As I See It: IT Come Home
September 25, 2023 Victor Rozek
Wanna buy a skyscraper, cheap? Need an extra million square feet of space to store your stuff? Want enough living space for you and 600 of your closest friends? No problem. In large and mid-sized cities across the country, once-robust downtowns are looking a bit gaunt. Storefronts are shuttered, restaurants are struggling, and once-thick downtown traffic has noticeably thinned. And for that, you can thank, or blame, technology.
Specifically, the technology that allowed so many of us to work from home during the Covid years. We got spoiled, enjoying unprecedented flexibility, freedom, independence, and convenience. No commute, no set hours, no dry-cleaning bills, no overpriced lunches, no staying late to impress the boss. Just blissful days at home interrupted only by a needy pet, a sprinkle of social media, a load of laundry, and perhaps an annoyed spouse whose penchant for home rule extends to business hours. And all of it interspersed with flurries of actual productive work!
But most of us suspected the good times wouldn’t last.
Convenience and flexibility notwithstanding, sometimes there are unintended outcomes to having too much of a good thing. Half the office workers have yet to return to their spawning grounds, and the resulting consequences are a growing cause for concern. In many cities, downtown commerce – the lifeblood of smaller and mid-sized communities – has slowed to a trickle. Things are getting so bad that during happy hour you could just about meditate in a downtown bar and not be disturbed.
With more employees working from home, many businesses reduced their office footprint. Some leases were not renewed, others were pared down to accommodate current needs. Vacancy rates rose as high as 30 percent. As a result, rental income shrank proportionately. Office building owners are having difficulty paying their outsized mortgages. Commercial property values dropped, and banks fear default on millions of dollars in loans. The dominos ultimately fall against the walls of the nation’s City Halls which have to absorb the collapse of an essential tax base.
The amount of money in play is truly staggering. Economics reporter Rachel Siegel of The Washington Post reports: “Much depends on what happens with the more than $5 trillion in commercial real estate debt sloshing around the economy, and the $2.75 trillion in commercial mortgages that are slated to mature by 2027.”
Needless to say many suggestions have been offered for reinvigorating downtowns, from converting empty office space into spas, gyms, and apartments, to flooding the streets with food carts. But the most obvious and quickest solution are RTO mandates. While forcing employees to return to the office may seem like the simplest solution, it is neither popular nor, apparently, productive. Goldman Sachs mandated its employees return to the office full time and saw earnings drop by 58 percent.
One explanation for the unpopularity of office work is the open floor workspace environment. In support of that argument economics columnist/blogger Megan McArdle offers the results of a 2018 study: “. . . researchers used digital devices to record actual interactions between co-workers before and after their firm switched from cubicles to an open floor plan. They found that face-to-face interactions actually decreased by about 70 percent. That’s on top of the other concentration-wrecking, morale-sapping, stress-inducing, potentially disease-spreading side effects of tearing down the walls.”
McArdle thinks the grand enticement would be to offer employees actual offices with walls and doors. Well, maybe. While cubicles are certainly a reasonable and preferred alternative to the chaos of the open floor, offices are not necessarily curative. The need for walls is largely dependent on maturity, position, and the need for privacy and confidentiality. Giving everyone an office with a locking door is not only expensive, but an invitation to spend hours on social media or otherwise donking off.
Regardless, most companies have settled on some version of hybrid-remote work. Even the federal government is caving. Four months after the government officially announced an end to the Covid national emergency, the president decided it’s high time federal employees returned to work. Good news for Washington DC since the government owns or leases one-third of the city’s office space. Still, depending on job description, employees are only required to warm their office chairs three or four days a week.
For their part, tech companies have become impatient and are reminding workers that the employment carrot comes with a jobless stick. Meta is telling its people to show up at work at least three days a week or risk being terminated. Amazon warns that if employees can’t commit to gracing the office three days a week, then “it’s probably not going to work out” for them.
But by far the most unexpected RTO mandate came from the folks that made remote work possible: Zoom! The company synonymous with office-free work wants its employees to work in the office. Well, sort of. Zoom is contorting to accommodate resistant employees. Only people who live within 50 miles of a Zoom facility are required to return to the mother ship, and then for only a whopping two days a week! Quelle unreasonable!
All of these two-three-four day RTO mandates make one thing clear: The five-day office work week is dead – at least in white collar industries. It’s outdated, outmoded, and not nearly as appealing as hybrid-remote alternatives. With few exceptions people want their work to fit into the totality of their complex lives, not become their lives.
The hybrid work week is one of the many unforeseen consequences of Covid which, unhappily, is rebounding as it continues to evolve. And that is exactly what office work is being forced to do: Evolve. No doubt the practical alternatives to the daily office grind will come with their own set of unintended consequences. Such critical functions as teamwork and mentorship will be more challenging to achieve. The casual hallway conversations (the lifeblood of corporate communication), the information obtained from observing body language, the camaraderie built on small daily achievements, the sense of being part of something larger, and the building of a company culture are but some of the things that will inevitably change.
I suspect the downtown business model will likewise be forced to evolve in order to attract new tenants and maintain a healthy flow of visitors. Happily, there’s an old song by Petula Clark coincidentally called “Downtown” that the local Chamber of Commerce may want to resurrect.
When you’re alone, and life is making you lonely
You can always go
When you’ve got worries, all the noise and the hurry
Seems to help, I know
Just listen to the music of the traffic in the city
Linger on the sidewalk where the neon signs are pretty
How can you lose?
The lights are much brighter there
You can forget all your troubles, forget all your cares
So go downtown, things’ll be great when you’re
Downtown, no finer place for sure
Downtown, everything’s waiting for you.
And if you believe that, I’ve got an office building to sell you.