Work From Home Trends
One topic that is a hot debate today is the effects on our economy with the Work From Home (WFM) trends that have been in place for the last few months. The market is definitely telling us that there are winners and losers and many think that these trends are here to stay. One of the most impacted sectors in the wake of WFM are the office space REITs that are down anywhere from 40%-60% or more. You would be hard pressed to find anyone projecting a bright future for this asset class, even large cap companies like Twitter, Square and Facebook have announced they are prepared to allow employees to WFM indefinitely, and may even allow employees to work remotely after the pandemic has passed. Pretty bleak future on the surface. But digging down into human behavior and using other frameworks to try and predict what the future holds for the office may give us clues as to where we might be headed. In this piece I would like to point out a few reasons why I think office space is here to stay, while facing longer term headwinds which arguably have been in force for the past decade.
Human Behavior
Humans, from a behavioral standpoint move extremely slow when adapting to change. Take the mall for example. E-commerce has been a threat for almost 2 decades. It seems every year we are seeing an article like this from 2008 https://www.newsweek.com/retail-american-shopping-mall-dead-84829. E-commerce has been around for 20 years, although more predominant in the last 10. Even though traffic on Amazon has seen huge increases, e-commerce still only made up 14% of all retail sales in North America (there was a big spike during the pandemic which makes sense, making up closer to 20% today). It took decades, not months or years for behavioral changes to take place. While using e-commerce as a framework for WFM, I would suggest that the trends we are seeing aren't permanent but will see headwinds over time if at all. Another example would be 9/11 which have some similarities with some of the Covid-19 trends we are seeing. In 2001 after the attacks on the World Trade Center and the Pentagon, there was a huge drop off in air travel. It took years for loads to come back fully, but they did come back as well airports looked drastically different. An argument could be made that once people return to the office, it may look very different than we are used to (more segregated and less open spaces).
Culture
One of the intangibles that you take for granted is workplace culture and the community that you build at the office. We are very much social beings, and we like being around each other and participate in team building.
Some employees may have job functions where it may not be necessary to have face to face interactions, but it's not a solution unless you are willing to sacrifice culture and community, some of the things that make companies successful. Also, how will you onboard new employees and have then integrate into the work culture? It would be lonely to start at a new company and not have a meaningful connection to your co-workers.
Communication
Technology has really come a long way in the past 10 years to allow us to functionally WFH in the last 90 days. If the pandemic happened a decade ago I am not sure this would be so seamless. We are able to have team meetings and zoom calls with clients or employees that make WFH tolerable and in most cases enjoyable. There is just something about knocking on a co-worker or superiors’ door and striking up a conversation or asking a question. The open arena of sharing ideas and debate in the office has disappeared and is fundamental piece in creating teamwork and culture.
Overall, the WFH era has really been pleasant. With technology today anyone working in an office space has been able to execute tasks without any issues. But the workplace is not going anywhere anytime soon. Will offices look different? Of course. will there be headwinds? Most definitely. However these trends take time, sometimes decades. So don't get too used to working in your pajamas!
Also check out the Barry Ritholz blog post linked below that I found interesting when trying to understand what the future might look like.
https://ritholtz.com/2020/06/how-much-has-the-world-changed/
In the meantime, tell your friends!