Localogy is not really focused on real estate. Yet the intersection between the office market, local and SMB is pretty clear. For example, when commercial real estate tanks as a result of work from home (as it has), the small businesses that rely on office workers to keep their doors open suffer.
So in this context, we keep an eye on developments in the office market. In particular on the tension between the desire among knowledge workers to work from home, or at least “remotely” (i.e., from the beach) and bosses’ desire to get workers back in the office at least a few days a week. This comes from a combination of a desire for control, often couched as a desire to foster collaboration, and a desire to justify the office rents they are paying.
Pay Your Bills, Adam
One interesting development that fits loosely in this context is the news this week that Adam Neumann, yes that Adam Neumann (WeWork founder and Jared Leto doppelgänger), has defaulted on an office building his family office was leasing in San Jose, a market where office occupancy is suffering.
Neumann’s latest startup Flow is reportedly trying to do for the residential market what Neumann’s former company WeWork tried to do in the commercial market. Ok, we don’t really know what that means either. The Flow website still says “coming soon.”
A16Z Dumps $350M into Adam Neumann’s Mystery Proptech Startup Flow
Neumann was, however, able to convince Marc Andreessen to part with $350 million of his VC firm’s money.
Last year, when we wrote about Flow, we quoted Andreessen saying his bet on Flow was a bet on the need to solve the urban housing shortage. And we have made note of this issue in writing about movement toward converting office buildings into apartments. So this is a real issue.
As far as we can tell, Flow is not in the business of taking on office space to convert it to residential. And then defaulting before getting around to it. The company has apparently been scooping up housing units around the country to, according to one report we read, “turn traditional apartment living into a community with shared experiences.” Sounds like a residential WeWork. And Neumann has been quoted recently saying he expects to eventually compete with WeWork (which still exists). Does anyone remember WeLive?
Are Workers Swiping Back in?
Meanwhile, we have been reporting on the troubling trend of high office vacancy rates. And the looming commercial real estate crisis (according to many). Yet there is evidence emerging showing that efforts by bosses to get workers back to their desks, at least part-time, are having some impact.
For example, there is data from Kastle Systems, a security firm that tracks key card swipes in offices across the top 10 U.S. metropolitan markets. The firm’s data shows that in July, offices hit 49.1% occupancy, and even topped 50% at times. This marks the first time since the pandemic that offices were half full or more.
The Kastle data shows us the degree to which offices that are already leased are being actually used vs. left empty while the boss still pays the rent. The office vacancy rate, on the other hand, shows us what share of buildings are truly empty. As we reported recently, citing data from Commercial Edge, the national office vacancy rate is 17.1%.
Still, the Kastle data does at least hint at one possibility. That CEOs’ efforts to get workers back in the building are having some impact. Will it be enough to change the emptied-out vibe in so many urban centers? That remains to be seen.
