Screams For RTO Are Only Being Made By Those With Vested Interests

Time to read [4 minutes]

Takeways

Corporations pushing aggressive return-to-office (RTO) mandates often have underlying financial motives.
Office market dynamics show a “flight to quality,” with only top-tier Class A buildings performing well while many older assets face severe value declines.
The remote and hybrid work shift is a lasting labor evolution, and evaluating the quality of sources on the phenomenon is essential.

I’ve noticed an uptick in corporate leaders demanding workers return to office (RTO), but it’s not for the reasons you think. This has broad implications for consumer selection of housing locations relative to work locations. We moved further from NYC because I anticipated coming into our Manhattan office half as much as before the pandemic. The standard RTO justifications are improved productivity, easier collaboration, building corporate culture, and management oversight, but these are not entirely valid, except for the last one. Some survey data I have seen suggests 88% of workers say they are more productive with a hybrid flexible work arrangement. More than half of employees have a hybrid workweek, but the media coverage suggests that employers want employees to come in every day or not at all, even though this is often not enforced. Curiously, as more companies demand RTO, more remote workers are being created. The corporations that push for RTO tend to have older boards, have invested extensively in existing office space, and, like JPMorgan, have billions in commercial office loans outstanding. When you come across a corporate titan pushing for RTO, there is nearly always an alternative motive not being discussed.

Three Office Classes And Only Part Of One Is Doing OK

In the office market, there are three classes of quality: A, B, and C. The upper half of Class A – trophy towers – is doing well, while the remainder is facing challenges with RTO and providing opportunities for conversion to residential. There is a tremendous flight to quality going on in the office market. I see a parallel in the high-end residential housing market.

Office Building Values Have Plummeted

The “Source” For Information Absolutely Matters

There is a lot of shilling going on right now by both ends of the RTO debate spectrum. At one end are the holders of a vast amount of commercial mortgages, including commercial office space, or companies that have invested heavily in the existing office space they occupy. These spokesmen tend to be in their 60s, having made their careers around the water cooler. At the other end are the doom and gloomers, selling software and services to feed the value collapse narrative, similar to the shared tweets I used in the previous section. As I have said early and often, without a proper source as taught by Edward Tufte, the content provided “is a lie” (misinformation).

Final Thoughts

The Work From Home (WFH) phenomenon is here to stay, and it can take many forms, with hybrid work being the most dominant. Pay particular attention to the sources that are providing the information. Here are a bunch of sayings you can use when explaining to people that WFH is not going away: