"The office is dead," say the headlines all over the place.
That is what I am hearing.
Since clients and others keep asking me what I think about this, I will weigh in.
I have a few thoughts to start with:
The office is not dead
The office is not dead
The office is not dead
Before I move forward with my article, I want to tell you a vignette from my career. It was long ago. This is in the one year I was a litigator, and before I switched over to real estate….
I still remember "carrying the bag" for Milton Gould – a famous litigator at the firm of Shea & Gould – 37 years ago in 1983. As we were…kind of getting near the courtroom (you can figure out maybe where we were) … he said to me, words I will never forget: "young man, always remember to empty your bladder before you enter the courtroom as you don't know when you will have another chance."
The relevance of this anecdote will be revealed as you read on…..
Now that I have your attention let me start with my view of the news media. This is my usual media rant…..
Please be mindful that it is NOT news to say what I will say here, which is that offices aren't dead – or anything close to dead. It is just that various trends in place pre-COVID will gradually continue to happen over time.
But it is news to shriek from on high that "The Office is Dead!!!!"
I mean, which article are you going to read? And talk about at virtual Zoom cocktail parties. We all need a good conversation, and the media is just the one to supply it to you.
Indeed, I will grudgingly admit that if I were running a newspaper, I would probably print the article about the offices being dead over this one. Perhaps this is why my Real Estate Philosopher hasn't gone viral yet.
So now that that is out of the way let's analyze what is really going on.
First – I think it is clear that the people espousing the dead office view are "only" talking about offices in big cities, right? Indeed, the biggest themes are that people can work "anywhere" and not have awful "commutes," and that could only mean that they would be in suburbs or offices outside the big cities. I don't think they are saying that suburban office is dead. This, at least narrows the dead office concept.
Second – I am not a CEO, but I am the Chairman of a law firm in the exact center of the biggest city in the U.S. As Chairman, I am not the "Boss," but I am sort of like an "Assistant Boss." And I can tell you this – it is mission-critical to get people back in my office. If we don't, our law firm, like most businesses, will eventually wither away. Everyone knows this. So we aren't giving up our space.
Third – every single one of my clients is doing the same thing. Not a single exception. They all want their people back in their space. Of course, first and foremost, they want their people safe, but the second they are safe, they want them back.
Fourth – if they don't come back to the office, where are these people going to work? Is it that new – annoying – acronym WFH? Well, you are reading this, and I bet right now experiencing WFH. If so, how do you feel about it? Some people – mostly rich people – have home offices that are all decked out. Most other people are using the kitchen table, with the dog barking, the kids, the plumber, the husband or the wife, and all the other things that go on at home. You either like it or you don't. Following that thought through:
- If you don't like WFH, then as soon as you feel safe, you are going back.
- If you do like WFH, but everyone else goes back to the office, you won't like that your career just died so you will also be going back.
- Also, don't forget that even though you might like WFH for a while, you might not like it forever. In this line of thinking, you might also be mindful that once you change your mind about WFH if you did it for a long time, they might not really want you back in the office, as you might have been revealed to be kind of unnecessary after all.
- So the only way you can like WFH and keep doing it is if most of the people in your office feel the same way, and your boss/CEO is fine with WFH on a long term basis. And I can tell you right now we bosses, and assistant bosses won't put up with it once it is deemed safe to return to the office. Not a bit. If you want to have a career, then you need to show up. No two ways about it.
Fifth – to augment this, there are some accouterments in the Office you won't get anywhere:
- Hanging out with your colleagues, mentors, and mentees
- My Milton Gould story I told above. Trust me, you won't get that kind of intel with WFH. Yes, it's a cute story, but you know what I mean. And yes I know it wasn't actually in the office when it happened, but my point stands nonetheless
- Wandering into your boss's office when she is in the right mood, so you get that plum assignment that makes you her right-hand woman and launches your career. This is going to happen on Zoom?
- Being there to show the flag when the chips are down
- Getting a bit tipsy one night with the gang – including your subordinates and your peers and your bosses – over zoom?
- Learning – yes, good old learning – all sorts of things. The most important things I have ever learned about clients and my team and my real estate friends were "all" learned when we were together. Maybe in my office – maybe in a bar – maybe at breakfast, lunch, or dinner. We were together somehow.
- Being part of a culture – being someone who matters to your organization. I don't see it with everyone else" there," and you are "zooming" in.
- Basically, if you aren't "there," you won't matter. If you think you can not be there and matter on a long-term basis, you are kidding yourself
Sixth – hub and spokes? I hear that some companies will put a good chunk of their offices in the suburbs and the rest in the city? Fiddlesticks. Let's examine this. Assume there used to be one location where people worked called the "Office". Now, with WFH, the organization has to put up with the Office plus WFH. Okay, maybe just maybe, some organizations can live with that if everything I wrote above is wrong. But the solution to add now a third location of a second Office in the suburbs simply makes no sense at all. My apologies if I am inadvertently insulting anyone, as I don't mean to do that. A few counter-thoughts to this are:
First – it implies all your suburbanite WFH'ers live near each other – or they will be back to having commutes anyway.
Second – you now have multiple offices to administer. You used to have one Office, and now you have two – plus WFH. Why would this be a good idea?
Third – what does it actually solve? Nothing that I can see. You are better off with The Office plus some WFH.
Sorry, I don't see this.
Seventh – shrinkage, I hear the cry. JP Morgan is allowing a good chunk of WFH going forward. And anecdotally, I think it was 68% of businesses want to shrink their office space. Of course, they do. They have wanted this forever as it saves money. I would love to shrink my office space too. Who doesn't? There is nothing new there. But what does that mean – does it mean 32% of their workers don't come in at all now, like it or not? Or do they swap offices in some incredibly complex office-sharing model? Maybe but I doubt it. This is a cluster-f__k waiting to happen. Yes, a few tech companies will pull this off, but I don't see it catching on. And of course, there is that social distancing thing that may make businesses take more office space after all.
So I just don't see all of this. The office is simply not dead.
But what will happen then? Okay, a fair question.
To answer it, I go back to my Bill Gates quote that people overestimate what will happen in one year and underestimate what will happen in ten years.
In that vein, some big trends going on will continue:
Real estate as a service
Mixed and creative uses
Zoom shrinking the need for travel
Offices morphing into cultural places and all that touchy-feely stuff
General disruption (I still hate that word) of the real estate industry that is evolving
And, yes, some of the items mentioned above, including WFH
These trends were in place before COVID, and these trends will continue. Smart office owners will be well to think – and "create" – new ideas for attracting their tenants to come to their buildings and want to stay there.
Offices in ten years probably won't look like they do today in many respects, but as Mark Twain famously said 100 years ago (paraphrasing):
"Rumors of the office's demise have been greatly overstated."
So office building owners, yes, you have some rough sledding, but, one more movie quote, from Monty Python (also advertising):
"You're not dead yet."
Not a bit.
Best regards to everyone.
Bruce Stachenfeld aka The Real Estate Philosopher™