Fresh Setback for Big Cities
The low level of employees back at their workplaces is intensifying pain for cities geared toward office life reports the Wall Street Journal, noting a New Setback for Big Cities.
The recent surge in Covid-19 cases across the country has led to an uptick in Americans resuming work at home after some momentum had been building for returning to the workplace, property analysts said. Floor after floor of empty office space is a source of great frustration for landlords and companies, which have invested millions of dollars in adapting building plans and developing new health protocols to make employees comfortable with a shared location.
The low level of employees at their desks is intensifying the pain for cities geared toward office life. Cities’ populations are falling as people working from home move to the suburbs or other less dense locations where they can find more living space for less money.
Apartment rents in downtown San Francisco have fallen 20% since their peak in March, according to CoStar Group Inc., as residents leave. Metro public-transportation systems in cities such as New York, San Francisco, Boston and Washington, D.C., have lost billions of dollars in revenue from months of employees favoring remote work.
About three-quarters of the 25 employees at OhmniLabs Inc., a San Jose, Calif., robotics company, returned to work this fall. But as infection rates increased, OhmniLabs reversed its policy for all but those directly involved in manufacturing the robots.
“Going forward we’re going to continue to encourage people to work remotely,” said Thuc Vu, chief executive. “Let’s just accept it as the new normal.”
Personal Anecdotes
I used to work downtown Chicago at Harris Bank, now the the Bank of Montreal.
The “fast” train from Crystal Lake to Chicago was 1:20 each way. Tack on 20 minutes each way to and from the train station.
That is three hours and 20 minutes lost every day commuting. Does that make much sense?
The cost of living downtown was prohibitive. And parking was a disaster.
Twenty years ago you could easily rack up $30 a day parking if you drove in.
It’s now up to $50 for downtown, but “only” $34 if you are willing to walk a mile or so.
If you work at a restaurant you cannot commute. Then again, restaurant traffic is down 75% or more and so are the jobs.
What About a Vaccine?
A vaccine will help stop the spread of Covid, but the office cat is out of the bag.
I have not seen any reports of lost productivity from working remotely.
Sure, some will take advantage. But others are happy to work 9 hours instead of 8 and still come out way ahead after factoring in commute time and costs, lunches, etc.
Ultimately, if you get the job done as expected, what difference does it make what hours you work or where you work them?
And that is what businesses are deciding, with obvious implications.
Mish
November 2020 totals for City of Chicago:
58 shot and killed, another 289 shot and wounded.
Yes, all those WFH white suburban women, walking their dogs in their neighborhoods with their virtue-signaling political message signs on their manicured lawns just can’t wait to play office again in the city.
Panic! Doooooooom! The brown people are coming to kill us aaaaaaaalllLL! RUNFOR YOURLIVES!
I work in centre management for a large property trust. Based at a large retail and office complex. This is in a CBD in Australia where the virus cases have been reduced to near zero. There’s a 50 story office complex. Lifts are restricted to four people at a time and will be for the foreseeable future. Trying to get thousands of people up and down with only four people allowed in the lifts is near hopeless.
A couple of the tenants are call centre operations with multiple floors. Their staff are now WFH and most wont be back.
Other tenants who in the previous years have rolled out open space office and hot desking and madly retrofitting their spaces back to high walled partitioned desks.
The cafes and retail stores relying on the patronage of the office tower staff are dying.
The food courts surrounding the train station downstairs – many of the concessions have closed doors including the big name franchisers.
On a better note. Black Friday was huge. Long queues outside the tech stores.
I was downtown today looking at a coupl of projects.
Floors of empty cubes with all of the phones on foward.
Making progress on two jobs adding elevators to existing buildings (8 shafts total)
Floors with 1/4 staff, all looking nervously at stangers in their midst.
Empty and closed small eateries in the corridors. Lunch time and onluy one place open and a handfull of customers totally.
I felt worse for the peopwho used to work in those eateries–they are out of work because there is no work-from-home for them.
Yeah that whole class of support people is going to be destroyed, and there’s nothing much out there to replace their income stream. This is going to get really ugly.
Up this morning at 4:30 for some quiet time and light breakfast. I then spent an hour or so on research before the market opened. Later, I had a chat with my wife and had anther cup of coffee. Later today I will take the dog for a romp and then go to the gym for an hour. Lunch was a bowl of good soup. I’m on Mountain time here in Montana, so my day starts early, which I like. Done by 2 pm.
All of this is nothing new. I have been working from home for 25 years since I left the “big city”. No employees, no bosses, no office politics, no overhead, no commute, much lower expenses, no traffic and knuckleheads to deal with on the street.
BTW, I had Covid in early October. All the bad symptoms and it took around 12 days to finally get over it. Still having some fatigue issues mainly from the whole last 9 months of inactivity and then the virus. That’s why I’m back in the gym and slowly coming around. I strongly recommend that you do all you can to avoid the virus until a vaccine has been distributed. If you are thinking about not geting vaccinated, please reconsider.
The Tech giants already tried this and went back to luxurious campuses in an attempt to get everybody in the same locality interacting with each other. Long term, people will have a harder and harder time understanding each other, knowing which way the wind is blowing, creative sparring, out of band joking about wild ideas. The trend may be to allow more work from home, but the interaction on zoom is too flat, matter of fact, poverty stricken, stripped of humor, fun, creativity, drama, etc. Just as ideas always strike when you sleep or go for a walk, a lot of stuff happens at the office when people lift their nose from their grindstones, walk by a colleague’s desk for a chat, go for a coffee, a walk, lunch, whatever.
We do all of these things over video conference. The only thing missing is communicable disease and farts.
I own franchises, our Corp entity is in SF. In 2018 HQ downsized from an entire skyscraper to a single floor of a building. The Corp owner is from China and rarely comes to the US, but likes having the HQ in SF, so I doubt we’ll relocate. But 90% of the HQ employees are furloughed and the other 10% are WFH, so the SF offices sit empty. It will be years before(if) we recover.
I live in the Portland, OR suburbs and watched this summer as companies moved out of downtown Portland to the corporate parks in the suburbs near me. It was a perceived employee safety issue, but had much less to do with COVID than the nightly riots (and that Portland is not friendly to businesses).
COVID is giving companies an excuse to abandon metro areas. In reality it’s about the bottom line (as always).
I find the events in Portland over the course of the year very troubling. I’ve been following Brett Weinstein’s podcasts sporadically, and it gives the lie to the liberal narrative that all the George Floyd inspired violence and property crime is being done by white supremacists and the right-wing extremists.
Well, probably (my estimate) 5% of the “George-Floyd-inspired” violence and 1% of the property crime is by right-wing extremists, so fact checkers will rate that “partially true.”
As much as I like to believe productivity is better in the short term I think there is a downside to working from home. I think companies that do go back to offices where employee commutes are short will find better long term productivity. This makes commercial real estate in the suburbs a better bet. Go to where your employees live and make their lived easier. They do want to interact with other humans after covid. It is the same reason more business is transacted in person on a gold course then anywhere else.
Speak for yourself. Other humans are disease carrying, noisy, interrupting pains in the ass. The only way I could hear myself think in the office was noise cancelling headphones playing heavy metal all day. It was miserable, and I’m at least 3x more productive now.
Slack and video chat give me all the interaction I need to get my job done. If I want to interact with people, I’ve got neighbors all around me that I’ve never met.
My company announced it is planning to reduce office space by 20%. With a global company setting such a goal, I don’t see how commercial real estate doesn’t crash.
It never recovered from the great financial crisis. The Fed holds CRMBS on its balance sheet. The investors in this dont lose anything . At worst they make the TIPS rate.
I’m a fan of Hunter Thompson….and a year or so ago I decided to go on Zillow and check rent prices for the “painted lady” house he lived in in at 318 Parnassus Street, in San Francisco, back in the day. It was in Haight-Ashbury, and at the time the Grateful Dead lived across the street, apparently.
In the mid-1960’s Hunter is said to have paid $300/month….not sure if that was for one apartment or the entire house, probably the latter….that’s where he was living when he wrote The Hells Angels book…..which made him famous.
As of 2018 or so…the house was split into 3 one floor apartments….with rents of $3600…each, as I recall. A (likely) rent increase of 3600% over the last generation
They are condo units……the current values of the 3 condos are roughly 1.6 million each today…which reflects a drop of slightly over 3% in the last year.
Still some pretty pricey real estate, even now….for a one time hippie crash pad.
I’m not sure what will become of all the office towers….I expect that somebody will want to rent anything available in the financial district at some price…..but I’m not sure what price landlords need to break even. I see bailouts on the horizon.
Those old buildings smell FUNKY too. You can’t get rid of it.
We used to occasionally book a hotel that was in a painted lady over near the Union Street shopping district…..cute outside but not so great inside….can’t even remember the name of that place…..been a few years.
We used to run in the SF Marathon and the Bay-to-Breakers….once my whole family, all six of us, ran the Bay-to-Breakers together ….a cherished memory now.
i’d recommend two books mish. “cubed” and “bullshit jobs, a theory”. both have great and very deep analysis of history and present state of office jobs. not many folks realize the uffizi was the world’s first office building.
So glad I didn’t have to work in the loop when I lived in Chicagoland. I recall the costs to do so for my ex girlfriend along with the massive amounts of time consumed for her to drive to work and back home to Woodridge. I always stressed when I had to work the Chicago dental meeting in February at McCormick as I was in practice management software sales. That week was very expensive, combined with the fact if you dare plug in your lap top without a union electrician paid to do it, you could be removed from the trade show floor.
The cost to do business in the city of Chicago is insane. Luckily my office was in Elk Grove and eventually out of my home.
Mish, you had a heck of commute. Beats any of mine.
I worked w/ a guy in Dallas who had a DAILY 2:40 commute EACH way. Near 5 & 1/2 hours out the window every day. Anyone know (for sure) or anyone w/ a longer daily commute?
As you say for many that will be cut. Airline travel too (as in today’s WSJ too). Perhaps a 32% PERMANENT decline.
All these people chasing dead cat bouncers in refining and oil are delusional about demand saving so many/much of them.
These aren’t commutes but for a while I worked in Manhattan NY and another time Minneapolis.
Would alternate weekends. Every other week I would fly from Manhattan to Chicago and on alternate weekends my wife would fly from Chicago to NY.
Minneapolis to Chicago was drivable on an alternating weekend basis.
So glad to see you’ve reduced your carbon footprint. 🙂
That is pretty hard to top. My wife’s brother (a database expert) commuted from here in Austin to Minneapolis for a few years…had an apartment there and flew home on weekends. I think your commutes even beat that one.
My life is so boring. I’ve made the same 56 mile round-trip 4-5 days a week for 33 years. It just takes longer now, at least in the afternoon. Mornings I still beat the traffic.
One of the small blessings of COVID is that it temporarily eliminated Austin’s drive time gridlock……not too different than my experiences in Chicago five-o’clock traffic. Now we’re getting back to normal…which sucks.
Hilarious.
Good article, hard to imagine how commerical real estate owners will survive in many places