There's a fear among real estate investors with money in office REITs (real estate investment trusts) -- that companies all over the country will continue to allow employees to work remotely, thereby severely diminishing the need for office space.
Over the past 15 months, many workers have thrived in a remote setup, and companies have done a great job of adapting to those forced circumstances. At this point, many firms are planning to uphold the remote employment setups that seem to be working well, since there's a world of savings to be reaped by dumping office space or downsizing to less expensive leases.
Clearly, that's bad news for office REITs, which have taken a substantial hit over the past year. But one major company is now telling employees that remote work is done with. And in light of that, more could soon follow suit.
One investment banking giant wants workers back in person
Morgan Stanley (NYSE: MS) CEO James Gorman recently issued a message to employees -- prepare to come back to the office this fall. Gorman was in fact quoted by CNN as saying: "If you can go to a restaurant in New York City, you can come into the office. And we want you in the office." And that argument certainly holds water.
Some Morgan Stanley employees are already working out of the firm's headquarters in Manhattan's Times Square. But by Labor Day, Gorman expects everyone to show up to work in person rather than continue to work from home.
Now Gorman did acknowledge that some workers may still be grappling with childcare constraints in the wake of the pandemic, and the company is willing to be flexible on an as-needed basis for those who can't yet make a full-time return. But one thing he was also clear about is that Morgan Stanley workers can't expect to take up residence in a smaller, less expensive city, do their jobs remotely, and collect a New York City salary. And that attitude could actually work wonders for New York City office buildings, which have seen record vacancies in the wake of the pandemic.
Furthermore, over the past year, many large cities have seen a mass exodus as workers have relocated to less costly corners of the country, all while enjoying their usual salaries. But even if companies continue to allow workers to do their jobs remotely, there will likely be some salary negotiations to consider as well. And that, in turn, could drive more people back to major cities.
The Millionacres bottom line
As such, Morgan Stanley's attitude toward in-person work may not only be beneficial to office REITs, but to major metro areas like New York City that have seen their share of residential vacancies as well. While it's clear that the pandemic has taught employers the importance of being flexible, it's also clear that not every company is rushing to unload office space. And if Morgan Stanley is going to insist on having workers show up to an office, there's a strong chance other large financial companies will follow in its footsteps.