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Shift out of centralized commuter offices a long term trend

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What will COVID do to housing? Home builders, city planners and market watchers say the jury is out on whether the COVID-19 pandemic will in fact prompt deep long-term changes in Sacramento communities. Will more Sacramentans move to the suburbs or to the hills for elbow room, figuring they may no longer have to deal with a congested commute to downtown offices? Will home prices continue upward, making home ownership increasingly elusive for many? Is it time for home builders to chop up their open-floor plans and begin building sound-proofed offices and home gyms? Or will the COVID era fade by next spring if a successful vaccine arrives, sending state workers back to downtown offices, people back to fitness centers for their workouts and families and friends back out to restaurants, bars and clubs? “Is this just a 2020 thing, or a 2025 thing?” University of the Pacific economist Jeffrey Michael said.

Source: Coronavirus, home prices send Bay Area families to Sacramento | The Sacramento Bee

It’s actually a 21st century thing. Information and communications technology advances are replacing the roads and highways of the 20th century when knowledge workers needed to commute daily to centralized, commuter offices (CCO). No more. They can begin their workday as soon as they get up and have a cup of coffee rather than an hour to two later after arriving at the office.

This is a long term trend. Public health infectious disease control measures put in place with with current pandemic accelerated it. The gravitational pull of the CCO was already weakening.

Working against the trend is a persistent belief that the best knowledge work requires knowledge workers to be in the same place every day — the office. Face to face communication is important since knowledge workers like other humans are social beings. Reinforcing those social connections however does not require a centralized workplace and the hassle and time suck of the daily commute since meetups can be most anywhere and anytime that’s convenient. What’s needed now as this story suggests are homes with dedicated office space. Also neighborhood co-working centers within walking or cycling distance. Performing knowledge work in the 21st century need not involve turning the key to a motor vehicle or boarding public transit as it did in the 20th.

We’ve Reached Peak Wellness. Most of It Is Nonsense.

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On a macro level, ask yourself these questions: Do I live in a place that feels unlivable? Does my commute totally suck my soul? I’m aware that I’ve got a lot of privilege to suggest moving geographically, but the kind of move I’m suggesting is one away from crazily expensive, competitive, and congested cities. I can’t tell you how many people I know who feel “trapped” in big cities like New York or San Francisco. Move! There are plenty of places with lower costs of living, more access to nature, and good jobs. And wherever you are, take care of the planet.

Source: We’ve Reached Peak Wellness. Most of It Is Nonsense.

Pandemic rapidly accelerated virtualization, decentralization of knowledge work

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The viral pandemic that closed down centralized commuter offices (CCOs) in the first quarter of this year accelerated a trend toward working outside of the CCO. The trend had been slowly growing in the previous decade or so, allowing knowledge workers to work in their residential communities during some or all of the work week.

The pandemic and the lockdowns instituted by state and local governments demonstrated to knowledge organizations that they could conduct their business without a CCO. Prior to the pandemic, the question was to what extent could their staffs work outside of the CCO and specifically how many days of the work week and which days. That forced organizations to adapt in how they communicate and collaborate, make decisions and coordinate and complete project using digital information and communications technology as the medium for those fundamental activities of knowledge work, replacing the analog mode of the cube farm.

Freed of the time sucking and often stressful daily commute to the CCO, knowledge workers have seen the quality of their lives improve, having more time for exercise, sleep, home cooked meals and family. For knowledge organizations, now that they’ve seen they can function without a CCO as their workplaces, they are beginning to address the larger question of the future role of their offices.

The issue is shifting from teleworking to virtualization. Organizations that were already partially virtual at the start of the pandemic with staff working only part of the week in the CCO and then shifting to the full work week with the pandemic are now examining whether to go fully virtual and dispense with the CCO altogether.

Others that were less further along on the trend line at the start of the year with staff only occasionally teleworking outside of the CCO are considering expanding telework while retaining the CCO. As they expand teleworking and their cultures and management practices adjust, over time these organizations could also begin to question whether it makes sense for them to virtualize and begin to migrate out of the CCO, realizing significant cost savings.

Confronting a large budget deficit ahead of the start of the fiscal year that began July 1, California Gov. Gavin Newsom called out the potential savings in his proposed fiscal year 2020-21 budget:

Historically, state government has been slow to adopt modernizations in the workplace. But the COVID-19 pandemic has forced a massive experiment in telework and allowed state managers, led by the Government Operations Agency, to rethink business processes.

This transformation will allow for expanded long-term telework strategies, increased modernization and delivery of government services online, reconfigured office space, reduced leased space, and when possible, flexible work schedules for employees.

The virtualization and consequent decentralization of knowledge work out of CCOs will have major implications in the decades following the 2020 viral pandemic that will reshape modern economies relative to labor markets, land use and real estate and transportation.

Metro areas developed like solar systems with CCOs as the stars at their centers with housing development and transportation systems orbiting around them. Their gravitational influence was weakening before 2020, diminished by information and communications technology that made them less relevant. Information and communications technology became the medium of knowledge work, allowing information to be processed and communicated virtually anywhere. No longer is it necessary to move the knowledge worker daily in motor vehicles to a set location during fixed time frames to accomplish that.

The pandemic hit like a huge gravitational wave, rippling through metro area “solar systems,” disrupting the gravitational tug of the CCO and scattering knowledge workers onto their own trajectories. Knowledge workers residing in the outer exurban regions of their solar systems were suddenly freed of the long super commute daily orbit to the solar center and back home again.

Some knowledge workers and their organizations realize than can exist in other “solar systems” — less densely populated smaller metros and towns free of commute congestion and where the pace of life is slower and the cost of living lower.

Looking back, the 2020 viral pandemic will be seen as a major event providing a tremendous boost for the rapid reformation of modern society.

State of California must overcome ingrained organizational culture, IT challenges to successfully navigate transition to virtual work

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Two factors have accelerated the State of California’s more than three decades in the making shift to virtual work:

  • The 2019 installation of a chief executive who unlike his predecessors has lived most of his life during the information and communications technology (ICT) revolution that brought about personal computing devices and Internet-based advanced telecommunications.
  • A global pandemic that made dense occupancy “cube farm” office environments decidedly risky for the spread of a novel communicable disease.

Without these factors, the state would have likely continued uninterrupted with its entrenched organizational culture where putting in hours at the office is regarded as both “work” and earning one’s future dollars in what’s become a rarity for most workers: a defined benefit pension plan with medical benefits. That culture has resisted virtual work for decades notwithstanding policy promulgated dating back to 1988 by both the Governor’s Office and the Legislature.

Management guru Peter Drucker is credited with the organizational behavior maxim that “culture eats strategy for breakfast.” It similarly makes a meal of public policy since culture is reinforced daily by group expectations and norms whereas policy merely exists in written form that’s meaningless without organizational buy in.

As The Sacramento Bee’s Wes Venteicher reports, Gov. Gavin Newsom has directed the 75 percent of state workers currently working outside of their state offices due to pandemic disease control measures put in place in March to continue to do so on either a full or part time basis as the state begins to reopen.

Going forward, Newsom’s revised budget summary for the fiscal year beginning July 1, 2020 notes contagion control measures implemented by his administration “has forced a massive experiment in telework.” It directs state agencies to develop “expanded long-term telework strategies” and to “rethink business processes.”  

A 1990 report on a state telework pilot project begun in 1985 recommended managers and staff be trained to think in terms of work results rather than work processes. That’s a huge challenge for an organization where the key process metric is time spent in the office. Standing present for duty in the office is also a component of the state’s preferred command and control management style. That way managers are prepared with a team standing ready in case someone higher up or very high up in the chain of command wants something pronto.

It’s unlikely more than three decades of fraught history with telework can be changed overnight, even by a global pandemic and the worst budget shortfall in the state’s history. Another challenge for the state is to put in place a robust and secure cloud-based IT infrastructure that can support virtual work on an ongoing basis given IT modernization has not been its historical strong suit.

One of the most favorable factors in this transition is the promotion of millennials into management roles. Unlike generations before them, they grew up with information and communications technologies. They know from experience they enable knowledge work and setting policy – the mainstay of government work – possible outside of the centralized, commute-in offices of their parents’ generation. As well as the traffic congestion and air pollution they generate that kicked off the state’s 1980s telework pilot project to help reduce it.

Silicon Valley renders itself obsolete

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Out of habit, inertia, or just a plain fear of change, many white-collar workplaces have avoided allowing employees to regularly work from home — but that may soon change. Plenty of so-called knowledge workers are finding that they can comfortably do their job from just about anywhere they have a wifi connection and their laptop. Large majorities of workers in the consulting & research (85%), insurance (84%), advertising and marketing (73%), finance and financial services (70%), legal (68%) industries have been doing their jobs remotely as a result of the coronavirus outbreak, according to the NBC|SurveyMonkey data. Among these same workers, most report wanting to either work from home all the time even when it is safe to return to the office, or at least wanting to work from home more often than previously.

Source: How Silicon Valley work-from-home ‘forever’ will hit every worker

Silicon Valley as a centralized work location has essentially rendered itself obsolete. In its early days, it was all about location. It had fertile mix of engineering talent, proximity to Stanford University and the larger San Francisco Bay Area as well as plenty of space for microchip and computer manufacturing plants run by household names such as Intel, Hewlett Packard and Apple Computer.

People and place combined to make Silicon Valley what it is. Or was. Now the world changing information and communications technologies it innovated as this article points out allow knowledge work to be done most anywhere, regardless of location. Even Silicon Valley.

And not a moment too soon as high housing costs and long commutes over congested freeways have made it a less desirable place to work. But Silicon Valley certainly deserves kudos. Its products have helped shrink the time and distance burden of daily commuting, benefiting knowledge workers wherever they make their homes.

Zillow survey suggests housing preferences could be upended in a post-pandemic America, leading to major questions about the future of dense metro cores

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SEATTLE, May 13, 2020 /PRNewswire/ — Where people choose to live has traditionally been tied to where they work, a dynamic that through the past decade spurred extreme home value growth and an affordability crisis in coastal job centers. But the post-pandemic recovery could mitigate or even produce the opposite effect and drive a boom in secondary cities and exurbs, prompted not by a fear of density but by a seismic shift toward remote work.

Source: http://zillow.mediaroom.com/2020-05-13-A-Rise-in-Remote-Work-Could-Lead-to-a-New-Suburban-Boom#Closed

This is consistent with a long tern trend I discuss in my recently published eBook Last Rush Hour: The Decentralization of Knowledge Work in the Twenty-First Century. Before the maturation of Information and Communications Technology (ICT) that enables knowledge workers to work from most anywhere with good Internet connectivity, the length of the commute to the office was a paramount consideration in terms of where people chose to live. ICT has reduced its importance since it shrinks time and distance. The personal computer is the automobile of the information economy and the Internet is the highway.

The current SARS-CoV-2 pandemic and social distancing out of centralized commuter offices (CCOs) demonstrated to knowledge workers and their their organizations it’s no longer necessary to commute every workday to a CCO.

We’ll see varying degrees of migration out of CCOs in the coming years. Some will continue to be used part of the week or as meeting spaces for larger gatherings. Other organizations will opt to go fully virtual and shut down their offices.

State of California looks to reduce office space requirements, citing “increased remote workforce.”

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California Gov. Gavin Newsom’s revised budget for FY 2021 is seeking considerable savings over the budget his administration proposed in January prior to the COVID-19 pandemic and sharp economic contraction that’s expected to drastically reduce tax revenues.

A component of the May Revise budget proposal would examine cutting the state’s real estate costs in light of state employees increasingly working outside of centralized commute-in offices as a disease control measure during the pandemic. This signals that the Newsom administration sees the shift as one that can be permanently adopted going forward.

With an increased remote workforce, the Administration, led by the Department of General Services (DGS), will evaluate the state’s real estate portfolio to determine which agencies and departments may be able to reduce lease space. Agencies and departments may be able to reconfigure their workspace to include additional meeting rooms and hoteling space, thereby reducing their lease footprint. Reducing space will decrease not only lease costs, but also energy costs. Additionally, DGS will look for possible restacking opportunities in state-owned buildings.

NYT: Big Apple facing inflection point on centralized, commute-in offices

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But now, as the pandemic eases its grip, companies are considering not just how to safely bring back employees, but whether all of them need to come back at all. They were forced by the crisis to figure out how to function productively with workers operating from home — and realized unexpectedly that it was not all bad. If that’s the case, they are now wondering whether it’s worth continuing to spend as much money on Manhattan’s exorbitant commercial rents. They are also mindful that public health considerations might make the packed workplaces of the recent past less viable.

“Is it really necessary?” said Diane M. Ramirez, the chief executive of Halstead, the real estate company, which has more than a thousand agents in the New York region. “I’m thinking long and hard about it. Looking forward, are people going to want to crowd into offices?”

Once the dust settles, and companies make their decisions, New York City could face a real estate reckoning.

Source: Coronavirus Live Updates: Top Health Experts Paint Bleak Picture of Pandemic – The New York Times

Pandemic may resolve SF Bay Area paradox

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At some point during this period, the economy will open back up. But that doesn’t mean people need to go back to the office, said Steve Heminger, a board director at the San Francisco Municipal Transportation Agency.“Are we returning to an old normal after this is over, or are we advancing to a new normal?” Heminger mused. “My vote is probably the latter.” Some companies have allowed remote work for years, but it’s never been enough to make a dent in rush hour crowds on BART, or thin congestion on the Bay Bridge. That all changed when the coronavirus shifted much of the tech-fueled Bay Area into bedrooms and home offices. If the trend sticks, it would reduce demand for office space downtown and lift strain off the transportation system, Heminger said.

Source: Cars, trains and uncertainty: How coronavirus will change Bay Area transit – SFChronicle.com

As I’ve blogged repeatedly in this space, the San Francisco Bay Area and neighboring Silicon Valley represents a profound paradox, clinging to mid 20th commute-in offices. While at the same time, the region is recognized globally as a powerhouse of innovation in information and communications technologies (ICT) that makes possible doing knowledge work from most anywhere with good Internet connectivity, effectively obsoleting the daily commute. Yet in recent years, the region gained the dubious distinction as having some of the worst traffic congestion and longest commutes on the planet.

A paradox embodies a natural tension that like a stretched rubber band eventually reaches a breaking point and snaps. The current viral pandemic may have brought it there.

“Seismic shift” in knowledge work

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According to a new MIT report, 34 percent of Americans who previously commuted to work report that they were working from home by the first week of April due to the coronavirus. That’s the same percentage of people who can work from home, according to a recent University of Chicago publication.

These new numbers represent a seismic shift in work culture. Prior to the pandemic, the number of people regularly working from home remained in the single digits, with only about 4 percent of the US workforce working from home at least half the time. However, the trend of working from home had been gaining momentum incrementally for years, as technology and company cultures increasingly accommodated it. So it’s also likely that many Americans who are now working from home for the first time will continue to do so after the pandemic.

Source: How coronavirus could change your office space and remote work from home – Vox