this post was submitted on 09 Feb 2024
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Justifying the rental expense doesn't really make sense, because they end up paying more in utilities in addition to the rent. If you're still on the hook for a lease and have most employees WFH, just downsize when the lease ends or move everything remote if possible.
Seems like banks are worried about the loan holders defaulting and are pushing companies to bring employees back to bring up demand for commercial real estate?
these leases are like 10 to 30 years, its not like a yearly one.
Why would anybody get into an unbreakable office lease of 10 years? Let alone 30.
You have never leased out a office building I can see. If you area going to spend 100,000's even into more to make the office space (as you build to suit inside the space as well) you wanna know you have it for so long. So it was good for biz as they knew they would have it for a decade maybe more and protect the investment. And it would also lock in the rent rates for that time so they could stave off inflating rents (there is a normally a year over year % increases built into the lease so the company that owns the building doesnt loose out too bad).
It was also something that C levels were spending their money on, they would own the property company and get even more out of it. They could spend a ton with a bank with the thought of I can assure you biz X (which they are on the board of if not the CEO outright) will be there for this many years and will pay the principal of the loan over this time, we also built space for other offices inside the building and we will give a discount to anyone that used or is referred by your bank. Again stacking security onto the loan they got, plus more to put on a plate of a potential biz start up.