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Corona / Covid-19 Virus - General Discussion (politics go to the Off Topic / Politics thread)

Commercial real estate is about to be a bloodbath. I know numerous large companies which are going to reduce their rental footprint by one half to two thirds and have people work from home on a rota system. Retail and hospitality are also a complete mess.

Maybe a silly idea but owners of such real estate may consider converting the property to housing, maybe even low-cost housing for which unfortunately there may be a high demand. I know that this requires investment, but they cannot just wait and allow this bloodbath to happen.

I also see a massive surge to WFH for many professions. The tools for doing it effectively are getting better by the day. One of the companies (S/W dev’t) I have invested in has done it for years for a major portion of the workforce. With a highly motivated crew (development, sales, customer support) it works just fine.

There will probably be a debate on whether the employer would have to contribute to some cost of the home. Actually, here in Spain the gov’t has announced that they are working on legislation in that direction. Nothing wrong with a good analysis, putting all the pluses and minuses for employer/employees on the table I guess. Including the intangible ones, like the time saved for employees and the convenience in various ways (being able to manage the plumber coming over to do some work, delivery of goods).

Private field, Mallorca, Spain

JasonC wrote:

Commercial real estate is about to be a bloodbath. I know numerous large companies which are going to reduce their rental footprint by one half to two thirds and have people work from home on a rota system. Retail and hospitality are also a complete mess.

Yes, and I think it has started.

Commercial landlords have been imposing rents that are out of kilter with where the market should have been for many commercial properties for a very long time. They werent sustainable, never mind Covid, but Covid will accelerate this process immeasurably. In the retail sector significant numbers of tenants were working almost entirely to pay the rates and rent to an extent that far exceeded the historical norm. When that becomes the norm., there can be little doubt the market must eventually correct.

In the retail sector significant numbers of tenants were working almost entirely to pay the rates and rent

In the retail sector significant numbers of tenants were working almost entirely to pay the business rates

But it’s always been like that. The local councils have always set the rates extremely aggressively, so only the biggest margin businesses can exist and the rest go bust. In the 1980s I knew a guy who had a tiny jewellery shop, so small you could not swing a cat in it, and he had to sell £500/day just to pay the rates. The result is a High Street full of shops that sell the same chinese crap as the next one (Sports Direct, etc).

There will be a correction, but also a lot of companies are looking to restructure to use up allowances. Below 12k RV you pay no business rates, for example.

Never waste a crisis…

Leicester has just been “locked down” for 2 more weeks. The reason appears to be almost exactly 50% BAME population (highly vulnerable in itself, not just due to high density living / large families eating together) plus many can’t read English and had no idea what the restrictions were… There was a doctor, from the community, on the TV saying that diabetes and heart disease is common among these people, too. It doesn’t take a PhD to work out why the UK has had such a destructive version of this epidemic; other apparently similar countries have East European migrants instead who are much less affected for all the reasons that are becoming obvious.

Administrator
Shoreham EGKA, United Kingdom

Silvaire wrote:

I have a nice office, pleasant view and lots of opportunity to get in people’s face without upsetting my family… My commute is 12 minutes each way. That’s my real world, along with bi-weekly bank deposits.

Obviously my point was that I’m not going to work from home and would not take a job that required it, regardless of whether I was compensated extra for allowing the company to use part of my house to make money.

Well that’s your point of view and you’re entitled to it. My point was that most people who work from home do so because they want to – it works better for them – not because they are required to, and that recent events may mean a shift from employers tolerating it to actively encouraging it.

I am not forced to work from home and could go into the office if I chose. But I choose not to incur the time and expense of the drive, nor do I wish to live closer to the office because I like where I am now. If an employer of choice set up an office 12 minutes from my home then I’d probably go in. I’d also consider selling up and moving because that sort of company within 12 minutes of me would mean that a huge shift in land use in this part of the UK had occured – one that wouldn’t be good for my quality of life.

Each to their own, but if you told any employer you expected to be compensated extra for working from home (or allowing the company to use part of your house to make money, as you put it) then you’d be laughed out of the building (assuming it exists).

EGLM & EGTN

Peter wrote:

But it’s always been like that. The local councils have always set the rates extremely aggressively, so only the biggest margin businesses can exist and the rest go bust. In the 1980s I knew a guy who had a tiny jewellery shop, so small you could not swing a cat in it, and he had to sell £500/day just to pay the rates. The result is a High Street full of shops that sell the same chinese crap as the next one (Sports Direct, etc).

I am not convinced it has. Progressively the percentage that rent and rates represents of gross profit has increased. The gross profit has also fallen as the market place has become more competitive with on line sales. This combination has proved lethal, and yet, you are correct, the local councils and landlords have seen no reason to change their business model. The high street will change far more quickly as a result of Covid, and, as the high streets change, so will in the inner City commercial sectors, not only because of Covid, but also because the reasons for being there will have changed as well.

JasonC is absolutel correct, and, as they say, you aint seen nothing yet.

Peter wrote:

WFH is extra hard if you have kids. I did it for 6 years. My then wife resented being “stuck with the kids” – even though I was bringing home enough to pay for a 5 bedroom house in 3.5 acres and 2 horses. How do you deal with that? She lived in a council house when I met her, but this lifestyle (oh I forgot the pool and the jacuzzi) was not enough. To this day I have no idea.

For many people such a lifestyle is not what they really want. Under those circumstances I’m sure my marriage would barely have lasted long enough to have two kids.

ESKC (Uppsala/Sundbro), Sweden

Graham wrote:

Each to their own, but if you told any employer you expected to be compensated extra for working from home (or allowing the company to use part of your house to make money, as you put it) then you’d be laughed out of the building (assuming it exists).

This is not true everywhere. Some companies I have worked for actually paid an allowance towards electricity and internet costs whenever they required you to work from home (being on-call for example). So it’s not the totally foreign concept you are making it sound.

LKTB->EGBJ, United Kingdom

Coda wrote:

This is not true everywhere. Some companies I have worked for actually paid an allowance towards electricity and internet costs whenever they required you to work from home (being on-call for example). So it’s not the totally foreign concept you are making it sound.

My company pays a very small allowance (about £12 a month) towards heat, light, power etc. and also pays domestic telephone and internet costs as a pass-through expense. This is all that is allowed (without tax) by law – anything more would be considered income and subject to tax.

This is normal indeed, but no one pays ‘rent’ in the way that is being described.

EGLM & EGTN

Considering a possible economic crisis: My club has so far seen no downturn in activity. On the contrary, we’re flying more than we have done for a decade at least. I’m wondering if there’s going to be a backlash later this year or next year.

ESKC (Uppsala/Sundbro), Sweden

Graham wrote:

This is normal indeed, but no one pays ‘rent’ in the way that is being described.

Right. I misunderstood, sorry.

LKTB->EGBJ, United Kingdom
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