The Platform


Cities are suffering from workers not coming back and it’s unlikely to change in the future.

In a recent interview, Kevin O’Leary of Shark Tank fame commented on the shift to remote work that has permanently changed the demand for commercial office space. O’Leary is a remote work advocate because he has seen the difference when it comes to increased profit to the bottom line because big expenses are shrunk by using remote employees. He said exactly what I have been predicting and preaching about since 2020.

There has been a critical paradigm shift in real estate since the pandemic and there are many sectors that can benefit from having more people work from home, instead of commuting. This means cities, their downtown buildings, and surrounding suburban office parks will never go back to normal. The thought of getting back to pre-pandemic levels of occupancy is not a reality.

Additionally, no one has talked about the huge impact on the environment this has had. If you have eliminated a significant chunk of commuters, you have removed a significant chunk of carbon emissions. This all adds up to a very positive impact on air quality.

Should there be some type of tax credit for companies and/or individuals for remote work? Emissions from vehicles have been significantly reduced over the last three years. So where is the accounting for that positive impact?

The other thing O’Leary mentioned during an interview with Yahoo! Finance was that the whole real estate market is going to face a huge shakeout. He pegs the number of people not going back to work at 40%. He talks about people not wanting to return to the office for a variety of reasons.

Suddenly, smart city concepts must be changed. Why bring people back into the city and waste all that energy if they can just stay home and do the job from their home office?

As I have mentioned in the past, we need to change and augment smart cities and expand them to smart regions where we consider a good percentage of people remote work. This changes the dynamics of where we apply broadband connectivity and the issue of improving air quality.

Broadband connectivity is another concept that I have been preaching about. In the past, many buildings were technologically obsolete. They needed to add intelligent amenities like redundant power coming in from two substations and redundant broadband connectivity from the network carriers.

Few in real estate wanted to make that investment thinking their buildings would always be nearly full. Those same buildings are now wallowing in double-digit vacancy rates and are still technologically obsolete. Profitability has been submerged by the tsunami of increased vacancy rates. They have the banks worried if their appraisals are going to come up short.

The whole rating and appraisal structure for commercial buildings also needs to be overhauled. Without the right technologies in place, a Class A building can easily slide into a Class B category because it cannot support corporate mission-critical applications. Who wants to lease a building that cannot support mission-critical applications?

Appraisers do not assess the technologies coming into the building. They still think the keyword is location. They are 20 years behind the times.

If building owners want to avoid a total disaster, they need to make some quick assessments of what they have in their buildings and what, if any, new intelligent amenities they can add in order to keep them marketable.

A senior analyst from CBRE posted a rebuttal to this article from Fortune on social media that focused on “those returning to work from home would be facing a couple of percent decrease in pay due to higher expenses.” The analyst claimed, “I would argue that the benefits of collaborating with your team in person well offset the potential costs of returning to the office.”

Did the author ever use Zoom or Microsoft Teams to collaborate with fellow workers like most other companies did during the pandemic? Most people found out they could collaborate using videoconferencing quite effectively.

She was then bombarded with comments from those who disagreed with her. They are right. People gained a lot of free time and cut commuting expenses as well as childcare expenses by working from home. Why would they want to go back to that now, especially when gas is more expensive?

This is clear proof that many in real estate firms have not grasped the reality of the paradigm shift that happened in 2020. How many times does it have to be said: We are not going back to normal and building owners and property management firms better wake up to this new reality and adjust their operations and marketing strategies accordingly.

James Carlini is a strategist for mission critical networks, technology, and intelligent infrastructure. Since 1986, he has been president of Carlini and Associates. Besides being an author, keynote speaker, and strategic consultant on large mission critical networks including the planning and design for the Chicago 911 center, the Chicago Mercantile Exchange trading floor networks, and the international network for GLOBEX, he has served as an adjunct faculty member at Northwestern University.