Big Offices a thing of past

Well... the "New Normal" is spurring new ideas like Barclays boss: Big offices 'may be a thing of the past and Post-COVID, 75% of 4.5 lakh TCS employees to permanently work from home by '25; from 20%. If these firms are thinking about it then it is certain these ideas will gain traction among others as well. The value proposition is compelling - why spend millions on RE when folks can be just as productive from kitchen desk as they are from the offices. However, if these ideas were to spread and gain foothold the consequences to the broader economy will be bad, really bad.

I firmly believe it still a good idea to put thousands of people in one large building; commute and traffic is great for a nation’s economy and solving this problem in alternate ways is the best way to continue to grow the economy. Here are my arguments against working remote...

When most employees works from home, companies no longer need to lease or buy office buildings, and will directly impact RE Brokerage firms, Asset Managers, Facility managers, REITs, Security Service providers, Janitorial services, as well as those who provide myriad of miscellaneous office related services like coffee, fruits, furniture, plant watering, paper shredders. building maintenance etc.

Empty buildings don’t need much energy and that means reduced energy demand. This drop in demand means pressure on energy producers, transmission companies, energy traders, power grids, coal miners, natural gas producers and industrial power equipment manufacturers. It doesn’t stop there... No driving into office means lower need for overall automobile usage. Overtime this means overall lower mileage and longer shelf life for automobiles, leading to lower sales volumes; longer refresh rate means lower revenue for state governments and insurance industry; this also result in lower gas consumption which will make it even tough for drillers, frackers, offshore operators, midstream operators, energy traders, energy transporters, storage providers, gas station and trucking; lower automobile production volume means reduced need for iron and steel, and related mining industries. Reduced traffic means lower probability of auto accidents when then affects body shops, parts salvagers, parts supplier, parts manufacturers and industrials; lower automobile usage means reduced need to service vehicles, change oil and tires; double pain will felt by automobile dealers providing lucrative services, specialized motor lubricant manufacturer, chemical industry, and rubber industry. Clustered around office building are set up that supports the commute weary office workers. These restaurants, coffee shops, bars, nail bars, salons etc will now start feeling the pinch of work not able to cater the work from home employee population.

Now with reduced energy demand, the need to hedge energy risks with options and futures contracts will be on the wane. Investment banking will now start seeing the cracks in the energy trading desks. Also, with reduction in in economic activity means lower opportunties for underwriting IPO or Mergers / Acquisition; lower economic output could result in possibly further reduction of interest rates. Low interest rates will reduce banks’ ability to attract deposit and reduce their income by diminishing traditional lending activity due to constrained capital accumulation. So banks need to further shift from the loans to other areas like securities underwriting, trading, or insurance which is already pressure. 

With few automobiles on the road means lesser traffic and that means lesser congestion. The urgency to add that extra lane or build new highways to ease traffic will become no longer immediate; infrastructure focused construction industry that solves these problems through the art of complex engineering will now have to find new problem to solve. Also, with no need for office space, there will also be reduced need for building new office properties. What this all means is lower need for cement, reinforcing bars, specialized chemicals, backhoe loaders, asphalt pavers, dozers and whole assortment of materials and equipment used in construction.

Next in line, those who work from home, do not really need a new clothing or button-down shirt or dress shoes; a worn-down t-shirt or beaten up high school band hoodie will do. Now the purveyor of fine clothing to utilitarian ones will experience reduced demand. Not only that, the small businesses that washes and presses clothes for living will feel pressed. Furthermore, the ripple effects will be felt further downstream in the supply chain including cotton, yarn, clothing makers, sewing, and stitching industries. Countries where sewing and stitching are prime lively hood with feel the hard pinch. The same idea holds true for the leather industry with affected categories that include handbags, belt, shoes etc.

Now, many industries across the board will feel squeezed if companies enmasse decide to embrace the idea of remote work. The companies that employs these remote worker will now start running out customers and clients to enables them to support these remote workers in first place; the only option will be layoffs to cut cost and that becomes the new pandemic further compounding the problem.

So, No Sir, No; working from home for majority of the company population is not a great idea after all; let us all drive together at the same time and leave office at the same time; let us all contribute towards the congestion and suffer the consequence of congestion; yes, this causes problems with pollution, global warming, stress level and health; but those are good problems to have relative to worst economic outcome with the possibility the current way of life collapsing. We need to realize that the entire economic system is built around automobies over the last 100 years and hence it cannot be unwound so quickly. So let us keep the focus on flattening the curve and heading back to work at the first opportune moment.