American Cities May Have Hit 'Peak Office'

http://www.forbes.com/sites/joelkotkin/2013/11/05/american-cities-may-have-hit-peak-office/

by Brajeshwar • 13 years ago

45 28 13 years ago

forbes.com

smoyer• 13 years ago

I for one welcome our new remote boss overlords!

It's about time for this to happen.

VLM3• 13 years ago

Article didn't have any exurb commentary, as employees are pushed out of cities, the appeal of a long commute declines.

_Adam3• 13 years ago

Interesting. My understanding is that office space is a function of the number of white collar workers in the economy.

I expect this number to increase slowly over time. But perhaps we're approaching a point where a sort of equilibrium exists. Further societal and technological changes will need to occur to significantly shift it.

MarcusVorenus• 13 years ago

My understanding is that office space is a function of the number of white collar workers in the economy.

Telecommuting makes this rule obsolete.

DrJokepu• 13 years ago

I understand your point (telecommuting has major effects on office space usage) but it will still be a function of white collar workers in the economy, simply because a certain percentage of white collar workers will be working in offices for the time to come (although this percentage will change over time). Office space usage will be a function (but not equal to) the number of white collar workers. There might be other variables too.

walshemj2• 13 years ago

You have been drinking the telecoms company's cool aid - they want to sell expensive teleconferencing solutions which have higher profit margins than the regulated services.

face to face co-located teams are still be best for many jobs especially complex software development.

Zigurd• 13 years ago

As a consultant, I get to see a wide variety of offices among a clientele and various service and technology providers I would expect to be at the progressive end of the spectrum. The offices I have seen that are solidly in the flexible/hoteling/work-at-home mode are in design firms and tech startups that decided to go distributed from the start, and O'Reilly Media and its spinout Maker Media. Disappointingly, there are a lot of tech startups that have retrograde office layouts and schedule policies. It's just not mainstream yet.

_Adam3• 13 years ago

I believe these positions are a percentage of all white collar positions, and that this percentage hasn't changed much in the last few years.

Technologically, there's been no major advance that makes working from home any better than it was in 2008. The only thing I can think of is the increased prevalence of video chat. But, I can't imagine that the former lack of free, reliable and high quality video chat is what was keeping employees in the office.

Telepresence robots are little more than a novelty right now (imagine trying to lead a whiteboarding session with one of those...). To completely eliminate the handicap of working from home full time, we would need some very convincing virtual reality.

Someone2• 13 years ago

Lots of white collar worker's work is being automated away. For example, compare the number of bank tellers twenty years ago versus now. Less visible is the effect of automation on accounting personnel. Electronic invoicing got rid of lots of data entry errors. Parts of what's left gets outsourced.

I am not sure there will be many traditional white collar workers in twenty years time.

_Adam3• 13 years ago

How do you define 'white collar'? To me, it's any job that can be done at a computer.

codex• 13 years ago

I think we may have to wait until the unemployment rate drops to pre-Great Recession levels before we can draw firm conclusions.

byoung2• 13 years ago

Exactly... Plus, companies that had layoffs over the past 5 years likely still have empty cubicles to fill first as they increase hiring. It will be a few more years before they need bigger spaces.

toomuchtodo2• 13 years ago

The only way the unemployment rate (the true unemployment rate, U6 [http://www.bls.gov/news.release/empsit.t15.htm]) is going to drop is if more people continue to permanently exit the workforce [http://data.bls.gov/timeseries/LNS11300000]. There just is not enough consumer demand, even with prodding by the Fed with QE to increase employment.

eli_gottlieb2• 13 years ago

Why on Earth would monetary stimulus to the lending markets create consumer demand? Should we really continue believing that demand is supposed to come from credit rather than wages?

programminggeek• 13 years ago

If we really have hit 'Peak Office' and Windows is on the decline, then no wonder Steve Ballmer is resigning from Microsoft. </joke>

ChuckMcM• 13 years ago

I'm still waiting for Forbes to hit 'Peak Linkbait'

Maybe when Priceonomics does an article on it I'll have another look :-) But seriously there are so many unconstrained variables in their questions that they cannot draw any conclusions whatsoever.

blackjack48• 13 years ago

Interesting to note: San Francisco adopted an annual limit on office development in 1985 of ~1M sq feet per year [1]. For the past decade, new office development has been under that limit and the remaining allocation has been carried over to subsequent years. Fast forward to today and planned large office development in the city is projected to exceed the allocation in the next year or so.

[1] http://www.sf-planning.org/index.aspx?page=3254

encno1s3• 13 years ago

Company I work for has offices all over the place. Every time I go to one of these places for meetings, the offices are usually empty.

Most everyone I work with is telecommuting. I do sometimes miss goofing around with folks in the office, but working in boxers is the best perk ever.

Spooky23• 13 years ago

IMO, this is a tax policy problem. You can go to a city where 80% of the buildings are vacant, but the property owners want insane rents.

Real estate developers have an incentive to hold on to property to let it rot, because they can use the losses (real and imagined) to avoid taxation. The carrying costs for the property are often largely driven by taxes, and assessed value is usually driven by rental income.

VLM3• 13 years ago

I would agree with your remarks about crazy rent demands although I'd make a mild correction that nobody has ever been foreclosed due to an imaginary loss, but real losses result in real problems.

So if you can't rent some shack for $20K/month and you've got a loan for half the value of the property, at least for awhile you can get away with telling the bank that you haven't found the right "fit" or "personality" or "match" and much as you're not allowed to criticize single people for such language, the bank will back off as long as you're somehow making the monthly payment. But the day you rent that "$20K" property for $5K the bank is going to freak out at the implication your 0.50 LTV ratio just insta-rose to 2.00 LTV even if you somehow can make the payments.

Its an accounting trick... unrented space is a temporary cost of sales... even if temporary turns into a couple years. But a contract proving the property is worth less because the rent has dropped, is an instant semi-permanent hit in the balance sheet, which you can't just paper over with "cost of sales" BS.

American Cities May Have Hit 'Peak Office'

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