Tags: Coronavirus | Financial Markets | business | coronavirus | downsizing

Pandemic the Final Push to Telework

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By Tuesday, 02 June 2020 01:36 PM Current | Bio | Archive

Many big cities just can't seem to catch a break.

First they got hit with coronavirus-forced business and buyer shutdowns.

Now, on top of that, it's a new pandemic of protests, riots, and lootings.

But even long before these events, numerous large metropolitan centers began experiencing another sort of economic threat — a digital wave of workplace and workforce transitions away from traditional big office — big city — operating structures made possible by internet connectivity.

Survival necessities, in combination with newly realized remote-working employer and employee benefits, are causing more and more corporations to dramatically downsize central city offices, or relocate them altogether.

On the necessity side, social distancing requirements coupled with ever-increasing city real estate costs during a severe economic downturn — expected to be the worst since the Great Depression — is forcing companies to cut operating costs or perish.

Accomplishing this by laying-off workers will often make recovery impossible.

Many corporations over the past decade have tried to squeeze the maximum number of employees possible into their facilities. Social distancing safety concerns are making this increasingly difficult, necessitating that the spaces they provide be either expanded or dramatically restructured.

Adding to this problem, ever-increasing large city real estate taxes and utility charges place heavy cost burdens on corporate profits. Opening smaller offices in suburbs closer to where many of their employees live, and where rental space according to Moody's Analytics REIS is 40% cheaper on average than cities, can yield significant savings.

James Ritman, an executive vice president at the brokerage firm Newmark Knight Frank that specializes in office leases in New York suburbs, attributes some of the movement to executives who don't want to take a train into the city anymore.

He told The Wall Street Journal, "In my 18 years in Westchester and Fairfield County, we haven't had this type of velocity of groups looking out of Manhattan."

Thanks to the advent of internet-enabled video teleconferencing capabilities, the coronavirus pandemic has sped up an existing trend that was already gaining popular momentum.

As I discuss in my book "Reinventing Ourselves: How Technology is Rapidly and Radically Transforming Humanity" (2018), Organizations ranging from larger corporations to small start-ups apply benefits of remote tele-employment: to recruit and retain the best people no matter where they live; and to buy a unit of service and labor at lower salary and overhead prices to minimize personnel facility requirements.

This also benefits employees, allowing them to escape having to pay exorbitant housing prices to live in densely-packed cities or, alternatively, spend time and money on long daily commutes. 

Numerous major technology, media, finance and other industry employers are reporting that their accelerated pandemic-forced reliance upon remote operations is working out surprisingly well.

Discovery Inc., the parent company of TV channels TLC and Food Network found that an internal survey showed most employees preferred to work from home two days a week even when things return to "normal."

Chief people and culture officer Adria Alpert Romm said, "It's worked better than we ever would have imagined. We will most definitely provide the opportunity to have this hybrid schedule because it's working."

Morgan Stanley CEO James Gorman agreed. He observed in mid-April, "I mean, if you'd said three months ago that 90% of our employees would be working from home and the firm would be functioning fine. I'd say that is a test I'm not prepared to take because the downside of being wrong on that is massive."

San Francisco-based Twitter Inc. notified employees that, with the exception of jobs that can't be done remotely, after the pandemic others can continue to work from home indefinitely.

The company, however, doesn't plan to close or shrink any of their offices.

Other companies plan to significantly reduce their office facilities.

Skift Inc., a New York media company, intends to give up its Manhattan headquarters in July when its lease expires, plus put an end to providing co-working space for London-based employees. The moves will save the company close to $600,000 annually in rental, utility and other expenses.

Office building vacancies, missing rent payments, and declining property values caused by corporate facility downsizings, closures and relocations to suburbs are putting increased pressures on impacted big-city property owners, investors and real estate companies.

Moody's Analytics REIS projects that current 16.8% U.S. office vacancies will rise to 19% by the end of this year, surpassing previous record losses set in 1991 as businesses shutter and lay off workers.

Big losers will be pension funds, insurance companies and other institutions that collectively have hundreds of billions tied up in low-occupancy metropolitan office towers.

Included are developers that built such costly new skyscrapers such as Hudson Yards in New York and the Salesforce Tower in San Francisco backed by heavy debt.

Shares of New York City-based SL Green Reality Corp. and Vornado Realty Trust are down 59% and 47% since the beginning of the year, compared with an 11% decline in the S&P 500 index.

In any case, coronavirus or not, transformative corporate decentralization and facility downsizing influenced by an accelerating remote working trend were always inevitable.

Whether better for some, worse for others, there's no turning back the clock on myriad ways that information technology advancements and applications are impacting not only our lifestyles, but also our fundamental perceptions regarding the types of business and personal lifestyles we deem most desirable.

The pandemic will end, and as always before, adaptive innovators will be the ones most likely to survive.

Larry Bell is a senior visiting scholar at the Texas Public Policy Foundation. He is also an endowed professor of space architecture at the University of Houston where he founded the Sasakawa International Center for Space Architecture (SICSA) and the graduate program in space architecture. Larry has written more than 600 articles for Newsmax and Forbes, and is the author of several books. Included are: "Cyberwarfare: Targeting America, Our Infrastructure and Our Future" (2020), "The Weaponization of AI and the Internet: How Global Networks of Infotech Overlords are Expanding Their Control Over Our Lives" (2019), "Reinventing Ourselves: How Technology is Rapidly and Radically Transforming Humanity" (2019), "Thinking Whole: Rejecting Half-Witted Left & Right Brain Limitations" (2018), "Reflections on Oceans and Puddles: One Hundred Reasons to be Enthusiastic, Grateful and Hopeful" (2017), "Cosmic Musings: Contemplating Life Beyond Self" (2016), "Scared Witless: Prophets and Profits of Climate Doom" (2015) and "Climate of Corruption: Politics and Power Behind the Global Warming Hoax" (2011). He is currently working on a new book with Buzz Aldrin, "Beyond Footprints and Flagpoles." Read Larry Bell's Reports — More Here.

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Survival necessities, in combination with newly realized remote-working employer and employee benefits, are causing more and more corporations to dramatically downsize central city offices, or relocate them altogether.
business, coronavirus, downsizing
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2020-36-02
Tuesday, 02 June 2020 01:36 PM
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