Remote Work to Wipe Out $800B from Office Values, McKinsey Says • Hacker News Board

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#171

Post by jdjdjdhhd » Sun, Jul 23, 2023, 10:50 PM UTC

bipop5000 wrote: post #48

This is what happens when urban planning goes wrong. In asian cities where most office buildings are zoned along with residential buildings and other types of buildings (shops, service providers etc) the office commercial property would just get converted to another type of commercial and possibly residential property and life moves on. An extreme example of this would be to have residential building type be almost i…

> An extreme example of this would be to have residential building type be almost identical to a commercial type which I have seen plenty of in south Asia.

I have seen this a lot too in the US... Usually a home gets converted to a business

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#172

Post by lamontcg » Sun, Jul 23, 2023, 11:18 PM UTC

stjohnswarts wrote: post #162

londons_explore wrote: post #96

Earlier quoted context omitted.

Plenty of leases have already expired. Yet it seems landlords would prefer to leave a building empty than to lease it for a low rent. Somehow the usual rules of supply and demand don't seem to be applying.

I don't understand why they can't have shorter leases with lower rent. I'm not sure why they can't do that and swallow their pride a bit. They can charge the next renter more when the short term 1-2 year lease is up. Better than making $0

It isn't better than making $0 because now at lower rents the property gets revalued to be lower, and when the rents and underlying property is used as collateral on loans then they adjust higher than they already would in a rising rate environment to cover the risk of default.

It works out better to kick the can down the road for as long as possible, hoping that something will change and to put off the day of reckoning, so they fight it tooth and nail.

The market is only going to adjust downwards when there's a real crisis and fire sales start happening due to forced liquidation that causes everything to get marked down to market. Then there's no point in kicking the can down the road any more.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#173

Post by sbarre » Mon, Jul 24, 2023, 1:04 AM UTC

akudha wrote: post #154

sbarre wrote: post #114

Earlier quoted context omitted.

This is fine for experienced workers who already know the job, but for anyone who is new (say first 2-5 years) or is looking for mentoring and growth/advancement opportunities, then the lack of in-person connections does hurt. > Those who claim they build friendships etc at work, maybe genuinely ask yourselves - how many colleagues from your previous jobs do you really keep in touch? I'll speak for myself and say tha…

I've a team member who is about a year out of college. He calls me 2-3 times a week asking for help on whatever task he is working on. His timezone is 10 hours ahead of mine. Mentoring is doable. Couple of months ago, there were some discussions on restricting remote work (thankfully it didn't go anywhere, at least not yet). He was distraught, as his commute was at least 90 minutes, one way . Obviously nothing beats…

Yep, I agree with you. Bottom line is it's complicated. I don't think there's an easy answer, and neither "work at the office" or "work at home" are catch-all perfect solutions!

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#174

Post by DANmode » Mon, Jul 24, 2023, 4:58 AM UTC

londons_explore wrote: post #96

dsr_ wrote: post #34

Earlier quoted context omitted.

Typical business leases were 5-10 years. If you weren't willing to commit to 5 years in 2018, nobody owning a building in a major CBD wanted to see you. You could get sublets from businesses that wanted to recoup costs while moving to a bigger space, or space at the fringes or outside of the CBD. The leases are just starting to run out.

Plenty of leases have already expired. Yet it seems landlords would prefer to leave a building empty than to lease it for a low rent. Somehow the usual rules of supply and demand don't seem to be applying.

How many jurisdictions allow writing off lost income (up to some monetary limit) from your unoccupied properties due to x,y,z market conditions?

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#175

Post by DrBazza » Mon, Jul 24, 2023, 8:55 AM UTC

thatfrenchguy wrote: post #93

DrBazza wrote: post #57

Earlier quoted context omitted.

My former employer (in London) has just instructed everyone, finally after COVID, to be in the office for 50% of the time. Many of my former colleagues starting looking for other jobs last week. It seems employers have two concerns: cost and presenteeism. The first is easily solved, downsize your office. The second, is an organisational problem. Why commute for 90 minutes each way to sit in a office with headphones o…

> It seems employers have two concerns: cost and presenteeism. There's real value in people talking to their coworkers in person and knowing them. There's an obvious cost as well, but let's not pretend there's no value there.

Does that require 50% of my week to be in an office? My current employer has several 'company days' in a year, and we're in an always on (camera optional) Zoom channel. I know my current set of colleagues far better than my previous group which was actually a smaller company where we were in the office 4 days a week.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#176

Post by londons_explore » Mon, Jul 24, 2023, 8:56 AM UTC

grepfru_it wrote: post #167

stjohnswarts wrote: post #163

Earlier quoted context omitted.

Even san francisco isn't that bad, only about 25% of office space isn't being use. It's not an apocalypse, these real estate people are just trying to declare "woe is me" because profits are down 10%

Your numbers may be outdated, San francisco is lower than my city coming in around 16 or 17% (i do not have the numbers in front of me atm). The hard problem with % numbers is that they are usually made up on the fly, 62% of the time. However, in my case, I got the CRE vacancy numbers from NAI which is more credible than a random person on HN (no offense)

Those figures are the percentage of office space that is unleased.

However, there is a good chunk of office space that is leased by someone yet isn't actually used every day. Usually because the company now does WFH yet can't terminate the lease early.

There seem to be a large number of employees who have a desk in an office, yet barely ever use it too.

I'm classing any seat that doesn't have an ass on it during the day as unoccupied.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#177

Post by dsr_ » Mon, Jul 24, 2023, 11:41 AM UTC

stjohnswarts wrote: post #162

londons_explore wrote: post #96

Earlier quoted context omitted.

Plenty of leases have already expired. Yet it seems landlords would prefer to leave a building empty than to lease it for a low rent. Somehow the usual rules of supply and demand don't seem to be applying.

I don't understand why they can't have shorter leases with lower rent. I'm not sure why they can't do that and swallow their pride a bit. They can charge the next renter more when the short term 1-2 year lease is up. Better than making $0

One of the things that can be done is to maintain the illusion of a high rent by working out lease terms. For example, a 60-month lease at $75/sqft might come with the first 4 months of rent in each calendar year for free, making the actual price $50/sqft. Or, a ten year lease on biolab space might come with the landlord paying for the initial buildout and equipment installation, equal to a 30% discount.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#178

Post by HeyLaughingBoy » Mon, Jul 24, 2023, 2:24 PM UTC

voisin wrote: post #145

HeyLaughingBoy wrote: post #77

Earlier quoted context omitted.

My former employer's CEO (a small business) owned the floor of the building we were in and leased it back to the company. I've known other smaller companies that owned their own building, but it would be interesting to see how prevalent it is. I suspect it's more common than we think.

In North America at least, having condo or strata units by floor of office buildings is relatively rare. I’m not saying it is ever a motivation but I just don’t think it is as big a motivation among tenants/employers as I see people on HN claim it is.

I realized that owning an office floor, condo style is unusual. My point is that I've known of several small businesses that owned their own buildings outright.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#179

Post by breakpointalpha » Mon, Jul 24, 2023, 2:48 PM UTC

jacknews wrote: post #130

csomar wrote: post #69

Earlier quoted context omitted.

The world will never stop, not even for humans. On the other hand, if you have built a career around commercial office real-estate, the world might just have stopped for you. Still, live goes on.

Sure you have to feel sorry for realtors to some extent. But real-estate is at the very heart of the financial system, and therefore the economy if not the government. So this is not about individual careers or working preferences in themselves.

Horses were at the very heart of the American economy for over a hundred years, until the invention of steam power.

Technology destroys old industries and creates new ones.

Re: Remote Work to Wipe Out $800B from Office Values, McKinsey Says

#180

Post by cmrdporcupine » Mon, Jul 24, 2023, 8:19 PM UTC

convolvatron wrote: post #80

pxue wrote: post #75

[flagged]

Yes. However no one ever seems to show up with any counter arguments. Some people here miss going in.

I actually miss going in. But do not miss long commute. And do not like the poor selection of local employers. And will not be moving for them at this stage in my life -- I already did that in my 20s -- so have to make do with remote.

But, I question any of the (esp local) employers now who are strictly hybrid or in-office only, because it tells me that -- among other reasons -- they're fine restricting their talent pool to what's in their immediate surroundings. That's fine in maybe a handful of locales where strong talent has traditionally congregated (Bay Area, maybe New York, London, a few places in Europe?). And so you have to ask the reason why?

It's gotta be one of: work doesn't call for special talent (so likely not interesting, and I likely don't want to work there). Or work doesn't pay competitive (so I don't want to work there). Or they feel they need to be looking over the shoulder of their staff (I likely don't want to work there.)

So a bit of an acid test, really.