Landlords and their lenders who’re still thinking work-from-home is just a blip will undergo a reckoning in due time.
By Wolf Richter for WOLF STREET.
Synchrony Financial, GE’s consumer financial services spinoff with 16,500 employees according to its website – presumably before the layoffs – announced during its earnings call this morning that it has “realigned and reimagined the way we work,” and that it would lay off people, and that it would close offices entirely, and that it would reduce the size of other offices, and that it would now allow all employees and require some employees to work from home permanently.
This is the latest in a series of major companies having made similar announcements, including Microsoft. But Synchrony’s proposal appears to be more radical in that it:
- Allows all its US employees to work from home permanently.
- Requires some employees to work from home all the time with no access to an office.
- Requires all employees to work from home at least some of the time.
- Requires even management with “assigned seats” to work from home at least 1-2 days a week.
Citing “safety and maximum flexibility for employees as a backdrop,” CEO Margaret Keane explained that the company has embarked on a cost-cutting mission, with cost savings of $150 million to $250 million in 2021, that entails an $89 million restructuring charge right off the bat, plus layoffs, work-from-home on a permanent basis, and drastically reducing its “physical footprint” – namely office space.
“We have reduced the size of some of our sites, and closing other sites entirely,” she said during the earnings call (transcript via Seeking Alpha).
“These changes stemmed from our employees’ desire to work from home. Their productivity in this environment will help us drive long-term efficiency and profitability of our business,” she said.
“We are also being thoughtful, targeted and aggressive on our cost structure as we move forward, allowing us to continue our focus and investment in future growth,” she said.
In a memo to employees, reported by Bloomberg today, CEO Keane and Synchrony President Brian Doubles explained that Synchrony will have three types of offices:
- Virtual offices: employees will work from home permanently, and there is no office they can go to.
- Hoteling offices: employees work at home permanently, but if they need to, can book a desk at a nearby office location.
- Hybrid offices: employees can work from home but they have an assigned seat at a nearby office where they can work at least three days a week.
Even executives with assigned seats — so other executives don’t have assigned seats? — will be expected to work from home one or two days a week, to “role model our work-at-home mindset,” the memo said.
“Our site footprint changes will drive significant cost savings which, combined with all of our efforts to manage cost, are aimed at preserving as many Synchrony jobs as we can and reducing the size of any layoffs,” the memo said.
Synchrony’s “new site footprint strategy” is going to impact its 20 offices spread across the lower 48 states of US (it also has offices in Puerto Rico, India, and the Philippines). These US offices cover everything from technology and cybersecurity to collections.
The company didn’t say which offices were already closed permanently, which would be closed permanently, and which would be reduced (image via Synchrony):
Synchrony’s website describes the functions and office environment at its eight “key” office locations – and this gives you a feel for what kind of jobs would be done from home:
Stamford, CT, headquarters. Functions include “Risk, Technology, Audit, Legal, Compliance, Finance, Marketing, Sales, Communications, Human Resources, and Enterprise Operations.”
Alpharetta, GA. Functions include “everything from Marketing, Finance, Risk, Sales and Technology to Collections, Operations and Client Development.” It’s “a bustling hub of activity,” it says. There is a dedicated cafeteria and fitness center.
Canton, OH. Functions include “Collections, Operations, Fraud, and Support.” The facility includes a dedicated cafeteria and fitness center.
Charlotte, NC. Functions include “Operations, Marketing, Risk and Compliance.” The site has a dedicated cafeteria and a “fitness center featuring walk stations that allow you to exercise and work at the same time.”
Chicago, IL. Functions include “Marketing, Risk, Operations, Collections and Technology.” And it adds, “It’s a beautifully designed space that includes a dedicated cafeteria serving fresh contemporary cuisine.” And there’s of course a “state-of-the-art fitness center, which features a wide range of equipment and classes.”
Kettering, OH. “Our largest US business center with employees across all functions including Operations, Risk & Fraud, Technology, Collections, Finance, Sales and Marketing.” The site has a dedicated fitness center and cafeteria. And look, “nearby Dayton was recently voted Forbes’ ‘Most Affordable City,’ making this a great place to raise a family.”
Orlando, FL. Two offices in Longwood and Altamonte Springs. Functions include “Customer Service, Collections, Recovery, Post Office Returns, Scanning, and Data Entry.”
Phoenix, AZ. “Our lively Phoenix office is home to employees covering Enterprise Operations, as well as other strategic personnel. The site includes a “dedicated café and fitness center.”
Getting rid of offices, cafeterias, and fitness centers, and whittling down the number of employees, and having those remaining employees work from home either all of the time or part of the time is surely going to save the company some money. It’s an irresistible thought. And now that the technology is in place and has been proven to function during the Pandemic, and has already been at least partially implemented, it’s just a matter of finishing up the details.
The more of these announcements we get, the more we realize that this isn’t a blip, but that the Pandemic has triggered a massive shift in corporate thinking, that what used to be dismissed as impossible has proven to work just fine of the past seven months, with some fine-tuning and lots of technology and some flexibility, hence the meeting places and temporary seats in an office and the like – the hybrid model that allows a company to drastically cut its office footprint while at least some employees are still able to get together.
Office expenses are shifted from the business to the household.
If both adults in a household suddenly work at home most of the time, their home might not be big enough to accommodate their needs, and they’ll need to look for something larger. And they now have to buy their own toilet paper, coffee, office supplies, office furniture, lunches, and treadmill where you can “work while walking at home,” so to speak.
On the other hand, they can also move further away to less costly areas and still dodge the horrible commutes.
And office landlords and their lenders will have to do a lot of creative thinking quickly. There is already a huge amount of office space available. More is becoming available, and new office space is still being built. Landlords and creditors who are still thinking that work-from-home is just a blip, and that this too shall pass – just like mall-landlords thought ten years ago that ecommerce was just a blip – will undergo a reckoning in due time.
“Sublease Pandemic?” Office leasing activity plunged or collapsed in Q3, depending on city, even as huge amounts of sublease space that companies no longer need got dumped on the market. Read… Commercial Real Estate Office Sector Crushed by Work-from-Home, Tsunami of Supply in Q3: Manhattan, San Francisco, Houston, Chicago, Los Angeles
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It’s interesting with all the corporate angst and virtue signaling about climate change that this hadn’t happened several years ago.
Personal state income tax question: what state does the employee working from home pay taxes to if “local” office affiliate is in another state?
You pay both are reduced values.
Depends on the states in question. They sometimes have agreements where they will not tax the income earned in another state.
You pay where you live and where you work. If both are in the same place you only pay to one.
Petunia – if you pay tax to 2 states on the same income, do you get to deduct the tax paid to the other state? Doesn’t that get recursive?
Would you get to claim unemployment in both states? My employer was on the fence about out of state employment for just this topic. Ultimately they opted to just keep us local but W@H
Several years ago? How about twenty? I retired in 2001 and was working virtual back then as were most of the people I worked with. Its shocking to me that Corporations are so far behind the curve.
Technologically, this trend could have started 20 years ago.
Every time I see money gratuitously wasted in an organization (looking at you, bloated NYC/SF/LA personnel counts/office space…) I immediately think…kickback.
Corporate personnel spend their lives looking at the financial numbers…when obvious cost savings are habitually avoided, it is possibly/likely because someone in a position of power is getting greased.
Then the corp world acts shocked! Shocked! When something like the Mattress Store real estate scandal (“250,000 locations to serve you better!!”) blows up and exposes vast kickbacks to insiders.
Different niche, same dynamic.
Not to take away on what’s happening but they did say offices not buildings. Good luck with them collecting and whatever else they do. Those offices sound like big warehouses in my opinion. Forbearance and a few trillion more is coming. Just think of all the deals on these buildings with private equity too. Sixteen thousand five hundred peeps, isn’t much. There is like three hundred million plus here.
Corporate ego and management ego. It’s harder to justify a bloated executive salary when you’re “managing” a network of people at home from your home office, compared to ruling over a slick office suite in a city high-rise.
Exactly correct.I remember all the promises of the impending work from home wave supposed to have occurred in the early nineties Telecommute,jobsharing,flexibility,less childcare issues blah,blah,blah.These REITS,banks,pensions,some local governments are about to go bellyup.All the redflags have been there for months.Unless most of the excess office,retail,warehouse capacity is converted to Affordable housing,medical,microbiz,artist coops,or pot dispenseries,I forsee massive problems.
My WFH experience goes back almost thirty years now. I left a big brokerage firm based in NYC and joined a firm based in Dallas TX which supported the “independent broker” in 1991. The day after I left, the WSJ had an article – “More Brokers Go Solo on the Street” (July 8th 1991 I believe).My landline telephone bill was $300 per month.
In 1994 I got a toll-free telephone number that rang in on my cellphone which cost me just $10/mo. The cell phone bill dropped to about $50/mo.
I continued WFH until I retired in 2014.
Because a lot of the vast technologies needed (which we take for granted today),as well as the COSTS then Involved..plus added Corporate inertia I presume did not make it seem cost effective nor readily applicable until recent developments literally ‘forced’ it on them..! aloha
You raise an interesting point that New Hampshire and Massachusetts will be going to court to battle over quite soon: https://www.masslive.com/politics/2020/08/an-emergency-order-allows-massachusetts-to-collect-taxes-from-out-of-state-employees-working-from-home-now-new-hampshire-is-investigating-its-legality.html
NH just filed a lawsuit against MA on this very subject matter in the US Supreme Court.
point your browser here: https://www.scribd.com/document/480707543/NH-v-MA-Complaint
things may never be the same.
Not sure any GE business unit or spinoff is a good indicator of the right thing to do going forward. They seem to be uniquely qualified to always do the wrong thing when examined in the rearview mirror. But they will certainly do it and the landlords will feel the pain.
Shouldn’t WeWork be doing very well in this new world? Companies can pay a monthly subscription for access to an “office” as needed.
Somewhere, somehow, I smell a big data breach coming…
While there have been a few during the pandemic, the sky hasn’t fallen, yet. Which, as I spend a lot of time with the infosec community, is really, really, surprising.
Illinois Department of Employment hacked twice last spring,I am sure there are others I am unaware of.V.A. just this week admitted hack of Thousands of vets” personal information.Zoom bombing.I amnot in security,but look at all the recent breaches including Equifax,Yahoo,big medical record hack-do not remember where. Why do people not remember to compartmentalize the various data?All this was easily forseeable twenty years ago.I am not a security/computer whiz or a genius,but come on.It will get worse
ABSOLUTELY!. Companies are scrambling now to simply identify the risks they created when they sent folks home for the pandemic. I work in the cyber security segment and it is simply crazy right now. The exposures companies are trying to address is just amazing. Think of all of Synchrony’s customer’s PII popping up on thousands of screens in unsecured employee’s homes and Starbucks across the US and beyond.
You know that if Synchrony’s management can somehow spin this (un)successful approach correctly their next step will be to send it to homes in India, Vietnam, Botswana etc.
Real estate costs are not trivial for major corporations and businesses but frequently they are simply rounding errors when compared to costs for staffing, IT systems, insurance etc. This screams of either desperation or the CFO wants a bigger bonus at the expense of their customers. Not a new story.
If that Happens..we simply “Book em Dano”…lolol
I’d think the opposite.
They will be one trust me.
Incorrect. I’m currently working on two events that are directly related to employees working from home. Employees have a lackadaisical view of security when they work away from the office. Numerous studies have shown this to be the case again and again. I believe IBM just released another study a few months ago reaffirming this fact.
Disregard my comment. You were responding to the WeWork comment. Oops.
I agree with your assessment.
Yes, I was replying to MonkeyBusiness concerning WeWork, not to Dano (below MonkeyBusiness) concerning the data breach. The way these replies are structured, with the lines going up, it’s kind of confusing.
I wonder how California’s proposed raising of property tax on commercial property will affect homes that are not strictly “residential”
California is finished especially San Francisco. It’s irrelevant discussing.
Heck, if the rents drop low enough, I’ll move to San Francisco.
Tony of CA:
I don’t have a large enough laughter emoji to respond to your incredibly uninformed comment about SF and California! But, that’s what makes the world go ’round!
That is a great question! It’s hard to believe the assessors would go after the house values even when everyone is working from home. If Prop 15 passes, the counties should get a good enough boost in taxes to be able to leave the homes alone.
In my area, Marin County just north of SF, office space is being advertised as something like, “kids driving you crazy? Get an office close to home and thrive in the new normal”
So perhaps the landlords and agents (Regus and others) are trying that angle before turning to more radical solutions. It will probably work, as this is a high income area with plenty of monied SF refugees.
But yes, I would file that under a cost shift to the household.
I think the next iteration is that many employees will ask to go independent/consulting, to get the tax write-offs for the office and so much else. As has been noted here on Wolf many times, for those not in the top talent tier, that’s a slippery slope to the Gig-Life.
Not even a gig. Coding will become fixed-price piecework.
Yeah…..the coders lived the high life for a loooong time.
……but now that time has passed.
I am totally delighted…. never been that impressed with their typical work.
I’m in a small southern town. I and 3 others sublet office space in a suite. The guy who we are subletting from can’t make his rent and needs to fold. His landlord wouldn’t reduce the rent. None of us subletters want to take over the main lease so we’re all looking for space.
So far I have checked Craigslist and it’s surprising how little is available and how it doesn’t look like prices have come down. Hmmm….
Drive around, write down phone numbers off signs. Landlords are often older and not hip with technology. Craigslist is a lot of noise.
You can try sites like loopnet, but those are mostly expensive properties.
Unfortunately people don’t want to mark to market price reductions. I was sniffing around, if next year the place I rent to live in hits a wall I was thinking about trying to live in a commercial flex space (Shhh.)
Even in small towns, you might be surprised at the number of “executive suites” that are affordable and rent with short term leases.
As mentioned above, landlords hate establishing lower prices during downturns (other lessors with Most Favored Nation clauses? Hit to aggregate valuation due to reduced rent roll?).
But what to do with a ton of empty space that can’t be leased at the asking rate?
WeWork (and Exec Suite companies long predating them) had an answer…rent to us and we’ll sublet at market clearing rates, at market clearing terms…all the while obscuring the details from MFN lessees and potential buyers…)
On a marginally related note, this story,
Has some stats buried a couple of paragraphs down suggesting that the average office building (random sample not guaranteed) only has about 11 business tenants.
Losing 2 or 3 of those probably puts the landlord below breakeven.
Keep your eyes open and haggle hard.
Totally already thought of that in cook county,IL because rents Are insane.Called several landlords of small reyail spaces first and I think they were crackheads because of their rent expectations.Now these were basic,long-empty spaces.Unless being used as a tax writeoff=bad debt they were nonproductive assets.
There *are* a lot of landlords of mostly empty properties who appear willing to play hardball right up until they corkscrew into the ground/go BK.
And this attitude predated C19…and I’ve never really understood it.
Other than being shielded by non-recourse loans/etc, the only rationale I’ve even been able to figure out concerning seemingly illogical landlord stubbornness (unto extinction) is that the initial financial modelling/current pricing of their properties built in a huge “vacancy” factor, such that properties can breakeven with occupancies as low as 65% to 50%.
But that seems like an insane amount of costly upfront idle capacity being built in.
Maybe there are some “super secret” landlord algorithms that show that total revenue is maximized when pricing is set to yield 50%/65% occupancy.
Anybody with yield optimization experience on the board?
When you get down to it, buildings and airplanes share a fair number of yield optimization/revenue maximization issues.
Shop around and make offers much lower than asking. Even if only 1 out of 10 accepts- that’s all you need. Look for properties that have been owned quite a while. If the 3 of you can stick together for an offer, it will probably cost less for the same amount of footage. & Walking or driving around looking for signs is a very good idea.
What are the tax implications for us working from home? Before if we were not required to work from home we could not deduct. But more and more are required. Does that mean I can deduct the room I use, the supplies, etc?
Can we start with tax-yr 2020, starting in March?
For people previously allowed to work from home and did, this can be a windfall.
You always could if you had your own business. I don’t believe salaries W-2 employees could ever do so.
The new tax law took away the home office deduction and various other work related deductions for W-2 employees. Prior to the new law, work related deductions were a schedule A deduction.
Businesses have some flexibility in picking their tax year, but individuals don’t.
All employees will simply become contractors. Then, with goodbye office goes goodbye company health coverage and benefits.
My question is what happens when a client wants to actually meet with their accountant for whatever reason?
Companies can eliminate 80%-90% of their office space (the cubicle warren) and still have plenty of meeting room space.
They’ll probably have to take a decrepit elevator ride up some extremely ugly, maintenance-deferred high-rise … picture visions of a Blade Runner-like future, complete with smog, bernaysian advert float machines, & that incessent atmospheric drippiness … to meet with the Bossman’s henchmen!
… or some such.
Nobody is getting rid of benefits or health coverage any time soon. How about “Goodbye wanting to work for you if you that.”
I worked from home for years and always took a home office deduction. As a matter of fact, I had built an addition on the house for that specific use.
For W-2 Wages?
No, I was an independent contractor.
Tax law changed in last tax bill. A lot of business expense were gotten rid until the future. It is one of the reasons that I started a company three years ago which reimburses me for business expense like training, computer equipment, etc. Lots of people will be mad when they start to do their taxes.
You’re still able to itemize with the now doubled standard deduction?
Tax deductible ”everything” for the home office, as long as you show some profit most years from your work, has been a great benefit for the last 50 years or so.
At one point early on in my biz, my CPA suggested that I might want to limit the (legal) deductions due to my paying so little SS tax on the net income.
Later, with growth of gross and net, and after I learned how to fill out all the IRS forms, (thanks to a very kind lady at one of the national tax prep companies,) I would take my forms to a registered agent and tell them that in addition to their fee for the review, I would share half of any legal savings they could find.
I will also suggest that you bee very careful to follow the rules of the IRS after being audited 3 times over those years; two times finally told to go away after a year or so of correspondence, once walking to the mailbox, with a check for IRS so they would not garnishee my bank account, when the mail carrier told me I had a letter from IRS that turned out to contain a check and apology from them because they finally understood what I had done.
The recent changes in federal tax code all but force you to do business as a sub-S corp. You need to be arm’s length. It’s not that complex or expensive.
I’ll take “lenders whore” for $500 Trebrek…
(Said in best fake Sean Connery SNL accent)
Working from home is a blessing when working in a toxic, back stabbing co-worker(s) office environment.
In addition, the co-worker(s) who typically accomplish very little while b.s.’g their way to a higher pay raise than you will now be more exposed since results will matter more while working from home.
Yes, it will be more transparent now who is doing the actual work. I also think many lower management types should fear for their jobs. I expect organisations to become more flat because of WFH.
“Client Development, Sales, Marketing…”
Yep. Should go real well at home in PJs…
Why should they be at an office, ever? They’re either at home, working clients; or they’re on the road, working clients. They should be precisely the people that never even have access to an office.
Wolf… in your humble opinion…
Is in-person interaction doomed “forever”? Are in-person sales meetings all about powerpoints in a board room and that’s that?
I think not. Deals and lasting business relationships are sealed over drinks and a meal or some kind of in person engagement (Golfing; hunting trip, destination business meetings). Are people reallllly bonding with their new clients on a web chat?
Here is a thought… as we all emerge from this social cocoon over the coming quarters the value of in-person interaction will be more desirable. Companies that start integrating situations where people work, meet, network in person will provide a refreshing break from house arrest. It will be a value add once again.
Those golf meeting and “lunch n’ learns” were probably getting stale after so much over saturation, but I’m predicting there will be pent up demand for good old natural face to face experiences. We are still human beings and this is hardwired into our collective psyche.
People are getting Zoom’d out…. (or zoom doubt if you prefer)
Well, you can always hire a Zoom-Life-Business Coach to teach you how to “connect” through cyberspace. Along with that you can take up virtual golf and how to chit chat while playing. /S
That’s more suited for the golf course.
Yep, that’s why Salesforce.com turned out to be such a nothing burger…hmm…
I think some jobs are well suited to WFH. Call centre activities are a good example where the activity and productivity of the employee is currently and easily monitored.
Other types of roles such as marketing, etc. might be much harder to maintain functionality and high performance when everyone is separated.
Humans, broadly, are gregarious. Separating us all might have some positive short term impacts like improved productivity but long-term people learn and grow through association and collaboration – hard to do by Zoom.
I think WFH is here to stay but not in such a big way. Too much immediacy bias is being shown.
Lastly senior managers, broadly , have sociopathic tendancies. Unless they have their employees around them which they can manage in their coercive styles, they may be redundant.
The manager of the WFH future will be a very different person (communicator/influencer/controller) than the manager of today.
Yes, WFH will be a problem for “middle managers” as it will become obvious that they are mainly unnecessary. Somwthing like 30% of all management in companies is totally redundant.
“…The manager of the WFH future will be a very different person (communicator/influencer/controller) than the manager of today…”
Yep. Only, this manager will no longer be human. All WFH drones will be continuously monitored by advanced “bossman” software, registering every keystroke, window opened, website visited, page printed, and so on and so on.
Even more advanced “boss of bossman” software will translate this raw data into “productivity indicators”, analyze trends, compare WFH drones among each other, and automatically print the pink slips for the lowest-performing percentage at the end of each month.
Given the trends in “human resource” management, I foresee an absolute dystopian work environment, that WFH drones will eventually give their lives for to escape.
I would rather learn a trade that is impossible to convert into a WFH job.
“All WFH drones will be continuously monitored by advanced “bossman” software, registering every keystroke, window opened, website visited, page printed, and so on and so on.”
Workers will be required to have a company spy robot (alexa?) in the room tattling on them.
Keep these ideas to yourself. I will not have a beta release of our “MidMan” (c 2020) software for another six months.
Don’t worry. I’ll build the software that games the bossman.
This exodus should make for some dang good quarterly earnings for corporations and banks for a while. Talk about cutting overhead. It’s a huge cost savings for both employers and employees.
A vehicle for work (payments, gas, insurance, upkeep), clothes, food, and of course time itself spent commuting is big money. You could get a little spot on the lake, set up an outside office, and watch the laptop screen with a fishing pole in one hand and a beer in the other.
Doesn’t work that way. If it is done right, you will work longer and harder at home than you ever did at home. 60 hrs. a week is nothing.
“If it is done right?” Via whose perspective?
But, to be realistic, WFH just opens the door for more out-sourcing. As corps cut costs, expect your insurance quote soon from a person with a foreign accent. The same with a loan. Even if you call the nurse for your child.
Thats nothing new. Its been going on for 20+ years now.
I keep thinking the latest hip new start-up will go totaly retro. With walled offices and executives with dictaphones and secretaries. Typing pools and company mail delivery several times a day for everyone else. Workers will be expected to dress sharp and golf on wednesdays. Highly skilled workers will realize how great this set up is and clamor to work for the new company and they will crush their rivals based on the sheer talent pool. Lets face it we built the greatest passenger plane ever (747) , the Lunar Lander ( which has never been duplicated) the transistor with that setup. What has the computer networked workplace gotten us; Facebook? the 737 Max?
“Lets face it we built the greatest passenger plane ever (747)”
Except it is such a fuel pig/capacity overkill/scheduling nightmare that it does not fly a single passenger anywhere on the planet anymore.
And I’m pretty sure the Lunar Lander never made a penny of profit.
Don Draper era engineering triumphs frequently only occurred because they were insanely subsidized by other products/by the G.
I’ll mostly give you the transistor though.
And, sadly, who needs Mad Men’s Joan (Christina Hendricks…yowza) when you got YouPorn…
The transistor, from Bell Labs, was funded by a regulated monopoly, no?
Seriously, the 747 was one of the most successful planes around for decades. That the sun is finally setting on it doesn’t mean that it wasn’t glorious in its time. The same can be said with the 777.
Remember the fuel efficient models of today is going to be the gas guzzling pile of crap tomorrow as technology advances.
Standards change… as for the lunar lander… I think 40 years on, we are still looking for it’s replacement.
I agree a bit, but the 747 (technology reach) vs. 737 (mkt-smart tech) debate is an important and common one (Concorde, ahem).
The 747 is out of the passenger business but there are thousands and thousands and thousands of 737s doing daily “flying bus” duty.
It ain’t glamourous, but it is crucial…that is why it is still around.
A *lot* of the time “engineering marvels” are driven by a sort of tech solipsism that almost willfully ignores market demand and simply does something (at great expense) simply because someone in power falls in love with an idea and has tons of other people’s money under his control.
Ask any VC just how often they get pitched “lab experiments” disguised as theoretical businesses.
The 737 and the 747 in terms of the markets they serve has nothing in common. One is a long haul heavy, the other is a medium haul airplane. Technology wise, both are about the same because they were born at the same time, but where as the 747 had the good graces to bow out of the pax business while the getting out was still good. The bozos at Boeing just kept wanting to extend the 737 instead of doing a clean sheet airplane. I wonder if they took the wrong lessons from 787.
For that, we can thank Boeing’s management, starting with Jim McNerny, but also before that.
Going onto the science experiments… they have a useful place in society, they are what enables mass produced products, the smart phone today, well, most of the technologies started as science experiments, and very poorly managed ones at that. Just think about touch screen, the iPhone took a tech that was 20 years old and made it ubiquitous.
and they’ll all wear fedoras …
Meanwhile Google just closed on an additional 42,000 sq. ft. of office space here in SF. Leased. Curious to see what the financial district will look like this time next year.
Google renewed its commitment to NYC as well.
240,000,000 sf of office space in midtown Manhattan alone.
They are expanding their legal team for the upcoming DOJ challenge to their monopoly power. Or maybe they are expanding their lobbyist department.
Dead and drowning in sublease space.
That’s not even an argument.
Here’s the argument:
Not really arguing against the CRE issue. Just as I predicted about Oakland 10 years ago, much of the current storefront/office space may become condo dwellings. What I am saying is that Google is obviously not going to do the WFH thing. And they are the major employer in Tech. I think the trend will follow the actions of the major players.
There’s this cafe called Working Girl’s Cafe in downtown SF. I would usually go there in the morning and be customer number 7x. Last Wednesday I happened to go downtown and decided to visit the cafe for lunch. I was customer no 6 …. for the day.
Downtown SF is so screwed.
Indoor miniature golf courses.
There’s a lot of cognitive dissonance in the markets right now. On one hand, people are excited because homebuilder “sentiment” is so high, which is really a function of people moving out and building in areas farther from city centers, which of course will only work long-term if work from home remains a reality.
On the other hand, there are people dumping tons of money into REITs and CMBS, as well as car manufacturers on the grounds that “This work from home fad shall pass.”
You can’t have it both ways. One group is wrong, and it remains to be seen whom that is.
I’ve seen too many control freak micro managers to believe this is a permanent change. Companies are going whole hog WFH now because they have no choice — it’s the only way to get back in business. As an employee, I’d be afraid management is learning better ways to outsource. That remote worker can just as easily be in India. I’d be careful about selling the house and moving to the country just yet.
In “normal” times Synchrony’s actions would be seen as the first step to going belly up. I’ll be they’re gone in 2 years or less.
This has been going on for 20+ years now. IBM has over 200,000 employees in India.
The one thing all this cutting leaves out is training. Today companies have the employees they need, but what happens as those people leave? One doesn’t just hire fully trained people off the street. For complex jobs this might require a year or more before new employees are qualified to work full time from home. Some facilities must be provided for training, and it could require some long-term individual time. Some of this is done peer-to-peer now, but with everyone working from home, that is lost.
Another factor that hasn’t been talked about is employee interaction and work ethic. This is pretty much picked up through association with peers, but this is likely to be lost. I see an unintended consequence of employees losing their company loyalty and having no qualms about switching employers on a whim.
You bring people in for training. That’s done all the time. Class-room kind of environment. Then remote training through screen-sharing, etc. No problem.
Once Zoom gets its Virtual Reality software up to speed, everybody will think they are back in the office. :)
With the roll out of 5G and hologram tech we’ll be getting closer to virtual reality.
You went to the Company Training Center and into one of the rooms. Someone then presented a PowerPoint deck and perhaps a video or two while contributing little pertinent to the training. You then went back to your desk and took an on-line exam. This was corporate training 20 years ago. Will work quite well from home today.
But surely only a fool has any kind of company loyalty?
I know companies demand it, or at least the show of it, but it’s surely not an operative concept: how can one possibly be loyal to an entity that knows no loyalty?
It is just a temporary liaison for the limited material purposes of both parties, is it not?
Training? What training? In the tech world the operational model is to throw the newbie into the maelstrom to sink or swim. You are expected to figure it out for yourself, and if not, sayonara! Some of the worst overtime I’ve ever done was when I started new jobs.
If you get laid off while working from home, do you have to clear out your home office and leave?
I have done an electronic version of this at Nike during its latest round of Layoffs. When the layoffs are announced in advance everyone gets some special software downloaded to the company owned computer being used from home. That software watches what files that you remove from the computer from then on. Then if you don’t make the cut, and you get your zoom layoff meeting, the software uploads all your files to the company headquarters and wipes the work from home machine clean . Like being escorted to the door by security in the digital age.
Aye! The more things change the more they stay the same. Multiplex yourself through AI and linked in etc. Manage your own AI self working for many employers. Be in a perpetual state of employment by starting continuing and stopping where needed. Stay ahead of the on going fallout.
Just wait till the replicants find their stride …
If the Child labor gets laid off, do the they get Police Pig socks from Kaepernick as severance?
Works right up until you boot into another OS. There are other ways around it as well.
No, but a Jerry McGuire “who’s coming with me” rant to the kids and wife might be funny.
“If you get laid off while working from home, do you have to clear out your home office and leave?”
Actually, yes, because you won’t be able to pay your mortgage…
No, but you might be renting it out to your neighbor so he can work from it away from his kids. Just send your kids out to play in the street, in 8 hour blocks of time.
Don’t accumulate anything at home that can’t be put into a couple of banker’s boxes and carried out the door.
They might outsource your home office function to India.
White collar jobs are going to be outsourced, just like the blue collar jobs before them were. White collar peeps never showed any concern for the demise of domestic blue collar jobs, as they were too busy checking their stocks, building additions, and hiking Machu Pichu.
White collar workers identified with and thought they were part of the elite. Turns out they’re expendable workers, just like the blue collar workers they deplore.
“First they came for the gypsys..”
Right now, there are quite a few white collar jobs on the block for AI automation, particularly for those that are glorified data processors.
My exact thoughts!Been watching this gig/subcontractor/illegal immigrant/temp. Worker witches” brew amalgamate since I did some college-age temp. Work in Chicago in 1990.Saw it coming.And yes benefits are and will continue to be cut.Yes,overheard conversations,articles,interviews of smarmy,educated whitesomethings looking down their patrician noses at us not quite Arrived types.They all had pat andwers to the stresses born by the American worker.Why don”t they work harder,smarter,2jobs,learnalanguage/computerskills?
Overcrowded hospitals, morgue trucks in the parking lot (refers), and finally people will actually understand what is going on. It looks like 2.5% mortality rate for Covid, vrs .1% from seasonal flu. I just used 220,000 dead / 8 million infections. Seasonal flu numbers came from Livescience.com.
Of course there is a sure fire cure. Just don a red ball cap (pun intended), meet your group, and madly cheer…….about nothing.
Personal opinion here – if a large number of offices close (and pandemic gets under control i.e. we learn to deal with it) – there is going to be a huge boom in neighborhood pubs, bars, cafes, other hangout areas that function currently as a 3rd place but will quickly move into 2nd place territory. For those unfamiliar with the term: 1st place is home 2nd place is work 3rd place is where you socialize with friends outside of home and work. For the past couple of decades 2nd place has often functioned as both second and third place but with this shift it will be 3rd place taking on the values of the 2nd place. I know it’s not as technically rated, but I feel almost like I just wrote something in Engle-ish.
I agree. I think it will refocus some of the energy on neighborhoods, including classic neighborhood institutions such as pubs and restaurants.
Not as long as the pandemic is happening. No one would put their time and capital into these kinds of risky ventures in the current situation.
Even if there was no pandemic say on November 4th, who would suddenly jump in to open up these businesses. In large cities especially, the situation has evolved, a good part of the clientele may have gone away… would anyone want to start up a new pizza joint or a bar in a neighborhood in SF these days given the overall situation?
Now, in some mid tier cities may be. But the large cities will have a set of dynamics that really pushes back on these neighborhood institutions however desirable they might be.
That would be an excellent outcome. It could definitely happen and I am hoping for this.
Perhaps it can help reverse the trend of past decennia that people don’t know their neighbours anymore. Will it help people reconnect with their local community?
Less loneliness, more care for each other. Elderly people who are now lonely at home can join the lunch breaks with younger folks, etc.
Likely? Perhaps not, but one can hope…
Back during the GFC in Florida, 2008-2012, the biggest home office was Starbucks.
When working from home, just remember to turn off your Zoom if you’re gonna go Toobin’.
Toobin was evidently .. taxed to the max!
Actually, once you know the political context of that New Yorker Zoom meeting (all – ahem – hands?) it turns out they were *all* j*cking off…
(Likely inspiring the T man…)
“If it’s something you wouldn’t want mom to see, don’t stick it in a computer.”
He will be back. Maybe they will make him a sports broadcaster?
Cant always have what you want
When its safe the workforce will want to hang out
at the office again. Cos that provide it will get the best of the youngest.
Landlords will have their day again- me thinks
The add that comes up for me on today’s blog says,” Solopreneurs and remote workers enhance your productivity by joining ourcollaberative work space.” Seems like someone is trying a twist on work from home by getting people to rent office space where they can work from home.
Here in Tucson, there’s a coworking space that’s promoting virtual memberships.
If you work from home, it might become more readily apparent whether or not you work at all. Furthermore, if what you do boils down to data bits streaming between your home and a server, why could it not become automated? I notice a lot of the functions you mention Synchrony defining being regulation compliance related, and maybe it is difficult to imagine automating that, but who can conceive of how things will shake out? Magazines back in the 50’s would run articles on “the coming age of leisure”, in reference to technological advancement making work obsolete. Instead, our endless debt expansion economy has us trying to inflate our prosperity away. Interesting times.
“Magazines back in the 50’s would run articles on “the coming age of leisure”, in reference to technological advancement making work obsolete. Instead, our endless debt expansion economy has us trying to inflate our prosperity away.”
It keeps baffling me how we have thrown this opportunity away in pursuit of more useless stuff carried by debt and people now having to work till their death in often stressful and mind numbing jobs, pushing depression and anxiety to all time highs. While at the same time pretending that we never had it this good.
It baffles me even more that this just keeps going on. But of course, with central banks basically raping everybody who tries to dissent by being a prudent saver this just keeps going on…
Yeah, but we got Facebook ‘an Twitter ‘an Instagram ‘an …
None other than John Maynard Keynes discussed the notion of increased leisure in his 1930 essay ‘Economic Possibilities for our Grandchildren’, where he proposed that productivity gains by the end of the century could allow a 15 hour workweek (I believe at the time 50 hours was the industrial norm).
Turns out he was right about the productivity part, but of course not the leisure part. And I don’t think that was a conscious choice for most workers, but enforced by companies looking to exploit employees to the max. And as inequality soared since the 1970’s, said gains were clearly not shared with those producing them.
Oops, meant 60 hours (10 hours/day, 6 workdays/week) pre WWII. I can’t understand why most websites don’t provide an edit function. At least the spell checker wasn’t to blame for this one.
Just checked on a county near me. Looks like a huge amount of the inventory of single family homes have sold very recently. Prices in the 2 counties near me have gone up 20 – 25% and 30% within 3 months. However- I’m not seeing any influx of moving vans. I drove by some of them and they’re still empty. One has been empty for 4 months, neighbors say no one has been there.
Meanwhile, our homeless population isn’t going down, and some sellers moving out of state.
‘Cough!’ .. hedge funds .. ‘Cough!’
Polecat nailed it.Hedgefunds,banks,foreign investors,basic rich people with good credit.Just like in 2008-now!Buy em,hold em,Jack the rent or purchase price. I remember being shocked at seeing BerkshireHathaway realtysigns in front of modest,CookCounty,IL homes after2008. Mo money,Mo money!
Lower/ middle management should be worried for their jobs. At least in the organisations where I worked, they often didn’t add that much and sometimes even contributed negatively by wasting peoples time with useless meetings.
However, I do think there will be some backlash. WFH works very well at the moment because one still benefits from the relations between workers that were built up during the old face-to-face era. However, this will decay going forward.
I also feel that working will become less attractive. It will be for the money only. When I quit my job many years ago, the only thing I missed about it was the social aspect of it. The conversations at the coffee machine and water cooler. With the social aspect diluted, quit as soon as this is financially viable.
You are correct, that many WFH employees benefit from relations created prior to WFH.
Working from home permanently results in a much smaller social network than going to a large office.
1) Elite executives don’t see their employees faces ever, unlikely they have had a small zoom meeting with them, which is very unlikely 2) employees speak with each other much less 3) Much less networking and discovery opportunities 4) If WFH persists I believe the culture will be more results focused, which leads to fewer employees and more contractors
The death throes of serendipity.
YuShan is correct:
Working with someone remotely is much more effective if you occasionally get together with them in person. At my last job in Sunnyvale we had an engineer that worked remotely from Victoria B.C. and an engineer that worked remotely from Milan Italy.
They would each come in to Sunnyvale and work on-site for a week every two months.
Indeed hard to see how tribal knowledge and solidarity will be maintained or enhanced with atomized workers. Even nerdy techies gain much thru interaction with knowledgable peers.
Decades ago, Galbraith opined about the meeting and its use as a way of bosses to reinforce their position on the totem pole. Just being able to call for a meeting
is reserved for chiefs. Not calling meetings could put your status at risk, especially if you actually have no indispensable expertise other than negotiating steps on the ladder.
I would add that there is an inverse relationship between meetings and real- world achievement. The test for whether an interaction or communication is a meeting: is the event called ‘a meeting?’
Serious govt, bureaucrat, and education pyramid climbers are infatuated with the word itself. What would be called a talk or just a question in a no- nonsense science or industrial task, becomes a meeting in an environment where the process is the product.
An example: my brother is retired from the Canadian Coast Guard. He spent time in HQ in Ottawa, but turned down promotion to escape the place and returned to hovercraft pilot on west coast.
One time before leaving he is in a meeting at DOT HQ and two uniforms arrive a bit late. Then it’s their turn and for about twenty minutes there is back and forth about things like the perennial ‘should we centralize or localize admin?’
The metaphysics simmers nicely until someone makes a reference to an actual physical object in their realm. That’s when it turns out the new guys are in the wrong meeting.
But education management may outdo govt. A strange thing about liberal arts ed management: it typically requires a PH.d, and the typical applicant has never managed anything where success is distinguishable from failure.
This is the mecca of meetings.
Saying the office is dead when we are literally locked out of the office is like saying that night baseball is dead because there’s a power outage for a couple weeks and the league decided to cancel the night games and only play during the day.
All these companies are doing is making decisions with the best available information they have at the moment. Frankly the goal seems more nefarious to me – seems more about justifying mass layoffs than working from home but I guess we will know more in the future.
Let’s see how everyone reacts when the lights are turned back on.
What they are saying is that the virus etc. is the catalyst to bring about a change that was overdue. Making people work at home as a temp measure is working so well now they’re wondering why they didn’t do it before.
If you work at a computer it’s actually easier to monitor your performance by yr boss than in person.
1) WFH can give u a heart attack on the Peloton.
2) Spending 50K – 60K on your home, sharing it with Costco
and your hi-tech co, is not a good idea, because the QQQ is a sleaze
big, but the DOW is weak.
3) After x3 stopping actions in Feb & Dec 2018 and Mar 2020, the DOW
have reached a lower high in Sept 2020.
4) Up 14,200 from Jan 2016(L) to Feb 2020 peak @29,600. // the DOW
retraced 11,400 to Mar 2020(L) @18,200, or 11,400 : 14,200 = 80%. The uptrend is very weak !
5) The FANG greatness will lead to their demise.
In the WFM scenario, I imagine there will be plenty of whiners and corporate sycophants trying to set up “off-line” back-door connections with their boss, so they can continue their own corporate spin operation for political gain. Hard-working honest workers won’t like it. How are they going to control the communications? Will they be transparent to everybody? Are they going to have policies around it, or will it be the usual corporate free-for-all, where only the squeaky wheels get greased.
This won’t end well.
Humans are mostly social and WFH for many is a novelty.
Let’s see how long the enthusiasm lasts in a few years when all the downsides and costs start tearing their heads.
I wouldn’t bet on anything about offices right now.
I agree that humans are mostly social. But this often mentioned “social” disadvantage of WFH is a red herring. Lots of people have been working from home for a long time, including me. We figured out that, duh, we need to socialize outside of work, which is actually a lot nicer because you don’t mix work and social — and all the problems that come from that. Work is work, social is social. You no longer rely on a company to provide you with the “friends” and social life the company wants you to have. You choose your own social life and your own friends. It’s beautiful :-]
Agree with you, like, totally dude,,, (Wolf)…
After 50 years of mostly ”sole proprietor” biz, both as skilled manual worker/laborer/contractor and office worker/contractor, it is very clear to me that the social aspects of any office are almost always a form of exploitation of workers so that mgmnt can claim at least hegemony, if not total control of their peed on folks.
”Free at last, Free at last.” Might actually be the best thing one of our beloved leaders has said, though he said a lot of very very good ones.
In spite of all the worries expressed on Wolf Street regarding the possible and/or eventual outsourcing of work to India or elsewhere, the fact is that good old ”murrican” creative engineering and other creative efforts still, at least for right now, continue to lead the world to ever greater individual freedoms, including freedoms from at least most routine manual labor, heavy and light.
That ”WE the PEEDONS” need to make sure that all future guv mint rules and regulations continue to allow such creativity must not be lost in any evolutions of guv mint, ever…
As Wolf has suggested in this article and others, the fact is that the ancient folks who made the mark for crisis also the mark for opportunity knew from experience that they were mostly, if not totally congruent
While I agree in a loose sense, I disagree generally.
I’ve WFH for almost a decade working for myself and I think it needs a certain type of person to thrive in that environment.
Some people can and you’re testament to that.
Many struggle to function without constant attention… I’ve read of people leaving Teams on all day to ‘feel connected’
Groups of co workers having ‘lunch’ in Teams groups listening to each other munch on food.
How long until management start wanting you on camera all day, or not putting people on ignore because they think they’re getting ignored and get upset which is another thing I’ve heard… the madness may have only just started.
Many won’t thrive in the unfolding WFH norm. They’re in a honeymoon period right now. Businesses are.
Everyone is giving a lot of latitude to the new situation, let’s see what happens when it’s not new and patience wanes and stupidity ensues.
In another 6 months, after a long dark miserable Northern hemisphere winter (at least in the UK)… with many living in commuting towns/villages with gutted local amenities and public transport, I can see the attraction disappearing.
Working long hours to try stay ahead and keep their jobs, no time for socialising or making new local friends, or enjoying the non-existent social venues.
I really do appreciate where you’re coming from.
But WFH for the masses is a new thing.
WFH for corporates supporting the masses is a new thing.
I’m excited to see how it pans out.
I think WFH can work in some instances and I think many companies will evolve how they use space, but as the future for all office I think this trend is overblown. Just because the technology exists to make it feasible doesn’t mean its a good idea for the long haul. Meanwhile despite all their WFH announcements big tech has been gobbling up real estate all over the country. Sounds like they are jawboning to get a better deal on space.
IT all depends upon how the Covid 19 gets resolved/evolved in the next 12 months+
Before that we willexperience how bad it will be in the next 3-4 months!?
Some genius needs to build an outdoor office wonderland. If we can sit outside to eat our meals at restaurants, we can certainly work out of doors. Maybe go long heat lamps?
Sis trying to buy overhead electric radiant heater for under house eaves : sold out so far.
Apparently 45% F is where outside dining becomes unviable for restaurants. Suspect many that have been hanging on with patio etc. will have to go take- out, but that dooms ‘white cloth’ segment and juicy booze sales.
M-F from my NYC Real Estate inbox – With emphasis strictly on office space forget about retail spaces.
Monday: Sub lease space available
Tuesday: More Sub lease space available
Wednesday: Even More Sub lease space available
Thursday: Yes that’s right great sub lease space available
Friday: Guess what drinks on me? No Even more sub lease space available!
Saturday: First 3 months no payment!
Sunday: Paid utilities!
The domino effect of the virtual/home office…..just a few that come to mind here:
1) decreased demand for expensive real estate where proximity to the office become redundant.
2) decreased demand for commercial office real estate and new commercial construction.
3) decreased commercial property tax revenues will lead to higher property taxes on homes
4) decreased demand for residential properties with high property taxes
5) decreased wages for employees working from home office as the overhead of employees becomes competitive both domestically and internationally
6) increased ecommerce sales as home office employees reduce their convenience of access to retail stores during commutes.
7) decreased lunchtime restaurant traffic
8) decreased revenue for the automotive sector
9) increased revenue for the household goods, landscaping and home construction.
10) increased demand for live/workshop buildings
I’d be interested to see, if it’s possible.
Breakdown on adding spare room to resi and kitting out like a decent office.
Vs saving for employer.
In the UK adding a bedroom to the average house is probably £50,000.
If the business saves on office space and wants employees to move to ‘cheaper’ (usually crapper in the UK, possibly away from schools, friends and family) areas so they can pay them less… and ask them to buy their own office space (a bedroom) they’ll then have to heat all day and run electricity etc.
I can’t see this ending well. It’s not really a cost saving exercise.
It does put human transport companies in a bad position though.
I’m a builder contractor….I’m putting all my trade employees on “working from home”. It’s their problem how they are going to dig the foundation ditches, pour the concrete, stick build the entire house (or large building). If they can’t they will be fired.
The plumber, the electrician, the inside finishers, the cabinetmakers, the roofers will all have to figure out how to “work from home” or I’ll hire outside the country. They will factory build the “buildings”, ship them to the job site and a “work from home” virtual robot will put the construction to fruition. Everything built in.
This world is going mad.
I think most people know WFH does not refer to plumbing etc. The main effect is on the clerical worker and there are lots of them.
We just just moved into a bigger house, we have a newborn baby, we both work from home at times – we need 2 bedrooms, a living room and a place for two people to work in and have meetings when required.