Earlier in the coronavirus pandemic, I speculated:
Think about it. If you're a business that until now has rented, say, a couple of floors in an office building to house your administrative functions, but you now learn to do the same job with most of your admin workers telecommuting from home . . . why go back to renting that space? Why not continue to have them work from home, and save tens or hundreds of thousands of dollars in rental every year? It's a no-brainer. Landlords should already be factoring that into their considerations for the future - and getting concerned.
Looks like I'm far from alone in thinking about that. The BBC reports:
Having thousands of bank workers in big, expensive city offices "may be a thing of the past", Barclays boss Jes Staley has said.
About 70,000 of Barclays' staff worldwide are working from home due to coronavirus lockdown measures.
This had led to a rethink of the bank's long term "location strategy", Mr Staley said.
. . .
In recent years, banks worldwide have shifted staff away from expensive skyscrapers in financial hubs, but Barclays and its rivals still have busy offices in places such as London's Canary Wharf.
But Mr Staley said his bank was re-evaluating how much office space it needed, as it was now being run by staff working "from their kitchens".
He added that in the future retail branches could be used by investment banking and call centre workers, hinting at an end to long commutes for some workers.
"There will be a long-term adjustment to our location strategy," Mr Staley told reporters. "The notion of putting 7,000 people in the building may be a thing of the past."
There's more at the link.
The implications of such a decision, spread across thousands of companies currently taking up office space in cities' central business districts (CBD's), are staggering. Consider:
- What about the transport infrastructure that's been built up to ferry people in to work and back home again? Railways, buses, even the roads themselves - what if the historical network suddenly falls to a much lower level of use or occupancy? Budgets will have to be adjusted, plans for expansion curtailed, vehicles and rolling stock mothballed, staff laid off. I don't think anyone's looking at that yet.
- What about businesses created to support businesses in the CBD? Cafes, restaurants, food carts, dry-cleaning outlets, gift shops - there are thousands of businesses set up to cater to and for office workers. If those workers aren't there in the numbers they were before, what's going to happen to those businesses?
- The biggest losers in the business world may be landlords. Hugely expensive office buildings may become financial millstones around their necks. (For example, One World Trade Center cost almost $4 billion to construct.) Loans to build more such buildings may dry up altogether if banks can't be sure of a return on so large an investment. Rents will probably have to be drastically reduced in an effort to persuade tenants to remain, and/or to persuade tenants to move from one landlord's premises to another's. Competition to sell office space might become much more cut-throat than has been normal up to now.
- Cities will be faced with a massive reduction in rates and taxes from a shrinking CBD. How will they make up for the shortfall? What about the money they've spent to build up a transport network to support the CBD? Many such networks have "featherbedded" contracts with trades unions. If demand for their services falls, can the city lay off workers, or is it contractually obliged to keep them, at vast expense? What will the unions have to say about it?
All these are questions that will have to be answered, and soon. Frankly, once companies see how much money they can save by having employees work from home, I can't see them keeping up such large offices any longer than they have to. They can always bring in staff once a week to smaller premises, staggering work days so that a central office receives, say, one-fifth of the employees and/or corporate divisions every day to brief them on developments, ensure everyone's working to the same script, and do the necessary administrative work. Even one day a week may prove to be more than is necessary in the long run. How will companies reorganize their operations and structure to take advantage of the "new normal"?
This will bear careful watching. I think it's going to affect a great many white-collar workers before long.
Peter
