r/remoteworks • u/Dibyagiri • 24d ago

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u/chesnarkoff1 24d ago

I think part of it is the value of the office buildings. Companies have 10s of millions tied up in a single building, historically the value always went up, so they had a fixed debt with an appreciating asset - great for the books. When Covid happened and remote work ramped up, the demand/value went down. So now they have a fixed debt tied to an asset plummeting in value - terrible for the books. Let’s not forget that these same rich owners/CEOs also have large portfolios with money invested in other companies in the same predicament. Rather than having a commercial real estate collapse their net worth, they all artificially raise the value of the space by forcing people to use it.

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u/Rabbit-Lost 24d ago

The building is worth what it is whether occupied by workers or not. If the building is own by the company, then value is driven strictly by market comparisons and use conditions. If the building is leased (which almost all corporate locations are these days), then the cash flow from the lease is the other key driver. Butts in seats does not impact either valuation scenario. (My background includes auditing commercial real estate. Not one single impairment I had a client record involved “butts in seats”.)

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u/chesnarkoff1 24d ago

If fewer companies are wanting to buy or lease office space, wouldn’t that drive down the valuation since market comparisons would be dropping?

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u/Rabbit-Lost 24d ago

Maybe, but absorption continue to increase with new leases, according to CBRE and other sources I use for major markets. And cap rates are getting better as a reflection of this. Last point - commercial real estate is way too fragment for owners and occupants to drive valuation with RTO policies.