you need the same amount of office space.
The biggest impact on that type of work from home is going to be on your retail space in an office building.
For wfh to impact office demand, companies either have to have employees entirely work from home, or structure it so so people are assigned wfh days, so they can control peak number of people in the office, and use hot dealing.
You may require the same amount of office space but part of the sector evolving is trying to figure out what space will that be? The GSE’s for example since OP mentioned it here have some prime real estate. Rent can’t be cheap. Do they still need to pay that expensive rent or could a class C office be sufficient especially since the work they do is not consumer facing. Could part of the benefit package for employees going forward be memberships to coworking space similar to gym memberships? These are the type of questions that will be answered in the next few years.
But from a landlord's perspective that also means running the building extremely cheap. Security for GSA's are almost always required, janitors/day porters, HVAC being run in office environments could almost be cut in half. So if rent is even 80% of what it is now it's still a positive as long as the building is still being leased up to the tenant.
Class C office is not going to cut it with health considerations for good HVAC systems, etc. Class A should be reasonably safe, B and C not so much, especially as B and C tenants who decide to maintain offices use the situation to move up to A.
I work at an F200 fintech co. We are all returning to the office, but they are making it so we only come in 3 days a week. Since different teams can go in whenever they want, and its not like employees only come in M-W, how do these companies save any money doing this?
talent retention. If you force your employees to come in 5x a week while the shop down the street makes you come in 3x a week, you better believe retention will be harder.
Was the whole point of this post to show off that you know what GSA stands for?
why don’t you enlighten us since we’re pretty sure it’s not what shows up on google (“gay straight alliance”)
And if they only use it 2 days why does that matter! Unless they are willing to share the space on off days, they are consuming the same amount of sq dt
if it was 2 days but staggered, they might use less sq ft and that might matter
Also heard the same. Pretty awesome if that is the case. It will be a nice balance of being in the office a day or two every week to get that facetime and exposure but also have the flexibility to work from home and not commute 5 days a week.
I mean this could change next month. So many companies have been changing their strategy/stance on work from home flexibility. What might seem to make sense today can be drastically different 6 months from now.
Very well could change, we saw this play out last summer where I think some tech companies jumped the gun a little but and advertised work from home "forever" policies if employees want to or they can work out of an office, then some few months later backtracked and wanted some to come to the office atleast few days a week. But that being said, we saw a revolt of sorts when tech companies seemed to completely abandon WFH which led to the companies once again going back to the hybrid option. So, its still early stages and we will see how things play out but I believe once you let the cat out of the bag and have people get used to the hybrid concept and embrace WFH (provided there is a decent work life balance), there is no going back. Sure 2 days in the office could change to 3 but 5 days in the office is ruled out now I think for those companies unless they want a revolt.
My point is that the cat is not out of the bag. As you stated: companies are starting to call employees back to the office. I'm sure there will be some companies that offer hybrid/remote work, always has been. I remember the same discussions about having nap pods and ping pong tables ("we will lose employees without this stuff!"). I don't anticipate a huge demand shift in office space in the mid/long term. Once the big dogs (like JP Morgan) start calling employees back, others will follow suite.
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