Anti-Karoshi
By the beginning of 2008, more people lived in cities than in the countryside for the first time in our history. The speed of our transition from a species who didn't much care to modify their environments to one that dwells in vast, complex colonies, is unique in evolutionary history. “Cities lived or died on the basis of common rules of behaviour and the ability of their citizens to bind themselves together with shared experiences, beliefs, and values, and then to extend these into the countryside that fed them” writes anthropologist James Suzman in his book “Work: A Deep History, from the Stone Age to the Age of Robots.” The oldest written history of a city actually takes the form of an epic poem and described the achievements of Gilgamesh, and early king of Uruk in Mesopotamia, famed for building the city's walls. Working life for most people in Uruk was probably not very different from working life in cities like Paris, London, Mumbai, or Shanghai on the cusp of the industrial revolution which heralded enormous growth in those cities.?
Initially, there was an expectation that the growth trajectory of cities might be disrupted by Covid as remote work and digital transformation gained momentum, and investors shifted their focus to companies expected to dominate the future, particularly in the technology sector. According to data from S&P Global, technology firms dominate the list of the 50 companies with a market value of more than $10bn that made the biggest percentage gains in 2020. But these early-pandemic winners have collectively shed more than a third of their total market value, the equivalent of $1.5tn, since the end of 2020 the Financial Times calculations based on Bloomberg data found. Zoom, the emblematic symbol of the remote work revolution, exemplifies this tale of boom and bust. Despite its meteoric rise with shares soaring by as much as 765% in 2020, the company has seen its stock plummet by about 80% since then, translating to a jaw-dropping $77bn drop in market value.
The rollercoaster ride of these pandemic-era winners underscores the transient nature of market exuberance and the enduring importance of fundamental business resilience. Steven Blitz, Chief US Economist at TS Lombard, aptly notes, “Some companies probably thought that shock was going to be permanent. Now they’re getting a painful bounce-back from that.”
Underpinning business resilience, and tech stock valuations, are the various facets of society, including work culture and organisational dynamics, where the aftershocks of the pandemic are still playing out. Sir Jim Ratcliffe's tenure at Manchester United for example has ignited debates on productivity and remote work policies. Reports suggest that the billionaire owner is seeking to overhaul the club's operations, including a push for staff to return to the office or ‘seek alternative employment’.
Meanwhile, insights from a survey covering 2,500 firms conducted by Decision Maker Panel, a collaboration between central banks and US and UK universities, shed light on the fallacy of assumptions surrounding remote work, starting with the idea that it’s uniformly good for workers – or at least for workers’ pay packets. Businesses with higher levels of homeworking have had lower wage growth since 2022, the data shows. Overall, for every extra day worked remotely, the numbers suggest there is half a percentage point lower growth.
Nicolai Tangen, CEO of Norges Bank Investment Management, broadens the debate to cultural factors, highlighting disparities in innovation and risk appetite between American and European companies. “There’s a mindset issue in terms of acceptance of mistakes and risks. You go bust in America, you get another chance. In Europe, you’re dead,” he said, adding that there was also a difference in “the general level of ambition. We are not very ambitious. I should be careful about talking about work-life balance, but the American`s just work harder.”
These observations on working patterns dovetail with data revealing differences between Americans and Europeans. According to the OECD, a club of mostly rich countries, Americans work, on average, 15% more hours per year compared to their European counterparts. And it is not just that Europeans spend a few extra weeks on the beach, the typical working day in Britain, France and Germany is half an hour shorter than in America according to data from the International Labour Organisation.
领英推荐
Despite these disparities, a surprising revelation emerges: while Americans work more hours overall, both Europeans and Americans now spend nearly the same amount of time in the office, with the rise of remote work playing a pivotal role in reshaping work dynamics. This suggests that Americans are working more from the comfort of their own homes, reflecting a shift towards a more flexible and enjoyable work environment.
Globally, South Koreans work on average 400 more hours per year than Britons or Australians, and have adopted a form of the Japanese system call karoshi, which is death resulting from overwork and excessive occupational stress typified by the phenomenon of hastily eating lunch at their workstations. According to official statistics, working hours in South Korea, China and Japan have declined considerably over the last two decades, with the greatest strides being taken in South Korea. This shift has been credited in part to the advocacy of anti-karoshi groups pushing for more harmonious work-life balance. In Japan in 2018, for example, the average worker officially clocked around 1680 hours of work 141 hours fewer than in 2000. This is close to 350 more hours per year than German workers but 500 less than Mexican workers.
The commentary and studies on working from home have ramifications for cities, but some of the biggest fears in real estate were focussed on the outlook for offices.?AEW though are bullish, projecting that prime office space will deliver the highest returns among all sectors, at an impressive 9.6% per annum over the next five years. This surge in returns can be attributed to the significant outward yield movement observed in 2023 and the first quarter of 2024.
Not all markets are expected to benefit. Occupiers are opting for smaller yet higher quality spaces, consolidating into fewer centrally located offices. The result can already be seen in higher vacancy rates in peripheral submarkets such as Docklands and La Défense. In contrast, central and accessible submarkets like the West End and Paris CBD boast significantly lower vacancy rates of 4.4% and 2.5%, respectively. US average vacancy rate sits at an uncomfortable 19%.
As monitored by the INREV Asset Level Index, European office vacancy rates have risen to 9% from 5% pre-Covid. That said, vacancy rates were 14% back in 2014. In their recent quarterly report, data from Kennedy Wilson backs up this finding with average office occupancy in Europe of almost 95% and net operating income up 14.3% in 2024 in Europe but down 0.5% in the U.S.
As the world grapples with the complexities of post-pandemic recovery, investors and policymakers alike are navigating uncharted terrain. The resurgence of prime office investments underscores enduring demand for physical spaces, albeit in a landscape reshaped by remote work trends. Contrary to predictions of obsolescence, prime offices are projected to yield robust returns, buoyed by repricing dynamics and evolving tenant preferences.
The Great Depression ushered the short lived ‘shorter-hours movement,’ and very nearly persuaded the Roosevelt administration to introduce the 30 hour workweek into law, in the form of the Black Connery 30-hours bill, which sailed through the Senate in 1932 with a 53 to 30 majority, although it was later abandoned. The debate about working hours is hardly new. The impression that Americans work harder than Europeans, is, however. Their ability to take risks, isn’t. That’s hardwired. Still, man is guilty all the same of wanting to shirk: “Hardly a competent Workman can be found... who does not devote a considerable amount of time to studying just how slowly he can work and still convince his employer he's going at a good pace” Frederick Winslow Taylor explained to a meeting of the American Society of Mechanical Engineers in June 1903. He was lecturing them about the perils of “the natural tendency of men to take it easy.” It’s clear that the impact of culture, regulation or changing work practices is by no means new. The belief since 2020 that the office is fundamentally flawed is equally short-sighted. Its mutating. It always has.