TenantSee Weekly: Maybe The Office Isn't So Bad After All
There’s been a lot written over the past 3 years about the negative aspects of office life, about how it harms our health, distracts us from what really matters and makes us less productive. The freedom to choose where and when we work, it’s argued, is transformative, enabling us all to create our own perfectly tuned work-life balance. It sounds nice, the idea that no one (at least no white collar worker) will remain oppressed by the constraints of working at an office, or working on a fixed schedule. Turbo-charged gig workers, calling our own shots. What could go wrong? Maybe a lot.
TenantSee Weekly: Swimming Naked: The Risk of Non-Performing Vacancy
Over the past decade the San Francisco office market was among the most desirable global markets for institutional office investment. Valuations increased by 100%+, and many assets traded…some multiple times. Even those that didn’t trade were often refinanced at substantially higher values, enabling the equity partners to take out significant amounts of capital. Today values are dropping as demand for office space in San Francisco is at historical lows, causing rental economics to decline rapidly. This presents unique challenges that are (typically) not entirely obvious to occupiers; namely, a full understanding of the debt and equity stack and the landlord’s ability to perform.
TenantSee Weekl: Change is Hard
While change is generally a constant state, big changes in one area can have the effect of spurring many additional changes in related areas. In most cases we’re not very good at forecasting all the add-on changes that may follow the initial change. We’re like low skill chess players, unable to see the full spectrum of opportunity and vulnerability created by our moves. And when big change requires us to take action, we often seek the comfort of doing what everyone else does as opposed to formulating our own approach. In the business world, this is a byproduct of risk aversion, or what can be called CYA at scale. Our corporate structures don’t typically provide incentive for creative, individualized responses to business challenges.
TenantSee Weekly: Market Outlook Q4 2022 Tenant Perspective
The Narrative
Too Much Office Space
TenantSee Weekly: Why Flex is Hard (but Inevitable)
The “flex” in flexible office solutions is about the occupier’s ability to limit commitment. A one-year lease is more flexible than a two-year lease, so on and so forth. With occupier uncertainty about why, where and when they should provide office solutions for their employees at an all-time high, you’d think landlords would be eager to offer high flex options in order to meet demand where it’s at. However, it’s difficult for landlords to provide the flex product, despite its potential to command premium rents and increase demand. Why? Because it’s expensive to build office space, and it’s difficult to design space that has broad residual appeal to a large swath of occupiers.
TenantSee Weekly: Educating vs. Selling
Selling is important. It’s what makes the world go round. But sometimes selling crosses the line and gets a little too close to misrepresenting or worse, lying. After all, there’s always been a healthy dose of deception built into selling. In sports, teams and athletes sell their opponents on the idea they’re going to zig when they in fact zag. Governments seek to sell a vision in order to successfully lead their people. Sometimes the vision is wrong, out of synch with what the people want. Look no further than China’s Zero Covid policy. Companies must sell their products and services to succeed. Startup founders must sell investors on the merits of investing in their companies. Buyers don’t want to buy an “OK” product or service. No one ever said, “…hey, let’s go with those guys, their product seems flawed but they’re really honest about it”. Much of what is sold is imperfect. Sellers have incentive to craft approaches that distract from imperfection while accentuating strengths. Even the salesman with a crappy product has to eat. It’s no wonder we’ve become skeptical. It’s essential to our survival. Storytelling is a form of selling. It often seems the best storytellers are selling the worst products. Sam Bankman-Fried of FTX and Adam Neuman of WeWork come to mind. My family loves the classic Christmas movie “Elf” starring Will Ferrell. There’s this great scene when his character, “Buddy”, first arrives in New York. He passes by a coffee shop with a sign in the window that reads, “World’s Best Cup of Coffee”. He sees the sign and runs inside full of excitement to congratulate everyone, much to their bewilderment.
