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High-rolling entrepreneurs such as Adam Neumann, co-founder of WeWork, and Masayoshi Son, creator of SoftBank, do not usually take Latin lessons. Nor do most real estate moguls, or their financiers.
That is a pity. For as the dust settles after the implosion of desk-renting start-up WeWork — whose putative valuation has collapsed from $47bn to almost nothing, creating chastening losses for its backer SoftBank — it is worth pondering the concept at the core of Neumann’s dream, namely: the “office”.
In modern parlance, this word is synonymous with a building. No wonder: physical “offices” epitomised white-collar work in 20th-century western culture. Hence the wildly popular television show of that name.
But, ironically, the original Latin roots of the word had nothing to do with buildings. Instead, officium meant “task”, “service” or “[divine] position”. This is why English speakers talk about politicians “running for office”.
On one level, this is just a cultural and etymological curiosity. But on another, it should remind investors of two crucial points. First, our working practices, like other elements of culture, are never fixed in stone, even if each generation thinks their social patterns are inevitable, proper and permanent. Memes and mores change.
Second, in our post-pandemic, hyper-digitised world, that Latin concept of officium — work being about tasks and people, rather than buildings — is newly relevant. The “office” culture is heading back to the future, albeit in a way most investors in commercial real estate never expected.
The issue at stake involves more than whether people are working from home or not. Yes, during the pandemic, levels of remote working soared dramatically. And while they have since dipped, the practice remains widespread. A recent survey by the US Federal Reserve found that a quarter of employees were engaged in hybrid or remote work, up from 10 per cent in 2018, and this proportion is expected to rise. A Gallup survey puts the hybrid ratio even higher, at about 50 per cent.
But what is even more intriguing than working from home is an associated — and subtle — shift in the mental map of work. In the 20th century, “offices” were associated in the west with temporal, spatial and social boundaries. The idealised vision of work (if not the lived reality) was that this happened outside the home, at defined hours (nine to five, say), with non-family colleagues and at a defined life-stage (for instance, before the age of 65).
But a combination of the pandemic and digitisation has blurred boundaries: more people have learnt to blend their home and work spaces, toil at a range of hours and “work” beyond retirement. This was (and is), of course, entirely normal for most societies during the sweep of human history. But it is different from 20th-century norms.
Some executives hope this shift is temporary. A survey by the accounting firm KPMG found that two-thirds of executives “believe that there will be a full return to office in three years’ time”. Maybe so. But I doubt that those last-century norms will return in full, not least because digitisation is fostering another subtle cultural shift in the direction of personalised consumer choice.
A generation is emerging whose members assume it is normal for consumers to customise their food, media, music, politics, families and identities according to individual tastes. And this pick ’n’ mix approach also shapes attitudes to work: employees increasingly demand flexibility in their jobs, even if they are going into an office, and many employers so far feel compelled to offer that.
This feels infuriating for many older executives. But it seems natural and desirable for younger workers. Hence the challenge for commercial real estate investors today.
In some senses, Neumann himself was highly attuned to these cultural shifts. The whole raison d’être of WeWork was to offer flighty gig workers (and others) the ability to pick and mix contracts in a flexible manner.
But since WeWork had leases that were on average 15 years in duration, compared with customers’ membership agreements that averaged just 1.5 years, there was an asset-liability mismatch. This, coupled with sky-high leverage and a wrong-headed belief that the new generation of gig workers would wish to go to an office (albeit a trendier version) as much as their parents did, sowed the seeds of WeWork’s demise.
That does not mean other co-working models will necessarily fail; if they are better run, they may chime with the times. Nor does the downfall of WeWork mean that urban spaces will die. Although office vacancies are high, and stranded assets are proliferating, mixed-used districts and buildings that offer flexibility can still thrive. Or at least they will if policymakers have the imagination to amend zoning laws, which are often ridiculously rigid.
But the key lesson that CRE investors — and SoftBank — need to learn from WeWork is the folly of modelling the future on the basis of the recent past in times of cultural flux, and amid gushes of excessively cheap money.
Or, to put it another way, the “office” is not dead; but it now thrives as much in its Latin form as in the 20th-century sense. Maybe it is time for a clever entrepreneur to create an officium app?
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