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.
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.
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.
What parent or you consider best is irrelevant, what matters to this discussion is what most employers think. And most office work is not software development.
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.
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.
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.
http://en.wikipedia.org/wiki/White-collar_worker. Operating a power plant is done at a computer, but I would call that blue collar; artistic painting can be done at a computer, but I would call it neither.
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.
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?
Well I wasn't even talking about growth vs steady-state. I was talking about monetary policy vs fiscal policy. A traditional Keynesian stimulus would have been fiscal in nature, and preferably direct state spending on productive matters.
Here's a few things that could have been done:
* Increased spending on scientific research
* Reform the health-insurance system to a universal system for greater efficiency while pouring extensive funding into it
* Vast amounts of infrastructure and public-works projects (especially: bridges, sewage infrastructure, electrical grid, fiber-optic internet, etc)
* Refunding/renationalizing state universities
Most of these sorts of things were utterly uncontroversial until the "neoliberal bloom" of the 2000s, in whose wake Western politicians have apparently forgotten how all their predecessors have managed recessions ever since the Great Depression.
And that's before we talk about undoing financialization and fixing the world's iniquitous trade policies! Those would be controversial!
Brad DeLong had an interesting post [0] on that question Friday. Basically, the strong market reaction to the talk this spring of tapering convinced him that yes there is a strong effect on long term interest rates which then stimulates investment.
Lower mortgage rates. If your mortgage goes from 5% to 4% your monthly discretionary income can increase markedly. If you spend it then, boom, increased consumer demand.
LOL no all it means is the sales price goes up. Harry HowMuchAMonth can pay $2K/month on his mortgage, and that's exactly how much he WILL spend regardless of interest rates. All the interest rate controls is how big of a check the former owners will get.
Although your reaction mechanism is wrong, the end result is the same, although the former owners are likely to roll their immense check into their new real estate purchase, eventually, at the far end, as people move into nursing homes or whatever, they DO cash out and those guys spend the "gains".
One problem is I don't know if $5K/month nursing homes are considered discretionary consumer spending.
There are also people who cash out refinance, and spend it on jet skis and Harleys. That works great at long as real estate prices only go up, regardless of personal income declining.
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.
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.
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.
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.
28 comments
[ 3.3 ms ] story [ 77.2 ms ] threadIt's about time for this to happen.
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.
Telecommuting makes this rule obsolete.
face to face co-located teams are still be best for many jobs especially complex software development.
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.
I am not sure there will be many traditional white collar workers in twenty years time.
Too many people believe growth is a requirement, vs a steady-state economy.
Here's a few things that could have been done:
* Increased spending on scientific research
* Reform the health-insurance system to a universal system for greater efficiency while pouring extensive funding into it
* Vast amounts of infrastructure and public-works projects (especially: bridges, sewage infrastructure, electrical grid, fiber-optic internet, etc)
* Refunding/renationalizing state universities
Most of these sorts of things were utterly uncontroversial until the "neoliberal bloom" of the 2000s, in whose wake Western politicians have apparently forgotten how all their predecessors have managed recessions ever since the Great Depression.
And that's before we talk about undoing financialization and fixing the world's iniquitous trade policies! Those would be controversial!
[0] http://equitablegrowth.org/2013/11/15/743/what-is-quantitati...
Although your reaction mechanism is wrong, the end result is the same, although the former owners are likely to roll their immense check into their new real estate purchase, eventually, at the far end, as people move into nursing homes or whatever, they DO cash out and those guys spend the "gains".
One problem is I don't know if $5K/month nursing homes are considered discretionary consumer spending.
There are also people who cash out refinance, and spend it on jet skis and Harleys. That works great at long as real estate prices only go up, regardless of personal income declining.
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.
[1] http://www.sf-planning.org/index.aspx?page=3254
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.
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.
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.