The Real Reason Bosses Want You Back in the Office Full Time (It's Not Productivity)

[lostnfound]

14. Might be more to it. Business analysts saw that a CRE meltdown could result in a broad financial crisis

A major cause of declining values was Work-from-home policies. I can imagine that in our world of ‘corporate ecosystems’ — with interlocking board members, alliances, partnerships, and social groups at the top — there might have been a consensus that a performative return to work was needed for a variety of reasons. I saw half-hearted attempts from some companies to appear to comply (hybrid), while others moved to all-in.

Like the push against single-payer health care, or the decision to kill the electric car in the late 1990s, we ‘can’t have nice things’ when it stands in the way of the markets.

An essay by Michael Litwack titled “How a Post-COVID Commercial Real Estate Meltdown Could Trigger the Next Financial Crisis” presented this view: (Search for the link on LinkedIn if you like.)

Banks, Real Estate Investment Trusts (REITs), and insurance companies are just a few of the entities with substantial stakes in CRE. A significant portion of the $20 trillion U.S. CRE market is represented by Equity REITs, which are publicly traded on stock exchanges. Similarly, banks hold about 60% of CRE mortgage debt, excluding multifamily properties, making them particularly vulnerable to the ebbs and flows of CRE prices. The recent surge in CRE loan defaults paints a grim picture for these financial institutions, particularly at a time when the aggregate balance of high-volatility CRE loans (HVCRE) in U.S. banks rose to nearly $37 billion at the end of Q2 2023 from $32 billion in the previous quarter. Interestingly, Goldman Sachs Group Inc, which is the largest HVCRE lender, has reduced its exposure to such loans by over 36% in the quarter.

A domino effect is at play here. As CRE values plummet, the asset value and income potential of REITs take a nosedive, affecting their stock prices and dividends. Banks, heavily invested in CRE through loans and mortgages, face the heat as the risk of loan defaults escalates with falling CRE prices. The scenario becomes grimmer with insurance companies, especially life insurers, who also have considerable exposure to CRE, often in the form of Commercial Mortgage-Backed Securities (CMBS). The declining property values affect the yields on their mortgage investments, especially when defaults and delinquencies are on the rise.

The broader narrative here is the intertwined fate of CRE and capital markets. The recent defaults and bankruptcies are not merely blips on the radar but potential harbingers of a larger financial storm brewing on the horizon. The fragility of the CRE sector, laden with debt and facing a post-COVID reality of diminished demand, is a ticking time bomb. The tremors of this bomb's detonation are likely to reverberate across the capital markets, possibly igniting the next financial crisis.

2) I would add that a desire to (or a mandate to) reinforce authoritarian roles is another big goal influencing most of these companies. The placement of Leonard Leo- approved board members has helped get the corporate world back in lockstep.
3) Lastly, a crisis that destabilizes communities may be another perceived benefit of acclimating workers to a workplace. If s*** hits the fan, companies can circle the wagons when so desired.