That's the entire point of RTO drives.
Make everybody miserable, pressure some to leave, not have to pay redundancy. Scummy as fuck.
this post was submitted on 29 Feb 2024
386 points (97.3% liked)
Technology
59708 readers
1881 users here now
This is a most excellent place for technology news and articles.
Our Rules
- Follow the lemmy.world rules.
- Only tech related content.
- Be excellent to each another!
- Mod approved content bots can post up to 10 articles per day.
- Threads asking for personal tech support may be deleted.
- Politics threads may be removed.
- No memes allowed as posts, OK to post as comments.
- Only approved bots from the list below, to ask if your bot can be added please contact us.
- Check for duplicates before posting, duplicates may be removed
Approved Bots
founded 1 year ago
MODERATORS
That’s the entire point of RTO drives.
It's really not, although I'm sure more than one C-Suite dweller has gotten a chuckle out of it. No the real point of RTO is trying to stop or soften a pending Commercial Real Estate apocalypse that could be even worse than the 2008 Financial Crisis. It's imminent too, like if it hasn't started already then it will in the next 60-90 days.
We'll know if its begun by looking at the Q1 CRE default rates when they come out in April. If the rate is over 1.9% then you should start keeping your cash in a mattress and stockpiling food...and I'm only semi-joking.
In the least callous to the everyday people that will suffer way I can say it, good it needs to die. Real estate as an investment needs to die
I can understand your opinion when it comes to Residential Real Estate, the stuff that people live in, but I wouldn't extend that to Commercial Real Estate. I see nothing wrong with a Business owning properties that are used by itself or other Businesses. I think the problem comes in when Businesses, especially large Businesses, own Residential Real Estate; especially if ownership of RRE exceeds a certain threshold inside a designated area.
I honestly think a lot of the problems with businesses owning RRE could be solved by not allowing those businesses to be C Corps, maybe constrain them to only Sole Proprietorship or LLC.
See I could agree with you for a company owning a building it uses, I don’t consider that investment, I consider that ownership and use, but I don’t think any entity should own land or shelter they aren’t utilizing. I don’t see any real benefit for any but capitalists
I do think there is some evidence that companies are just doing that stuff regardless. There's a "speedup" I think I've seen it called, a push to do more with fewer people and make basic benefits feel more like a privilege.
My company fortunately did not issue RTO mandates but has taken to requiring people to work watched in a Zoom room all day and explain any bathroom trips longer than 3 minutes. That's where I think the real estate angle becomes relevant, probably the only reason my workplace went the other direction and full-remote is that a) we're stalking people on zoom now and timing their #2s and b) we're midsize with few close corporate relatives, and leased all our space previously. We have no other skin in the game besides saving a massive overhead cost
One of the more honest arguments I have seen about RTO:
The company has rented an important building for operations.
That building is prime real-estate, which is now loosing value, because no one is using it and no one wants to buy it.
Since that can get very expensive, forcing use of the building to keep the investment stable makes sense on paper.
Result: Workers are forced back into office, to everyones detremend. Just because some guys asset is loosing value and now everyone else has to suffer because of it.
Why would a company care about a rented property losing value?
Has less to do with companies who rent and more to do with ones whom finance the construction of the building in the first place. It was a lot more common back in the day for companies like sears to build sky scrapers as a vanity project that they could park money into. Trump wasn't the only person in the real estate market advantageously overvaluing his properties.
Pretty much every sky scraper devoted to office space is a huge waste of money, and are rarely ever utilized anywhere near their capacity. It why so many NYC government agencies were located in the world trade center. The local government was basically helping achieve some of the capacity they approved for the project, helping make the wtc look more utilized that what it was.
There used to be a pseudo economic model that was surprisingly consistent. That anytime the newest tallest building in the world was announced, there would be some sort of recession within a couple years. It was seen as a sign that corporations were running out of productive places to stick their earnings.
Why would a company care about a rented property losing value?
You asked a salient question and it's truly unfortunate that no one is answering it. The first thing to know is that nearly all of the Companies pushing RTO either own Commercial Real Estate (CRE) directly or are otherwise tied to it by investment or peer group.
Companies like Amazon, FedEx, Twitter, Facebook, Goldman Sachs, Google, JPMorgan, SalesForce, Zoom and hundreds more all know that the United States is about to experience a CRE collapse larger than the 2008 Financial Crisis and they have a strong financial incentive to stop it or at least soften it. Here's a look at the problem.
During the pandemic many buildings were empty of workers either due to RTW or companies going under. Either way tenants weren't paying which meant that the Commercial Property Companies(CPC) were struggling with the mortgage payments. The lenders (banks) not knowing what else to do followed a policy of "Extend and Pretend", where they extended the loan terms and pretended that everything would get back to normal when the pandemic ended.
It didn't go back to normal though and the CPCs are starting to go bankrupt because the banks won't re-finance their loans, or if they will the payments will be much higher due to higher interest rates. These CPCs increasingly can't afford the modest terms they have now so higher mortgage payments simply aren't possible.
So as the CPCs go bankrupt and their mortgages go into the default the banks are left holding more and more CRE that isn't worth anything NEAR what it was five years ago due to lack of demand. I've seen estimates of CRE dropping in value by 40%!
If this was only a few buildings in a few cities it wouldn't be a problem but we're talking about tens of thousands of buildings all across the United States. For example New York City has over 90 Million Square Feet of empty office space, Los Angeles has 54 Million Square Feet, and Chicago has more than 60 Million! You could bang in with any large city but here's a good report on Seattle.
With nearly 900 BILLION dollars of CRE Mortgages coming due in 2024 alone a 5 % default rate has the banks taking losses of 45 Billion. By contrast at the height of the 2008 crisis the rate hit nearly 9%, which would put 2024 losses at over 80 Billion dollars. Then it happens all over again in 2025 when another 20% or so of CRE Mortgages come due!
In short the proverbial shit is about to get real deep and with no life jackets available the Companies pushing RTO are trying to save themselves and their buddies from drowning.
As an aside the Cities also have a strong financial incentive for RTO. They're already losing staggering amounts of tax revenue and if CRE takes a 40% pricing plunge they'll be even further underwater. Like turning off the lights in City Hall during the day to save money kinds of under water.
detremend
Wat
"Loosing" value
Thank you!
The top three comments all should have used "losing" and it was starting to make me think I was the one that was wrong.
“Losing”?
It is one of the driving forces behind RTO. There is no small amount of worry over a total collapse of the commercial real estate market. When large companies announce RTO it helps keep the commercial real estate market going.
Counter point to that is that companies that force RTO end up loosing the good employees who actually liked remote work. So the real estate is "saved" and they get a "free" layoff with no severance payouts but the company gets a brain drain.
Companies, currently, are viewing this as a net positive.
I work in IT, there the situation for corpos who want to force RTO is just a nightmare.
There are a bunch of companies waiting with open arms and better contracts to gather these disgruntled workes with knowledge in the industry. So not only do you loose a lot, your competition grows stronger at the same time.
On top of that, if you dont need to rent a huge building at high price, massively cutting costs on overhead an maintenance.
And once the bleeding starts its hard to stop: Others need to pick up more work, get pissed and then also leave for greener pastures.
All because you are stuck in the past.
I don’t get this logic though. How does having a fake illiquid value for RE holdings make sense on the books?
If RTO doesn’t increase value, then no one is going to up the lease at market value and so the property is going to lose value when push comes to shove. Wouldn’t you just take the depreciation now and write it off on your taxes if you own the building? If you are the lessor, why wouldn’t you keep pushing WFH so you can get a lower rate if you decide to renew the lease at expiration?
Wouldn’t you just take the depreciation now and write it off on your taxes if you own the building?
These people don't "own" the buildings though. Most of them have mortgages and if there's not enough, or no, tenants then they can't make their mortgage payments, they go into default, and then the Bank is left holding a property that's worth a lot less than what it was in 2019. This wouldn't be a problem if it was a few buildings in a few cities but when it's tens of thousands of properties in every city in the United States...well...we could watch a replay of the 2008 Crisis and it could be even worse.
If you are the lessor, why wouldn’t you keep pushing WFH so you can get a lower rate if you decide to renew the lease at expiration?
A lot of lessors are also owners or they have investment in CRE. Meta for instance may not own one building it's in but it could easily own another one in that city and they DEFINITELY own large expensive buildings in other cities! They have a strong financial interest in not allowing a CRE price collapse, it'd cost them way more money than they'd ever save negotiating down a lease rate on a rental property.
It's the kind of short sighted strategy you always see from upper level corporate execs. They make impulse decisions on limited data and justify it with predictions based on old data.
You know, the only kind of data it's possible for them to have at the time of their decision because they refuse to pay for external analysis or external data when they can use their own people and records!
So some jackass sets up a slicer on an excel file assigning an arbitrary value to the asset based on headcount capacity and woudknt you know it? The numbers go down when there are less people there.
Well that answers everything you need to know. Keep people in office, property retains value. Simple stuff really but they will say in their speeches and presentations that they have gone over the numbers and this is the way to go.
Never having considered that they could leverage the square footage in other equitable ways than they already do because, well, that data simply wasn't available.
And it's all bs anyways because real estate value is speculative and determined by the buyer. So when larger business embrace the hybrid or work from home model they give themselves a market advantage and can purchase or lease smaller office space at lower costs than they would have previously so really the only way this grift works is if all they big players keep overpaying for property.
Sooner or later it gets solved by the market whether that want it to be or not. The genie of work from home is already out of the bottle it's just a bunch of "boomer" businesses death gripping and smoking copium as much as they can until they are forced to adapt
wait, that wasn't the entire point?
Our CEO announced a partial RTO yesterday and I can't imagine a situation where it would make less sense than here. I'm literally the only person in my city working in my team. And none of the others are in commuting distance to an office, one is even in another country. What the duck should I do at the office? What an idiot.
Yep, same here, I moved cities while being fully remote, anyone within 50 miles of an office has to go in and it seems there’s an office in my new city less than 50 miles away. My whole team is in a different city, which if I was still there I’d go in. I didn’t go in once since the start of the new policy 3 months ago, ended up getting called out on it by our director. Literally three days later I told my team I was leaving since my old company (which is fully remote) offered me a job when I reached out lol
I really hope that happens so often that companies start to understand how idiotic they behave. Let them bleed.
And good luck at your new old job!
I know it's not indending it but the way the headline is phrased makes it sound like the employees being miserable is a positive.
RTO doesn’t improve company value, but does make employees miserable 🤷
Considering how this is being pushed by petty micromanagers at expense of profits, they might as well see it that way.
The daily driving to and from the office (for those of us in areas with shitty or non-existent public transportation) is also one of the most dangerous things we do by far.
Kinda wish that risk were acknowledged by the C levels when they make these decisions.
Considering the most highly correlated trait for being a CEO of a large and successful company is psychopathy, I’m going to file that under “highly unlikely”
This is the best summary I could come up with:
When the acute aspects of the pandemic receded, some who at first struggled began to settle into a work-from-home (WFH) groove and appreciated the newfound flexibility.
Many made the argument that the return-to-office (RTO) policies and mandates were better for their companies; workers are more productive at the office, and face-to-face interactions promote collaboration, many suggested.
Overall, the analysis, released as a pre-print, found that RTO mandates did not improve a firm's financial metrics, but they did decrease employee satisfaction.
Drilling down, the data indicated that RTO mandates were linked to firms with male CEOs who had greater power in the company.
Although CEOs often justified RTO mandates by arguing that returning to the office will improve the company's performance, "Results of our determinant analyses are consistent with managers using RTO mandates to reassert control over employees and blame employees as a scapegoat for bad firm performance," the researchers concluded.
Specifically, after an RTO mandate, employees' ratings significantly declined on overall job satisfaction, work-life balance, senior management, and corporate culture.
The original article contains 591 words, the summary contains 170 words. Saved 71%. I'm a bot and I'm open source!