The (Yes, We Were Waiting For This) Demise Of Commercial Real Estate

A few more country club memberships will be going on the VISA.

I don’t write that much about real estate. I do write a lot about work, though, and there’s a necessary dance between work and real estate, from meowing about “talent hubs” to commercial real estate guys wanting to keep their country club memberships fresh and needing to sell some space in downtown cores. COVID piped all that, and you had about 919 demographic shifts happen all at once: affluent people fled cities, tax revenues for cities declined, downtowns writ large became less energetic with less workers, those businesses (“snappy salads!”) suffered, and everyone in commercial real estate seemed to pivot to warehouses and collecting rents instead of office space in downtowns.

Now we’re three years on with COVID and its various aftermaths and people ignoring it, and the landscape still isn’t completely clear. I think the 35,000-foot view is that companies probably need less office space these days, even for the Boomer Bellowing Class of “Y’all must return to the office.” So we’re talking about less office space, but we’re talking about a time with some progressive mayors who want to do more in terms of making their cities equitable and equal, but that requires, well, money — and corporate office tenets paid some of that money in the past. So the “rock and a hard place” intersection is that businesses, who have always wanted to pay less taxes, now have a way to pay less — simply don’t have HQ offices. But cities want that money, and if cities don’t get that money, they’re going to shift the burden to homeowners in that same city. You’re seeing this everywhere.

That’s a long way of getting to this article by Thomas Edsall, which is super thorough and covers all the important points (well, most) of the post-COVID reckonings around work and real estate and urban cores. Let me point out a couple of key portions: