I suspect that for many large companies, the issue is not the existing leased or owned space, but whether they need to keep adding to that going forward.
From an investing perspective in SaaS companies the leases are irrelevant. It’s a worry for REITs, not for SaaS.
Denny Schlesinger
There is absolutely something missing with all this work from home. You cannot network effectively. You don’t run into people and have pop-up conversations. You can get yourself a bit of tunnel vision if you aren’t careful.
Just an anecdotal observation. Over the years I’ve run companies where most of the personnel had to travel everyday in order to work at different sites.Hundreds of people. Worldwide. About 20% of their work could have been done from home saving office space and infrastructure,and streamlining the logistics of reporting. If the option had been there we would have grabbed it. At the same time the management superstructure (overhead) and support staff could all have done as well from home and a good bit of international travel could have been avoided too… Ditto for all planning meetings and quarterly conferences and such. We would even have saved some golfing fees. Customer conferences are a mixed bag.Ssome can be Zoomed and some can’t. Even so there is ample opportunity for savings.
Things are a bit different in an industrial R&D setting particularly where you may encounter extensive development requirements. Most other types of non scientific research, and also government operations can in my opinion transfer to home offices. I’ve managed large programs in each of those venues.
So IMHO while WFH will not take over the world it will grow very large. The convenience and savings are just too attractive.
Cheers.
Work from home may be necessary longer than many think. This article in Politico https://www.politico.com/news/2020/05/16/uss-theodore-roosev… calls into question when this situation will end (via herd immunity, and/or vaccine):
“Thirteen sailors aboard the aircraft carrier USS Theodore Roosevelt have tested positive again for Covid-19 after recovering from the disease and returning to the ship, which has been stranded in Guam since late March after an outbreak of the virus, according to two U.S. defense officials.”
If they can grow headcount significantly without adding more space, that is a substantial saving.
Agreed. I said that also. My company built another building at the corporate headquarters a few years ago. It is really very nice. I’m wondering if management is regretting that decision given how apparently successful WFH is. Something like 80% of the company is WFH during the “stay at home” orders. They could have implemented that years ago and saved the capital costs of that new building, while still having capacity to increase headcount.
If you answer phones, or push papers and go to meetings, that can all be accomplished from home. About the only things you can’t do from home are production/manufacturing and lab work. If you don’t have to physically handle “stuff” (in my case, wafers and parts), you probably don’t need to be there.
1poorguy (my perspective is semiconductors, and I do handle wafers and parts frequently in a lab setting; but my wife deals with product development which is mostly design reviews and checklists and can be done from home)
One of my clients is a large insurance company that has been fighting the work from home trend for years. A number of senior executives were stuck in “old school” thinking and just couldn’t envision a world where employees didn’t come into the office. In speaking with one of those executives last week, she confessed that the thinking as completely reversed. They now accept that WFH is here to stay, and they need to get on board if they want to retain their best employees. Early analysis on their part shows that they may be able to reduce office space by as much as 50% over the next two years when they embrace WFH. Office space is their third largest corporate expense, behind only payroll and claims.
One year ago I would have bet that they were at least five years away from embracing WFH.
Bierwagen
I work in the Midwest. My nearest co-worker is and hour and half away. My manager is three hours away.
We meet three times a week via Web Ex.
This has been the status for 10 years or more.
Works fine.
Cheers
Qazulight
Although OT, I agree with all of these statements about my company (e.g., didn’t believe it could be done, cost savings, etc).
I just want to point out a couple facts: in good times, up to 20% of office space in good times is vacant (sick leave, travel, vacation, WFH, etc). Cost of office space in big metro areas is as much as $15,000-$20,000 per employee. If my company could eliminate this 20%, the savings would be in the hundreds of millions (per year) - by things like shared office space, squatter space etc.
The pandemic has been a forced WFH experiment. Management now sees no real loss of productivity. They are all taking another look at this. Plus, because we’ve made office space more “dense” in the past few years, we can’t just force people back into the densified space (e.g., high efficiency work spaces, shared offices, etc).
With all of that said, there is a worry that psychologically employees are being impacted. Is that more from shelter in place or WFH? Or a bit of both?
I’d be very wary of office space REITs or investments long term.
Mike
My 2 cents
For some companies/jobs, WFH can be a permanent change (like call center employees for example).
For most other companies, it think it is a pendulum swing right now toward WFH, but I expect it to swing back the other direction within 2 years.
Examples of things I think will make it swing back:
All of this assumes COVID goes away as a major risk. If that does not happen, then my opinion is completely different.
The pandemic has been a forced WFH experiment. Management now sees no real loss of productivity.
That is yet to be seen. I know some people that are “working from home” that are definitely not being productive a lot of the time. It can be done (being productive at home), but you need to have the right temperament to do it. I worked from home the last 25 years of my career, but I’m very disciplined, had a home office, and can tune out distractions, there are many people that cannot. There are also the additional distractions people are having during this time of other family members home doing their work/school also. We’ll see in another quarter or two how productive companies really are with WFH.
If this trend of WFH continues after this is all over and stays a large part of the work culture, it will be to our detriment.
You are correct that total WFH has significant disadvantages. The most likely outcome is that many/most companies will go to flexible arrangements, allowing people to come in once or twice a week.
With “hoteling” or “hot desking” companies can still save on office space, while allowing employees to avoid the soul-sucking drain (and cost) of the commute on most days.
Seems to me some people will have the discipline to work from home, some will not. It is up to management to sort them out. And of course compromise, x days in the office y days WFH.
Time will tell which companies do it best. And since WFH saves money, those who do it best (both companies. and employees) will have a competitive advantage. Whatever the percentage of work or conference from home ,it will be higher than pre Covid. And companies that enable this transition will do well. Unfortunately a lot of that is priced in already.
I owned an insurance agency for 24 years and sold to a national company in 2009. In 2007 we started telecommuting our personal lines staff 1 day a week, and they loved it. After our purchase the national company brought our staff back in their office and were not willing to let employees work from home. Fast forward to 2020, pre-covid, that same company is now letting the majority of their staff work from home, plus they renegotiated their lease and gave up a complete floor of a large commercial building because it saved them so much money and they didn’t need the space. They were actually set up well to handle this pandemic because so many of their staff already worked from home. epm
One of the interesting parts of WFH will be the distinction between 100% WFH where going to the office is rare enough that one can live in another state if one prefers and mostly WFH where one needs to be close enough to go into the office on some regular basis.
My wife used to do recruiting. For jobs that could be done remotely her rule of thumb was hire within a two-hour radius. This meant the people were physically available when occasionally needed.
DB2
If somebody had to spend 2 hours(or more)total every day commuting to an office, but then got a job requiring him to be in the office only once every 7 or 10 days it would pay off for him to live several hundred miles off , much cheaper cost of living, and fly in when needed. It would save time and money. The $600,000 up median cost of a home in some places means many can never own a home, the prime source of savings for many
2 or 3 hours of auto commuting put a huge stress on people and exposes them to more risks (auto accident),. Same time in a mass transit puts them at more risk of getting infected with something.
It’s a worry for REITs, not for SaaS.
Boom! Yes, REITs are in trouble. Ouch.
I think the move to WFH is just a trend. It will be over in less than two years. This happened before. IBM and Yahoo ended WFH and used it as a stealth technique to lay people off. Remember?
I would never bet 100% on being able to WFH. Once the job market comes back, and the deep motivation to keep a job recedes, employers will want people back in the office. Just like before.
“employers will want people back in the office. Just like before.” Does it have to be an either /or thing? There will be a mix, with WFH occupying some unknown percentage higher than before Covid.
The NUMBER of LARGE US companies going on record who plan to permanently or significantly extend WFH for a significant number of their employees is growing, and growing rapidly. Most of us have heard that Twitter, Facebook and Google have all indicated they will shift towards work-at-home models for many of their employees. After Googling this subject, here are articles published in the last day or three that back this up.
“Open Text –One of Canada’s largest tech companies plans to close half of its offices world-wide on a permanent basis, resulting in 2,000 of their employees WFH.” https://business.financialpost.com/opinion/jack-m-mintz-home…
“Before the coronavirus crisis, three of New York City’s largest commercial tenants — Barclays, JP Morgan Chase and Morgan Stanley — had tens of thousands of workers in towers across Manhattan. Now, as the city wrestles with when and how to reopen, executives at all three firms have decided that it is highly unlikely that all their workers will ever return to those buildings.
The research firm Nielsen has arrived at a similar conclusion. Even after the crisis has passed, its 3,000 workers in the city will no longer need to be in the office full-time and can instead work from home most of the week.
The real estate company Halstead has 32 branches across the city and region. But its chief executive, who now conducts business over video calls, is mulling reducing its footprint.”
https://www.nytimes.com/2020/05/12/nyregion/coronavirus-work…
“A PWC survey found that 26 per cent of U.S. companies are now looking to reduce their real estate requirements in 2020.
Capitol One announced earlier this week that most employees working at home can continue to do so at least through September. Amazon and Microsoft have extended telecommuting as well, saying employees will work from home until October. Real estate company Zillow told staff they may work from home through December."
https://www.nbcnews.com/tech/tech-news/following-twitter-squ…
“Facebook has announced it is extending its work-from-home policy, put in place to stop the spread of the coronavirus in the workforce, through the end of the year.
Most Google (GOOG) employees will likely continue to work remotely through the rest of this year. A Google spokesperson confirmed the accuracy of the report.”
https://www.cnn.com/2020/05/08/tech/tech-companies-working-r…
and it goes on, and on and on…
https://www.shrm.org/hr-today/news/hr-news/pages/covid19-a-f…
It’s not like we’ve all of sudden discovered that people can work from home. It’s just that this pandemic has taught so many companies that the switch can be win-win, save them money and be successful.
It is also not like all businesses can work from home including healthcare, construction, manufacturing, etc.
sjo
Fantastic post from SJO with some actual examples of WFH extending, just like Saul’s original example of Twitter allowing employees to extend it indefinitely.
Why don’t we leave it there? None of us know how pervasive this will be, but it’s interesting. Not interesting enough to merit a 38-post thread, though, in my opinion.
Let’s get back to discussing companies! There are real opportunities out there and I don’t want us to miss them. I’ve posted two analyses of companies today and judging by the rec count people have enjoyed them. I challenge each of you to do likewise!
I’ll leave you with another great example…wsm007’s great Anaplan write up: https://discussion.fool.com/bear-thanks-for-your-and-others39-gr…
…which I also praised here: https://discussion.fool.com/anaplan-plan-34507042.aspx
Cheers!
Bear
PS I’m now in:
WORK (5.5%)
LVGO (3.2%)
PLAN (2.5%)
and even FSLY (1.8%)
in addition to my big 5, CRWD, ZM, AYX, ESTC, and ROKU.