What’s still keeping workers in the United States out of the office?

June19, 2023

Good morning! Yes, it is an official, lawful federal holiday, our newest — and, we think, a Minnesota government holiday, also = Juneteenth. If you are nevertheless working, you are probably in the majority. Read more about it: Juneteenth National Independence Day in the U.S. High heat might be good for baseball, but high and dry heat ain’t so good for agriculture… as the drought and high temperatures continue. (Can’t help it, my roots are in farming.) “Some people may be better than you think.”  (CBS News)

Getting a glimpse of the topography and rugged terrain of the expansive and unique ~312 acres Los Angeles Country Club (reportedly worth ~$7,000,000,000!) invites you to imagine that land before time, before all of it was leveled and paved over, that is.  Amazing!

• Fifty years ago the United States work force included nearly sixty percent (60%) of older teens (ages 16-19) employed at part-time or full-time jobs.
  • Today, approximately thirty-seven percent (37%) of that demographic is employed.  (U.S. Department of Labor, 2023)
  • There are approximately 16,000,000 in the age group today = approximately 10,000,000 humans not employed.  (U.S. Census Bureau)
• Here’s something to think about:  (Altman, Kiron, Etc., et al., 2023)
  • How do you define your work force?
  • A confident minority of executives say their work force is just their employees…
    • … but the overwhelming majority, especially leaders on the front lines of organizational transformations, takes a broader view that goes beyond just employees.
  • Increasingly, they characterize the work force as all of the people and groups involved in achieving the company’s business objectives.
  • Hierarchical, command-and-control, internally-focused management practices are ill suited for work forces that span internal and external organizational boundaries.
  • Using siloed functions to independently manage employees and external contributors, for example, is fraught with challenges.
  • Work force ecosystems include employees as well as external contributors and partners of various kinds —
    • — long-and-short-term contractors, gig workers, application developers, service providers, and crowd sourced actors.
  • An ecosystem perspective explicitly recognizes that accessing and engaging work forces is no longer the sole purview of the human resources function,
    • but requires cross-functional actions involving leaders in the C-Suite, technology, procurement, finance, legal, and other areas.
  • Intentionally orchestrating a work force ecosystem requires leaders to coordinate activities across their own organization and with external contributors.
• “I don’t make as many mistakes as they do.”  (Rose Zhang, 2023)
• “The best leaders create clarity, not confusion.”  (Eades)
• Commercial real estate in large cities — and in smaller cities — is stressed under the whole back-to-the-office vs. hybrid vs. work from anywhere debates.
  • ULI and NMHC recently concluded, “commercial-to- multifamily conversion shows promise.”
    • “We disagree and think the conversion narrative is overplayed…”
      • (Of note:  The Minneapolis Tribune  recently reported a 33% office vacancy in downtown Minneapolis, an historic level going back decades.)
    • SUPPLY: How much office space will be converted to multifamily?
      • We surveyed large U.S. office markets–starting with Midtown Manhattan–and estimated that less than 5% of office space in most markets could be converted to residential in the near term due to several challenges…
      • Floor plates: The average office building in Midtown Manhattan has a typical floor plate of nearly 24,000 gross square feet vs. multifamily buildings with 16,000 square feet.
      • It’s very common for office building plates to be 30-40% larger than multifamily.
      • What do you do with dead, windowless space?
      • Building configuration: Columns, depths, large cores, and a lack of water/plumbing systems are significant challenges.
      • Building sizes: The average office building in Midtown Manhattan has more than 700,000 gross square feet of usable space, which would equate to an average building size of 1000 residential units.
      • Encumbrances: Most urban office buildings are 70%+ leased, and less than 3-5% (depending on the market) are less than 50% leased.
      • Capital: In a more normalized capital markets environment, there’s plenty of debt, but it comes from different sources with varying sweet spots.
      • All of these sources are sidelined right now, with banks (primary providers of construction debt) undergoing the most systemic shift.
        • Bottom line: It’s not impossible to convert office buildings to multifamily, but it’s not easy.
        • We believe it is unrealistic to think that a building can be converted simply because it’s out of favor.
        • Many other conditions have to be in place to make conversion viable, and these conditions seem to only be relevant for a relatively small share of existing office buildings.
    • DEMAND: How much space will office tenants need?
      • CBRE recently surveyed 200+ occupiers and found that 40% of tenants plan to meaningfully reduce their office footprints while only 10% plan to meaningfully increase their footprints. Perhaps more concerning, 14% of respondents plan to downsize by 30%+.
    • SUPPLY/DEMAND SCORECARD
      • Hypothetical scenario: Half of the office-to- conversion candidates turn into multifamily projects, shrinking office supply by about 2.5%, while 30% of tenants downsize by 10%, resulting in a 3.5% reduction in demand. All else equal, these two moves would result in a neutral net effect on the overall office market.
      • Therefore… Perhaps the headlines, conference panels, and industry reports on the “promise” of conversions are at least slightly overplayed?  (ULI and NMHC, 2023)
• What’s still keeping workers in the United States out of the office?
  • At a time when restaurants, planes, and concert arenas are packed to the rafters, office buildings remain half full.
  • Thinly populated cubicles and hallways are straining downtown economies and, bosses say, fragmenting corporate cultures as workers lose a sense of engagement.
  • Yet workers say high costs, caregiving duties, long commutes and days still scheduled full of Zooms are keeping them at home at least part of the time, along with a lingering sense that they’re able to do their jobs competently from anywhere.
  • More than a dozen workers interviewed recently say they can’t envision returning to a five-day office routine, even if they’re missing career development or winding up on the company layoff list.
  • Managers say they will renew the push to get employees back into offices later this year.
  • The share of companies planning to keep office attendance voluntary, rather than mandatory, is dropping, according to a survey released in May of more than 200 corporate real-estate executives conducted by property-services firm CBRE, one of the largest managers of U.S. office space.
  • A battle of wills could be ahead. The gap between what employees and bosses want remains wide, with bosses expecting in-person collaboration and workers loath to forgo flexibility, according to monthly surveys of worker sentiment maintained by Nicholas Bloom, a Stanford University economist who studies remote work.  (Smith, Carpenter, 2023)
    • Without A Vision Consultancy’s perspective:  MOST workers never left their work, most… we often forget to remember and to mention those who daily get up early, go to work, remain faithful to their work, and keep the economic engines churning.  The vast majority never stopped going to work because their work can’t be done remotely.

Cordova Crow

By Michael A. Mullin © 2023

I played chicken with a crow more practiced than I.

It hunched hungrily outside my window, loitering on my narrow lanai,

cocking its head from side to side

to see more clearly

the morsel it sought so dearly.

Fluffed feathers, jagged beak, jet-black plumage, prancing to and fro –

spindly legs, razor-sharp talons at the end of each toe,

pacing on my railing, fearless, focused.

If Alfred were here this siege would soon end,

one less human,

one game of chicken,

no longer pretend.

(Written recently in Cordova, Alaska on the occasion of a goose attacking my plane and forcing an extra day’s stay.)These accumulate from week to week… I can’t bear to take leave of them… these are not required re-reading:

“Some people may be better than you think.”  (CBS News)

“I don’t make as many mistakes as they do.”  (Rose Zhang, 2023)

“All dogs have a bad day sooner or later.”  (U.S. Postal Service)
“The only difference is packages don’t complain.”  (Federal Express founder, Fred Smith)

“Analyze, organize, initiate, and follow-through.”  (Douglas Jr.)

“The best prize life has to offer is the chance to work hard at work worth doing.”  (Roosevelt, T.)

“We are not provided with wisdom, we must discover it for ourselves, after a journey through the wilderness which no one else can take for us.”  (Proust)

Underrated skill:  Following up. (Schwedelson)

“When the sea was calm, all boats alike / Showed mastership in floating.”  (The Bard)

“Vision is equal parts inspiration and aspiration.” (YT)