Dean Clough

October 26, 2022

Portico Darwin: Office Buildings Are The New Pyramids

TODAY'S RAMBLINGS

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Disclaimer:  what follows was greatly influenced by this In Plain English podcast, and specifically, the research done by the guest on that episode, Nicholas Bloom.  A lot of what I say below is backed up by the cold, hard research done by Bloom and his fellow brainiacs.  Their stuff is at WFH Research.

With that out of the way:  it has been interesting to observe (vs. participate) in the work revolution wrought by the pandemic.  I left TEECOM in late 2019 and have essentially been retired since.  So it's no stretch to say I've been a witness to the whole thing.

Here's how two different companies - the first my former employer, the other my wife's current one - went about it.   

TEECOM
TEECOM had sweet offices!  In fact, as I was departing the company in October of 2019, they were wrapping up a super-nice expansion of their space, which resulted in the company having an entire floor at City Center, in downtown Oakland.   Their office was in the 10 story building in the right middle of this photo.
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Pre-COVID, this downtown district was gentrifying, with new condos, bars, and restaurants popping up everywhere.  There had always been offices, yet little neighborhood life, but that was changing.  Plus, it was a sweet commute for nearly anybody - the location itself is central Bay Area, but it's also directly on top of a BART station.  My commute from The Marina in SF took a max of 45 minutes door-to-door, with no driving.

But despite the swank (and enlarged) HQ, TEECOM's president David Marks had made the decision even pre-virus that the company was "Remote First".  That meant that anyone that wanted to could work remotely, and not go in to an office.  But coming in was always an option.  This was smart even before the pandemic - it expanded the labor pool and reflected the reality of the nature of this particular company's work.

But, at the time, it was also predicated on the company growing - they also had and were paying for thousands of square feet of Class A office space.  That's all over now. 

After the virus hit, TEECOM completely shuttered not just their Oakland HQ, but all of their satellite offices, too.  The company became "Remote 100%".  There is no office to go to, even if you wanted one.   

While I'll never quite be thrilled about my departure, I will say this:  I would have been bummed - big time - if I had stayed and then not been able to go into TEECOM's very cool and fun office, at least when I wanted to.  Having enjoyed a modern workplace, I know something is lost when everybody's remote.  I think TEECOM was onto something when they still had offices, yet gave people the option of being 100% remote.  That choice doesn't exist any longer, nor does it at an increasing number of other companies, nationwide.

That is a big fucking deal! 

And BTW:  this part of downtown Oakland has been really hurt by the exodus of not just TEECOM, but many others.  It borders on being dangerous there now.   

Kilpatrick Townsend Stockton
If I didn't spend my time writing blogs and guzzling Weissβier, I think I could write a serious case study on Kilpatrick Townsend Stockton, because it captures the multiple dimensions of the whole issue. 

Some background.  Kilpatrick Townsend Stockton (KTS) is a large, multinational law firm for whom my wife works.  Headquartered in Atlanta, they have 21 offices.  Their SF office is important, as it's the center of the firm's intellectual property practice.

As such, it is what you'd expect:  pretty f'ing nice.  In fact, the monthly lease on their offices on the 18th and 19th floor of 2 Embarcadero Center - pictured below - is approximately $1 million.   
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By the time the virus rolled around, Julie had worked for KTS for about 30 years, in that building above or places just like it.  And during that time, here's how often she worked from home: 

Zero.

I don't mean rarely or occasionally.  I mean not one single time.  Nor did she have a mechanism on her phone or home computer to even check office email - let alone do her actual work.

So it was something to see that change, literally overnight.  On Monday, March 16, 2020, Julie went downtown to her office and worked, as she had for decades.  Until SF Mayor London Breed shut the city down at noon that day.  The pandemic had started.

On Tuesday, March 17, 2020, Julie started working remotely full time and did so for the next two + years.  Kudos to their IT department for handling such a monumental change so well.  It was only this summer that her firm "encouraged" people to return to the offices. 

Julie's going in 3 days a week now and reports many colleagues are simply ignoring the firm's missives and rarely - if ever - coming in.  Why? 

What happened was and is being repeated everywhere, and Bloom's research confirms it:  Julie and many of her colleagues are happier and more productive working remotely.  Her law firm's profits have never been higher, so the quality and quantity of the work performed by a nearly 100% remote workforce hasn't suffered. 

And the simple fact is working from home recaptures almost 3 hours of Julie's time each day.  Getting ready and commuting there and back - even from an SF neighborhood - is time consuming.  And for what purpose?  Millions have asked that question and the answer is . . . there is no purpose.  Or at least not one obvious now.

What's Next?
My take:  the world of offices and the buildings that house them in America's cities will never be the same.  I believe many office buildings will be torn down, repurposed, or abandoned.  Like the pyramids.

Consider all of these factors:
  • Commuting to an office for many is a chore and contributes to climate change
  • The research is conclusive that workers that can do so are happier working remotely
  • The research is also conclusive that workers are as productive, if not more so, working remotely
  • Many companies have faced stiff resistance when they've asked their employees to return to the office, even on a hybrid basis
  • There is a shortage of skilled workers in many business sectors
  • Office space is expensive; consider the examples above but also Apple's $1 billion campus

Combined, it would appear that the most that will happen is some workers will go in to offices some of the time.  But make no mistake:  that's going to devastate commercial real estate and the many small businesses dependent upon it.

That's not just a theory:  Julie's law firm is moving everyone in to one single floor in the San Francisco office.  And that's repeating itself over and over, all around America - consider that if you think my pyramid analogy is a stretch. 

Or:  if these fine buildings now sit mostly empty, how long will that last, and what will become of them if it's forever?
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FROM THE UNWASHED MASSES

Speaking of pyramids!  I went to our beloved de Young Museum yesterday here in SF and saw the West Coast premiere showing of "Ramses the Great".  Killer, for the record.
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Thank you to any one that is reading this newsletter.

KLUF

Here on their jinx-free sophomore album are Talking Heads and More Songs About Buildings and Food.
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