Anyone who does not understand the sunk cost fallacy should not be in management.
You’ve spent $x on office space. You can:
A. Use it, and make your employees hate working for you or
B. Let it go unused, and your employees are happier to continue working for you.
The money is spent either way. The only difference is morale, which does in fact directly contribute to your bottom line.
C. Get rid of what you don’t need so that everyone is happy
When you are locked in to a 3/5/10 year lease for the space, that’s not actually an option. Most leases signed pre covid should be up by now but clueless management probably renewed anyways.
And the really big corporations own their buildings. You think the company locked into leases are mad? The companies who own the building are pissed! Some have a multi million dollar building that’s losing value faster than the speed of light.
Good. Turn that shit into housing.
Are sublets not an option?
You mean sell it for money and actually make more profit while everyone is happy? Preposterous!
Or c, keep just enough office space to create rolling “layoffs” as people are asked to return to the office.
Step 1: Hire staff
Step 2: Train staff to do job
Step 3: COVID! Oh no! Everyone work from home.
Step 4: ???
Step 5: Fire staff to save money.
Step 6: Profit.
It’s nice to find the rant in your head written out. A previous employer of mine dropped two properties in favor of a store front.
They can’t depreciate the assets and use them as a deduction if it doesn’t count as an office expense. That only qualifies if a threshhold minimum number of workers spend a threshhold minimum amount of time in the office.
C. Sublet out the property and make back the cost of the lease or even a bit of profit.
There have to be relationships at play or something like that. Or saving face. Maybe investments?
We had some slight pushing into going into the office more, but instead of firing people, it was decided to switch to a smaller office space, so the people who like to work in an office can do so, and less money is wasted on a mostly empty office
Understandable that this is not an option for all companies, but insane that people are happier losing talent than at least trying to work something out
When the CEO personally owns the building and leases the office space to the company, that’s not an option.
Then he should act like any other office building owner and rent some space to other companies.
Bonus points if he gets with the future and works to convert some of the building to living space so people don’t have to travel to get to work. Not everybody will want that, but it will appeal to enough to make it worth doing. Shopping malls across the country are being converted to such hybrid spaces so most everything one needs is within a convenient distance.
Bold of you to assume he already doesn’t. But WFH across many industries drives down urban office space value overall.
I edited the comment to expand more clearly upon what I mean. There are other ways to capitalize on the space.
Converting office space to residential is costly (if even possible for a given building), and would require a lot of effort. There may be zoning issues in the way as well.
Much easier to just use the CEO hat to keep desks full, and the landlord hat to collect rent.
Which is why I gave it “bonus points” for attempting to do so.
Won’t someone please think of the poor rent-seekers!
Then he should act like any other office building owner and rent some space to other companies.
There are more buildings/office spaces to rent than people wanting office space these days. There are LOTS of empty unrented buildings. He would have difficulty even finding a tenant.
Bonus points if he gets with the future and works to convert some of the building to living space so people don’t have to travel to get to work.
An exceptionally small number (we’re talking single digits in the world) of Class A office buildings are good candidates for this, and these are typically done with grants/subsidies from state or local governments. These are only in the most lucrative geographic locations where housing is at an absolute premium regardless of the cost.
For good value of converting office space look at Class C buildings. These are typically older and smaller office buildings (think built in 1910s-1950s). In these, there are ways to make cost effective residential conversions and these are happening by the dozen now.
The class B pic shown in your link would be a perfect candidate to retrofit to housing if it’s unrented. The classifications you’re showing are classes of rentals, not building construction.
The class B pic shown in your link would be a perfect candidate to retrofit to housing if it’s unrented.
According to the architectural studies I’ve read when I looked into this question for myself, you would be incorrect. Open floor plans are apparently pretty horrible for residential conversions. Many residential building codes require each bedroom to have a window with a screen for ventilation. Now look at that picture of the Class B. The only exposed areas that could have a window with a screen would be on the perimeter. Further, codes many have rules that say that you cannot have one bedroom accessible by passing through another, so that would exclude long skinny apartments unless the are a 1 BR. That would leave lots of square footage trapped in the middle unusable for bedrooms. Could you put windowless living rooms and kitchens there? Sure, but even then its very few residences when they could knock that building down and get many more windowed rooms on the same piece of land.
Class C’s don’t have these issues as they were built with small individual offices in mind and not open floorplans, which make for affordable cost effective conversion to residences.
The classifications you’re showing are classes of rentals, not building construction.
I’m no building expert, but I am not aware of a difference in “class of rental” vs “building construction” you’re making the distinction of. The studies I read only referred to them by class letter and never mentioned any distinction that you’re referring to.
Here is a better example of the different classes in architecture: https://www.landzero.com/post/understanding-property-zoning-a-comprehensive-guide
As far as the windows, I don’t know that site and the window requirements, but it’s hard to see what’s going on on the sides. The overhead trusses are easily accessible as well. Maybe, maybe not.
I disagree with you on what you think you can do with “Class B” , but I don’t think you’re wrong about anything, if that makes sense.
Here is a better example of the different classes in architecture: https://www.landzero.com/post/understanding-property-zoning-a-comprehensive-guide
That looks like a guide on zoning, not on the layout inside office buildings or the age in which they were constructed.
As far as the windows, I don’t know that site and the window requirements, but it’s hard to see what’s going on on the sides. The overhead trusses are easily accessible as well. Maybe, maybe not.
I’m confused. You said this in the prior post:
The class B pic shown in your link would be a perfect candidate to retrofit to housing if it’s unrented.
If you say “its hard to see whats going on” or “maybe, maybe not”, why did you say that picture was the perfect candidate?
Don’t just take my word for it. Go look up the studies actually performed on Office-to-Residential conversion. There was one that evaluated something like 1250 office buildings in North America. Look up your local building codes for residential apartments. Some Class B are good candidates yes, but I doubt the one pictured is for some of the reasons I cited and more.
I disagree with you on what you think you can do with “Class B” , but I don’t think you’re wrong about anything, if that makes sense.
No, that doesn’t make sense to me. I’m no expert in this field. I just read the studies commissioned by the Federal government or articles about those studies. I even replied on Lemmy with this info a few months ago citing those sources. You’re welcome to take a look at it for more info here.
i think you fundamentally misunderstand the motivations involved that would lead to the CEO owning the office real estate. commercial real estate is a means for them to siphon profits from the business, not a genuine attempt to provide a valuable service to anyone.
The other companies that are also doing WFH?
I edited the comment to expand more clearly upon what I mean. There are other ways to capitalize on the space.
then it’s not wasted money is it
Ours tried full RTO, and then they compromised with hybrid WFH when they lost many skilled people who had been there for 10+ years to remote positions at other companies. Sometimes with little to no warning.
Some execs gotta learn the hard way.
Early in the pandemic, our CEO asked why we paid so much for real estate if everyone could work from home. They’ve been trimming leases as quickly as they can.
We’ve been hiring people who live out of state. They only come onsite very rarely, maybe only once a year.
My company did that too, then they replaced us with cheaper labor from overseas.
Ours did that before the pandemic and not my area. Within a year, it went back to what it was because of how terrible the quality was. Now they are dumping all the buildings that aren’t needed and sent a lot of us home. Of course, the main product that my job deals with needs buildings for machines to work so they didn’t get rid of everything. No more corporate, and for now, we are all home for the foreseeable future. I also wonder when they will get the bright idea to start outsourcing again now that it’s been like 7 years…
You would think that of all people, rich CEOs would understand the concept of the sunk cost fallacy.
The money on desks, rent, insurance, etc. is already spent. You’re not getting it back. Asking people to come back to the office “so that it doesn’t go to waste” assumes that you aren’t taking on additional costs for people coming to the office.
You now have worn carpet, doors, pens, paper, etc…money you could have saved if you weren’t such a knob.
You would think that of all people, rich CEOs would understand the concept of the sunk cost fallacy.
I’d expect that of someone who has to make hard decisions and work hard to get where they are.
A Nepo-Baby is neither of these things.
Are you really suggesting that you expect CEOs to be competent? Scamming people and exploiting workers doesn’t require skills, except if immorality is one.
Immorality is sadly a skill, ignoring that voice in your head that says “This doesn’t feel right, we can’t go othrough with this” and the one that says “Look what we’re doing to them!?! We have to make this right!”
Is very hard to do for people like you and I.
I work in commercial real estate. Two years before the start of the pandemic, my company considered downsizing our office to have most employees work from home and just come in when needed. We also discussed how we expected the office building market to struggle in the future. (Thinking in 10 years, not two).
Anyways, we got a deal from the property owners to sign another lease, so we stayed put. And now, big surprise, they forced RTO. Someone asked our president about it in a quarterly call. He basically said “we’re never ever going back to WFH and you can quit if you don’t like it”.
So, naturally, we’re struggling with turn over and our headcount is down about around 10% so far.
For many of us, our teams are split up amongst multiple offices so there is no difference from working in the office and working from home. It’s all about that empty lease.
Also! I should add that for many property owners in commercial real estate, they can be “punished” for tenants that go dark, or stop operating at the location, even if they are still paying rent.
For example, say you own a strip mall with a grocery store and a few restaurants. If the grocery store stops operating in that location, there are less customers at the restaurants, making it more likely that they will stop paying rent also.
At least one in three bosses are shitty bosses. If their responsibility is to the company and the shareholders, telecommuting saves a ton of time and money.
Also, for those companies that love to position themselves as “green”, commuting is a horrendous waste of resources and a cause of pollution. My company preaches about how important it is to lower your carbon footprint, then institutes policies that increase carbon footprints by the tens of thousands and don’t even blink.
Convert to apartments
Make profit
Tada!
I agree this is what should be done! Though it is surprising challenging to convert an office building to an apartment.
One issue, for example, is that the plumbing and electricity lines tend to be located on one end of the building. If you want to convert it to apartments, you have to reroute all the plumbing.
In the US, there are also rules about the number of stair cases. That’s why many apartments here are long and flat buildings of 3-4 floors rather than taller, taking up less space.
I guess they should enjoy the consequences of their actions like… regular people do?
Or maybe these bosses just aren’t good at what they do. After all, they wasted millions on real estate and empty desks. Shouldn’t the shareholders be demanding new leadership?
We don’t even have the office space anymore for full RTO. If at some day too many people would go into the office some wouldn’t have desks to work on…
Same here. A smart CEO wouldn’t force RTO, they would lease out that unused space or expand using those unused desks.
I thought it was because they couldn’t make friends & wanted to force people to be around them.
I think some of them are also doing it for the tax breaks they get if they pump a bunch of employees into the local area’s economy.
And we all know how difficult is is to get companies to voluntarily give up free tax money from the government. It’s like trying to take drugs away from an addict.
Corporate “Welfare Queens”
How was this not obvious when the panic set in with the pandemic.
It’s never about productivity, it’s always about increasing value.
Worked at Boeing, where you have 1990’s cubicles with 17" 3:4 monitors. I’m glad to he back in the office.
So does that mean you guys are gonna start doing actual work on the new planes, or…?
Sorta. It’s going to take 8 weeks for me to get a box of pens.
