- Too few homes/high costs: WFH improves it (both allowing people to live elsewhere AND improving supply).
- ICE vehicles are contributing to poor air quality/climate change: WFH improves it (less commuting, lower traffic, etc)
- Rural areas are losing population, suffering from poverty: WFH improves it (relatively affluent families can move there)
- Suburban areas have poor walkability/local shopping/facilities: WFH improves it since people will spend more time there.
The people who seem to be fighting this are corporations that hold commercial real-estate (and the media companies they run). Really just goes to show that most of their statements about the environment are just nonsense (looking at Apple in particular).
People need to stop with this whole "only commercial real estate supports working from the office" nonsense. Some of us simply want our job to provide us with a space where we can work that isn't 10 feet away from where we spend the rest of our day, the same way that our job provides us with other tools we need. Not that I'm necessarily defending forced RTO but I hate this framing of the issues.
Also if your vision of WFH is that everyone sprawls out then it doesn't solve some of your other issues: people will still need to use their vehicles to get places (because unless we solve the root issue of 'too few homes' then those people will be spread out from each other or services to not create more cities with too few homes) and their sprawled out suburban communities will not suddenly become more walkable. They'll just drive everywhere.
> Also if your vision of WFH is that everyone sprawls out then it doesn't solve some of your other issues: people will still need to use their vehicles to get places (because unless we solve the root issue of 'too few homes' then those people will be spread out from each other or services to not create more cities with too few homes) and their sprawled out suburban communities will not suddenly become more walkable. They'll just drive everywhere.
Partially disagree.
Maybe I'm not representative, but most of my family's driving is specifically _commuting_. All other weekly errands add up to less than one day of commute driving. Actually, less than one way of one day of commuting.
Unless you compare a "fully rural" drive-60-miles-to-get-groceries lifestyle to basically a "downtown manhattan" walk-to-the-office one, I'm skeptical that total car-miles will increase when transitioning from WFO to WFH.
Most "completely non-walkable" suburbs will still have a grocery store within a few miles, usually in a so-called super center with a bunch of other stores. I don't have data to back this up (other than talking with coworkers), but my sense is that people who talk about transitioning to a "rural" WFH really mean "move to a small town" or "move to the outskirts of an exurb".
So, even if they become completely car dependent, they're still reducing from 50 commuting miles per day to 2-3 "errands" miles.
> we're trying to make sure going back to the office isn't a REQUIREMENT but a luxury
There are multiple equilibria. I like hybrid work. That doesn’t mean others shouldn’t be allowed to require office time. The market will work this out in tech; employees have bargaining power.
> people will still need to use their vehicles to get places
Hmm ... walkable neighborhood has even become more livable and walkable, all my car uses could now be public transport or car sharing.. needing one now maybe at most once or twice.per month, sometimes less.
> we solve the root issue of 'too few homes' then
Yes.. but on the other hand you can mix only so many homes around offices.. which would make my neighborhood less walkable again.
Also I neither want to be location dependent for job selection, nor do I want to move due to jobs? Kind of arrogant privileged view, on the other hand, why not just leave the space for people that actually really need to live nearby their working location, like the merchant, the doctor, etcetc?
> Some of us simply want our job to provide us with a space where we can work that isn't 10 feet away from where we spend the rest of our day
If you really have that luck to be able to live that close to your office, great.. but how long will this hold? I idiot actually moved pre-pandemic closer to the job, just that they wanted a cheaper location and reorganize and moved then farer away, lol, so I had 2 month of 10 minutes to work :) Until I get that back I prefer not to was so much time travelling for barely nothing.
It's also ridiculous because it demonstrates a lack of understanding of sunk costs. If a company with an office is that concerned about costs, it's cheaper to keep the office closed without paying for utilities and all the other overhead.
A lot of people here just want to work from home and the range of social and economic problems they work backward to have WFH solve is astounding.
I don't actually believe in the whole commercial real estate conspiracy. The employers who actually have the agency here are presumably mostly not so stupid as to be making decisions based on (often relatively short-term) sunk costs.
But if those same employers are OK with employees who want to and can productively work from home, they're also justified in largely ignoring the preferences of employees who would prefer a bustling in-person office.
Most employers don't own any real estate at all... they lease it. It's extremely uncommon for companies not directly in the business of Real Estate to own their own buildings... there's probably some single digit % of office space owned by the company occupying it.
There may be an incentive for executives tied to local real estate, though. e.g. owning a home in the Bay Area, and seeing it get devalued as everyone is moving away. Residential prices have been falling in the Bay Area... but then NYC has been pretty stable and there's still an urge for BTO there among the banks. Finance is much more relationship driven than Tech, though.
The companies I worked for in San Francisco signed like 10 year leases for premium real estate in the city (millions per year). Before COVID it was a “sure thing” that prices would only go up, incentivizing longer and longer leases.
I suspect this is the real reason big companies are so incessant about RTO. They have to stay or breach the contract which would cost a ridiculous sum of money. Funny enough I’ve observed the exact same behavior when buying colo space or circuits in a datacenter. The previous person would sign a 10yr contact and act like we saved a ton of money, then we’d be stuck paying $10,000/mo for a 100Mb internet connection long after prices dropped an order of magnitude. Unfortunately there is no requirement for critical thinking skills to sign a contract.
It’s a little astonishing that so many companies reacted to “we made our own lives difficult by signing a contract for a thing that, it turns out, we don’t need” with “we can solve the problem by deeply annoying a lot of our employees.”
I know it’s a little more complicated than this, and I know there are jobs with Reasons to be in the office (I enjoy one) but still… now you have TWO problems.
I have noticed this as well, companies leaning on the sunk cost fallacy to feel more comfortable throwing away the rent by having the office occupied. In the end its much better for companies if office rents fall substantially, so why fight it?
In general there tend to be conventions around lease durations, and in a hot market you don’t have much bargaining power to change the terms. The better the tenant, the more leverage you have though.
In general the risks of locking into long duration contracts needs to be weighed carefully, as we saw with SVB
It’s not so much about individual investments, but how commercial real estate sits as an asset class in wealthy people’s portfolios generally. There’s no scenario where a 2008 for commercial real estate doesn’t cost them a lot of money, so it’s in their material interest to push for back to office.
> It’s not so much about individual investments, but how commercial real estate sits as an asset class in wealthy people’s portfolios generally.
Those same individuals also own companies that pay rent, and so also have an incentive to reduce the amount of money spent on that.
I don't think anyone in the managerial class is looking at their E-Trade asset mix, and deciding that they should change company policy to protect their investments. One decision at one company isn't going to move the needle one iota. And even if it did, it would move another needle the other way (companies are tenants, not landlords).
Much easier to sell the real estate and purchase more shares in companies that were once tenants.
> whom would they sell this real estate in a tanking, high-interest rate market, exactly
Anyone with the political connections to get a residential conversion approved. The wealthy elite are uniquely positioned to profit from this in a civically inactive and politically insular city like San Francisco.
Residential conversions are wildly expensive and frequently infeasible, so even assuming you have the political connections, the financing is going to be a challenge, and of course your end goal is to fill them with tenants in a down market for tech jobs.
Congratulations, you’re basically back to square one of filling empty real estate, now at additional cost. And thus why the incentives are to try and ride out the status quo by forcing people back into offices.
This really depends on the specific building. There are many office buildings that could have slapdash remodels done to make them habitable and revenue positive, and there is plentiful pent up demand for affordable rents in urban cores.
Nevermind the knock on effects of retaining and growing the on street retail base that has fled entirely commercial sections of many urban cores. You don't get a safe, friendly neighborhood when the streets are deserted every evening after 5:30pm.
As cited elsewhere on this thread, it really only works for old buildings and not for huge swathes of the newer-built commercial real estate that’s sitting empty right now:
Again, we also have to think about what the incentives would be for preserving the value of the general case of the asset class, not whether individual buildings are convertible.
Generalizing the forest while ignoring large swathes of what it consists of is a bad idea, not every metro area has the same building makeup and composition as NYC.
NYC already has seen many extreme building conversions, for example turning large apartments into micro-apartments. Many other cities have not had the economic pressure for conversions to occur.
When these buildings default and their property taxes go unpaid, the locality will have to do something with these properties, and often the financing available to municipalities is much better than what the general market can get.
That's sufficiently indirect and diffuse that I don't really believe it. That's a bit like Amazon is a non-trivial part of my stock portfolio even through index funds so I'm going to make us go all-in on AWS for that reason (as opposed to other herd-following reasons that may be good or bad).
Especially among execs who have so much wealth that commercial real estate holdings, much less the ones they can directly influence, are in the noise.
An individual investor has nowhere near as much sway over masses of other people as the business owners we’re describing here, so this analogy doesn’t hold. If you could invest in Amazon while simultaneously forcing others to spend millions on their services, you probably would!
In most cases, those are close-in neighborhoods that few would consider suburbs. Inner ring suburbs might qualify but those usually mean compromising on home size or school quality.
Streetcar suburbs were close-in neighborhoods that were built on streetcar lines (and horsecar lines before that) and were typically a mix of single family, 2 family, and 4 family residences with some commercial properties at intersections (corner stores, etc.) along with a few larger apartment buildings. They started being built in many cities in the US around the 1880s.
They were fairly walkable but people typically needed to use the streetcar to get to work in the central core of the city. They're a little less walkable now, at least where I live, because the corner stores no longer exist, people go to big box grocery stores.
We cannot reliably measure medium to long-term productivity with or without WFH.
I find it a little galling though that the "Pro WFH" side needs to prove it, but the "Nay WFH" side doesn't simply because we've arbitrarily pinned that as normalcy. I've read studies that support both modalities, and based on comparing their methodology it seems very easy to construct them to show any conclusion you set out to show.
I'd argue given the benefits I set out above (and others), a higher burden of proof should be asked for in-office, rather than just accept it as the De facto standard and setting the bar high to challenge it. If they both started on even footing WFH would win because the benefits are quantifiable, whereas in-office are anecdotal.
PS - In the above I even forgot all the family benefits of WFH.
I'm not suggesting that WFH is "plainly rational", but we have plenty of examples where the corporate world will persist in irrational beliefs long after any principled approach would have given up. How many years did it take for the corporate world to get over the belief that women could only be nurses, secretaries, and typists, for example? Corporations are made up of people and they're not collectively beholden to any particular logic or rationality.
You'd be surprised how little is based on facts and data and how much is feelings and beliefs and just somehow reconfirming them... on all levels far beyond WFH/WFO debates (:
> Really just goes to show that most of their statements about the environment are just nonsense (looking at Apple in particular).
It's not that they're nonsense, they're simply whatever those corporations deem to be most profitable to say. To expect differently is misguided.
It's exceedingly rare for what's most profitable to project/say to align with what's most profitable to do. Even for individuals... "do as I say not as I do" is an idiom older than dirt.
Doesn't make it right, corporations are incentivized to behave like psychopaths. But it's not nonsense, it speaks volumes to what a given business is appealing to. In my experience they're often most vocal about the aspects they're actually behaving the worst in.
Keys... hah easy, we have actually been searching our car in the 15-30 minute range.. trying to remember when and why we last drove it, and where we parked - and as I write that right now I cannot remember again where it is right now :/
Ditto. That's why I sold my car after starting WFH. It became annoying to occasionally try to remember if I collected my car from that parking lot 2 weeks ago.
Not for me. I work from home but I will typically go for a drive after work just to get out of the house and because I love to drive.
I mean I don't love to drive in west coast cities that are congested, but in most of the country you can drive at highway speeds on the highway, except for rush hour, which in those places lasts one hour and during which you can drive at highway speeds minus 10 mph.
I find commuting from the 24th and Mission to downtown via the BART very pleasant these days. Before COVID I would fight my way and barely squeeze in. Now I get a seat just about every time. I get off at Montgomery, so I am able to skip over the sketchier stops on Market (Civic center and Powell to some extent). There are still plenty of great cafes, coffeeshops, and bars open within walking distance of my office. Overall no complaints; I enjoy going into the office much more than before COVID.
The BART website clearly states that they are able to provide current operations due to COVID funding which runs out in 2025. They plan to stop offering weekend routes, stop running after 9PM, reduce train frequency to every 60 minutes, etc.
BART's budget is not funded by San Francisco. I think there are many sources of funding such as bridge and highway tolls which should be explored to shore up BART operating budgets. In addition, BART should abandon boondoggle capital projects like the monstrous tunnel VTA is proposing in the San Jose extension to invest in ways that improve service on existing lines. Finally, it is more than reasonable to redirect highway spending to transit.
That sounds reasonable enough, thanks. It looks like tolls generate ~750M currently and BART shortfall is ~330M. So, it's doable if we're able to push through an increase of 50% on tolls.
I wasn't able to easily look up our highway spending budget.
That's not what BART's report says, at all. That is a worst case analysis. The Metropolitan Transportation Commission required all agencies to undertake an unusual analysis using scenarios provided by MTC. The report concludes that BART cannot cut its way to solvency in the given scenarios. The report does not reflect BART's actual projections or plans.
Okay, sorry if I am fearmongering. It's not my intent. What do you feel will happen?
From my perspective, there's a website that has the word crisis in the URL, a chart that shows a ~40% loss in revenue due, and the two-year SF budget shortfall is trending up - recently revised from $720M to $780M. I find it challenging to take away an alternative perspective when none is offered up on the website beyond "be a transit champion."
This is a bit too optimistic. BART in its current two year budget is projecting consecutive years of $300m operating deficits. That is very far from sustainable and not an unusual worst case.
Many subway systems are profitable, like the Tokyo JR East. If there is a will there is a way. Americans simply prefer sprawl and cars when it comes down to it.
The vast majority are not, the systems in a bunch of Asian cities (mostly in Japan, HK, Taiwan, Singapore) are the exception due to a few reasons, most notably because they use distance-based fares and land around stations often belongs to the operator bringing in massive commercial revenues.
It's impossible to know if Americans genuinely prefer sprawl because the alternative of building more compact communities is banned by regulation all over.
>Transportation infrastructure isn’t meant to be financially viable.
Not profitable != not financially viable. At some point, anything that loses too much money becomes not become viable. Transportation isn't exempt from this.
>* Users of the highway passenger transportation system paid significantly greater amounts of money to the federal government than their allocated costs in 1994-2000. <https://web.archive.org/web/20170628114204/http://www.rita.d...> This was a result of the increase in the deficit reduction motor fuel tax rates between October 1993 and September 1997, and the increase in Highway Trust Fund fuel tax rates starting in October 1997.
>* School and transit buses received positive net federal subsidies over the 1990-2002 period, but autos, motorcycles, pickups and vans, and intercity buses paid more than their allocated cost to the federal government.
>* On average, highway users paid $1.91 per thousand passenger-miles to the federal government over their highway allocated cost during 1990-2002.) track
You are citing a common accounting sleight of hand where you look at federal gas excise revenue and compare it to only federal spending on highways. Some issues:
* This includes an important subsidy from urban road users - who are federal funding ineligible - to highway users.
* Federal funding is only 25% of highway spending, the rest being state and local funds.
* Most road expansion capital projects deliver worse increased passenger throughput per dollar than highway projects.
Regarding costs, a good rule of thumb is the best performing road networks pay for half their expenses with user fees (Texan highways). Some poorly performing ones like Maryland are at 20% (http://www.actfortransit.org/archives/testimonies/2009Apr29T...). Owen D. Gutfreund’s
Twentieth-Century Sprawl is a good reference.
The final logical mistake in this line of analysis is looking at per rider subsidies between roads and transit, since American transit systems are uniquely inefficient precisely because of the burdens on transport laden by the road system. You can’t build densely because everyone thinks their cars won’t fit in the new urban geometry, but density is a precursor to successful transit. So we are stuck in an equilibrium where we prop up despots around the world for gasoline while everyone hates their commute.
I'd wager at this point in the history of the West, the full "return to the office" back to pre-pandemic levels will never happen. We will look back at 2019 as the point at which we hit "peak toil", before the WFH movements and AI automation changed the structure of productivity forever.
I’m surprised to see it that low. Downtown SF is pretty dead. As an introvert looking for some quiet time I head into the office with an open floor plan to not see people while I work.
A 100-person office that has one introvert coming into it every day because they are looking for some quiet time is not considered 'vacant' by this statistic.
I don't even think it would track it if 0 people were coming in, as long as the lease is still active. Commercial office leases tend to be on the longer end compared to residential (eg. 10-year is not uncommon).
The proper way to track it would be traffic in the commute hours and spending on lunches and so on during the work day, I suppose? Isn't that what cities are measuring and looking at with this return to office stuff?
That's comparing various sources with undisclosed methods. I suggest apples-to-apples comparisons of the Cushman & Wakefield reports for the two cities. In their reports using comparable methodology SF is 24.8% and Austin is 23.1%.
From the article rents aren't responding properly. I saw this also in the 2008 crisis: landlords would prefer to have a building empty (not just class A office, but retail space too) then rent for a lower amount.
On the other hand, in SV we got a year's free rent, so we took enough space to fit our guess for what we'll need in 18 months. I imagine that will be reported as what rent we'll pay when we finally do start paying, without averaging in that year of no revenue.
> landlords would prefer to have a building empty (not just class A office, but retail space too) then rent for a lower amount.
Interestingly: I have heard that, for loans on commercial real estate, having vacant space with a high rent is better for the landlord than having a paying tenant and lower rent. Specifically, that banks:
1. Often allow the landlord to defer a fraction of the mortgage payment (proportional to vacant space) to the end of the loan
2. Often require an additional payment (to reduce the LTV) if the average rent of non-vacant units falls below the level when the loan was originated.
So, landlords keep the space vacant because a) they can; and b) reducing rent means they have to pay the bank extra money they may not have.
I think (and am maybe imagining?) that there is some kind of tax deduction for empty warehouse space and that technically a floor in an office building with absolutely no employees there qualifies as a warehouse. Not my area of expertise though.
But nevertheless I’ve heard there are some cost optimizations to be had when the office is fully empty too.
If it does rebound, it might not be until the next generation of startups reaches mid to late stage on the other side of the current lending crunch, presuming they don't exclusively work remote or choose NYC as their primary hub.
> If it does rebound, it might not be until the next generation of startups reaches mid to late stage on the other side of the current lending crunch,
Building boomed in SF during the GFC (2008 et seq) so there was extra capacity as things recovered, and eventually space was at a premium again. The real estate glut helped early stage startups.
> presuming they don't exclusively work remote or choose NYC as their primary hub.
I love NYC, and am even on a couple of boards of actual tech companies in NY, but c'mon it doesn't make a lot of sense for tech businesses, except I suppose some fintech. Advertising, online retail, sure, I suppose, but those rarely need bespoke technology, much less anything novel. But California's level of investment last year slumped to only 3.5X NY...it has a long way to go. And much of that slump was in SF -- SV held up much more strongly, as you could also see in the real estate article posted on HN today (NYC commercial vacancy rate isn't as high as SF's, but is higher than SV).
These hot spots thrive on network, and nowhere are the networks more intense than NY, but on the tech side the biggest, most active network in the USA, err, world, is still in the Bay Area.
My casual observation that drove that thought, which was admittedly off the cuff, is the people who really want to go back in-office are new grads who want to live in an exciting city, and NYC is way more livable and exciting than SF. That urge to live and work in SF, instead of the suburban Valley, was part of the gravity that brought big companies back to the city 2010-2020. Secondary NY hubs seem to be doing much better than pre-2020, though to your points, making the leap to NY primary is a much higher bar.
Real estate has very very sticky prices when it comes to down markets, because those who hold real estate have every reason to believe that their speculation on ever-increasing prices will be well rewarded.
San Francisco in particular has done everything it can to reward speculation and higher prices by opposing development, thereby greatly enriching those in real estate.
Weathering one to two years of missed rent might be very well worth what they can get on the other side. In anti-development areas like San Francisco, the profits from real estate appreciation are one of the most important aspects of the financial side of the property, and rents often take a back seat.
Yes, though that's mostly with newer builds that are just starting to rent out. After a few years, rent appreciation in SF makes the initial mortgage requirements for renting moot, for the most part.
Perhaps we can repurpose some of this real estate for housing/retail use. Perhaps having a jobs-to-housing ratio of 3.5 is not sustainable, who would have guessed.
The fact is that SF has added way more jobs then housing for decades.
IMO this is a great opportunity for SF to re-balance their jobs/housing situation. I have no doubt that SF and surrounding cities will act promptly to turn this into an overall win! \s
As I understand there are debt-to-income ratios on commercial loans and those are calculated on the rent, so leasing to someone at a lower rent than you used to can bankrupt you since your lender will require you to come up with the cash to bring your ratio back into compliance. Basically like any other optimized system, real estate is not tolerant of transient conditions and it's not clear what's going to happen to commercial real estate. At least for CA housing, the state will prop it up through the junior loan program.
One of my friends is in real estate is complaining about this. His employer wont let him rent out their vacancies to market price since that would lower the nominal value of the estate.
They rather have 0$ than what the market can bear as long as they wont have to lower rents.
There was a recent discussion on HN about this https://www.nytimes.com/interactive/2023/03/11/upshot/office... ,
but yes. Basically older buildings can work (though the conversions are still expensive and tend to assume luxury apartments) but it's a lot harder with newer skyscrapers.
- ICE vehicles are contributing to poor air quality/climate change: WFH improves it (less commuting, lower traffic, etc)
- Rural areas are losing population, suffering from poverty: WFH improves it (relatively affluent families can move there)
- Suburban areas have poor walkability/local shopping/facilities: WFH improves it since people will spend more time there.
The people who seem to be fighting this are corporations that hold commercial real-estate (and the media companies they run). Really just goes to show that most of their statements about the environment are just nonsense (looking at Apple in particular).