The digital age is creating new work styles that conflict with the management styles from the post industrial and early information age. Remote work is an example of a paradigm shift that is here to stay. And because it’s here to stay, it’s important to look down the road at some of the meta consequences of remote work.
For example: how might society change as a result of large scale and prolonged remote work? At a high level, it sets society on a collision course between past and future needs.
Look ahead 6 to 12 months. Remote work has scaled across organizations on a permanent basis. Hybrid office models have rolled out and workers only appear in the office several times a week. While more traditional workstyles are held onto by managers that believe productivity is lost by remote teams. Simultaneously, the pandemic lockdown policies are rolling back.
It may not be the same lifestyle from before the pandemic, but it’s much closer to the true quality of life that people can expect. And that means these new workstyle models will reap the full benefits that remote work can offer.
But now that life is returning to normal, traditional in office employees will get a taste of FOMO from their remote peers. Enough FOMO that they’ll advocate for more hybrid and remote models. And many more companies will adjust out of fear of losing top talent to flexible and accommodating competitors.
The massive number of companies that shift to remote work will begin to downsize their corporate real estate needs.
In time and at a large enough scale, remote work will likely cause a massive glut of corporate real estate to hit the market at once. And this glut will gravely impact the businesses with longer term exposure. In many cases, it will lead to systemic default on corporate debt obligations which will impact the global economy.
Remote Work – Key Points Looking Ahead
In the backdrop of 2020’s society wide remote work experiment, there is a successful vaccine rollout well underway. Because of the efficacy of the vaccine, governments are more willing to relax many of their more authoritarian mandates.
From then on, people that experience remote and hybrid workstyles will be able to realize the full benefits of the work style. They can travel, have the flexibility to work from cafes, and they will be available to attend to family needs. In the summer months of 2021, leisure travel will explode as these individuals experiment with working while leisure traveling. (AirBnB is well positioned to service this niche.)
While remote workers get to experiment with these new freedoms, others will be called back to the office fulltime. And they will return with an emerging sense of FOMO. These “stuck in the office” workers will watch their friends and family enjoying this new free lifestyle with a growing sense of jealousy. And this fear of missing out which will have rising a cost to employers.
Time will pass and in office workers will start to revolt against the traditionalist managers that want more face time. Placing significant pressure to adjust practices towards a compromise. ie: a more hybrid work model.
Why would they concede to change their office models?
Because the top talent will leave for the growing number of opportunities that accommodate their needs. Remote and hybrid formats of work culture are becoming part of the strategy for attracting and retaining top talent.
Meta Consequence of Remote Work – 2nd Order Effects
Now, assuming you buy into this narrative, lets look at the deeper consequences. The meta economic consequences that will emerge from this scenario.
As companies decide they no longer need as much space (whether hybrid or remote), they will downsize their corporate real estate. Fully remote teams will abandon office space completely, hybrid models will downsize in favor of smaller and more modular offices. Relying on hub and spoke campuses and co-working spaces.
Maybe WeWork will have a second coming.
Eventually, the traditional office culture companies will determine the need to adapt to employee preferences. If they don’t, they risk losing their talent that will defect for a better quality of life. It’s not rocket science, talent will leave for better opportunities.
In this scenario, any organization that has a long term corporate lease and is exposed to corporate real estate will likely be forced to endure that expense.
At a high level, that means banks, REITS, and large scale corporate real estate organizations will struggle in this changing corporate real estate environment.
As companies adapt to this new digital age workstyle they will aggressively look to dump their lease obligation. This will cause a glut of available real estate on the market. Prices will plummet and organizations that need tenants to fulfill their debt obligations will start to default. Laying the groundwork for a potential 2008 style real estate crises.
Beware of Who Has Skin In The Game
When you hear an executive or public figure advocating for back to work styles of pre-pandemic, you have to ask yourself what are the motivation for these advocates. For bank execs like Jamie Dimond, they have a tremendous amount of corporate real estate debt on their balance sheets. For others, it’s about maintaining control over legacy styles of business processes.
The push to bring workers back to fulltime is more about what these legacy stakeholders stand to lose from a digital age paradigm shift.
Remote work prioritizes different skills and competencies of managers that previously weren’t as significant to productivity. Organizational skills and asynchronous styles of communication come to the forefront. Less in your face style networking and political style posturing to the top and more meritocratic systems. This requires a challenging adjustment for managers. And many would rather see things go back to the way they were than adapt to changing times.
With all that said, it’s important to acknowledge that remote work is not ideal for all businesses.
However, businesses must adapt to the new reality. Otherwise, they will struggle to attract and retain top talent. Employees will develop a real sense of FOMO when their peers have improved quality of life from the freedom remote work offers.
This will translate into significant compensation upgrades for in person workers. There is a real and growing cost that will emerge for employers mandating in person work. Companies will increasingly feel that impact on their bottom line or will struggle to attract and retain top talent. Those that require in person work will have to pay top talent more in order to retain them.
3rd Order Effects Create A Feedback Loop
As companies grow more comfortable with remote workforces, their hiring initiatives will change after they’ve put good policies in place for handling the nuance of remote work.
And once they understand how to organize and manage asynchronously across time zones, massive changes will impact the global work force.
The realization that if workers can be productive from anywhere, why not look abroad where the cost of living is lower and thus, cost of labor is lower. Meaning that in time, companies will realize they can cut human capital costs without sacrificing quality of work by looking abroad. A globalized labor arbitrage will take place.
This further reinforces the reduction in localized real estate needs. It also validates a move away from hybrid models to purely remote. And the ultimate consequence is further pressure on corporate real estate values in the developed world.
The Bottom Line and Meta Consequence of Remote Work
A meta consequence of remote work is that it inevitably leads to a shakeup of the corporate real estate markets. These markets are linked to the foundation of the global economic system. Thus, the massive change that’s underway posses systemic risk to the financial system. I’m not predicting another great financial crisis. But I am saying this is going to have a massive impact on society and is worth following.
I’m piecing together a new narrative that makes sense of society’s shift into the Digital Age. The goal: to give you the facts and tools necessary to successfully navigate an increasingly digital life. I cover topics and narratives you can’t fully appreciate because you’re in the thick of it. Providing insights and analysis that are not always covered or accepted by conventional thought.
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Photo by Sean Pollock on Unsplash