When the coronavirus pandemic first erupted back in early 2020, many workers were told to pack up their desks and gear up to do their jobs from home for a handful of weeks. Back then, no one assumed that those remote work setups would still largely be in place 18 months later.
Alas, here we are. Just when companies were making plans to bring workers back to the office, the delta variant came into the mix, causing a surge in coronavirus cases and forcing countless companies to rethink their plans.
That's bad news for real estate investors, though. The longer workers remain remote, the more inclined they'll be to want to stay that way. And that could spell trouble for office buildings, which are experiencing some of their highest vacancy rates in decades.
Some companies, however, aren't making it so easy for employees to continue doing their jobs remotely. In fact, Google (NASDAQ: GOOGL) recently announced that it will be cutting pay for some of its remote staff. And if more companies follow suit, it could discourage the remote work trend -- and bring more people back to offices in due time.
Employees can't get the best of both worlds
Workers are often compensated in a manner that reflects the cost of living they're subjected to. Tech companies that require employees to move to Silicon Valley, for example, will often reward their workers with higher salaries to make up for housing in the area being among the most expensive in the nation.
Google's decision, therefore, makes sense. If an employee opts to work from home permanently and relocate someplace cheaper in the process, that worker should expect a pay cut. In fact, Google has even provided its staff with a calculator that allows workers to figure out what sort of pay cut they're looking at based on their relocation plans.
Google also isn't the only company to implement salary cuts for remote workers. Facebook and Twitter have also instituted pay-cut policies for remote workers who move to less expensive parts of the country.
All these policies could work to benefit investors with money in office real estate investment trusts (REITs). Companies slashing remote workers' pay could drive more people to want to return to the office. And once that demand increases, companies will be more apt to resign leases -- and help pump revenue into office REITs.
Of course, pay cuts aren't the only way remote workers might lose money. Those who don't come into an office and interact with management may have a harder time climbing the ladder and snagging promotions -- and the raises that come with them. That, too, could inspire more people to get back to office life.
At this stage in the game, fears over the delta variant may be keeping some workers out of office buildings. But as more and more companies mandate vaccines for employees, that could change. So, office real estate investors shouldn't give up hope on a full-fledged office building recovery. It may just take some time to get there.