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Comment by freddie_mercury | Hacker News Reader

It is hilarious that people think the second largest company on the planet, with a market cap over $5 trillion, spends even one second worry about the profit margins of commercial real estate companies, makes any decisions based on that, or is somehow cowed by their alleged political power despite being much, much, much smaller than Microsoft.

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I was very clear, I thought, when I said “RTO mandates are about...”, that I was not saying “All of these factors are relevant to Microsoft”.

With Microsoft its probably mostly (3), with maybe some degree of (2), with (1) maybe, especially in the political salience, being a plus in the eyes of some decision-makers but not really driving the decision.

There are firms (and public agencies) where the relationship between those factors is very different in driving RTO mandates.

No CEO cares about commercial real estate profits. It isn't a factor in any major company decision.

Why not extend the baseless paranoia and say it is because they want to see auto company profits go up? And also support petroleum companies?

Or is it just real estate that is boogeyman secretly running the country behind the scenes?

The City of Philadelphia sent all of its workers back to the office with an explicit statement from the Mayor about struggling commercial office real estate in the city center. They may not be "running the country" but they are definitely heavyweight players in the market.

Businesses care about commercial real estate as much a renters care about landlords.

This commercial real estate take is so backwards you have to wonder if it's a plant to make the anti-RTO movement look like idiots.

There was no such explicit statement from the mayor that it was because of real estate.

https://www.phila.gov/2024-05-20-statement-from-mayor-cherel...

Umm, yeah, because city executives whose “organizations” are funded by local taxes, especially commercial real estate taxes care about it.

That says nothing about why CEOs of thousands of private firms who have nothing to do with real estate firms would care about those other companies’ profits.

> No CEO cares about commercial real estate profits. It isn't a factor in any major company decision.

No spherical CEO in a vacuum, maybe.

Cfo and shareholder do care about value of their building as these are on the balance sheet as asset and large swings can impact the metrics by which the market evaluates the companies.

I worked for a large company that did just that. They reduced the number of buildings they had to shrink costs, and get rid of employees without 'firing' them. MSFT does not strike me as a company that does not understand cost per employee. Why would you think the cost per employee does not come into the picture? I am just curious about that PoV as it is basically grilled into all MBAs and part of financial calculations of most businesses.

May you explain why ruthlessly profit driven CEOs of megacorporations don't care about the commercial value of the real estate they own?

Because who are the profit driven CEOs (are there any other CEOs?) sell their buildings to? The value of their building affects the profit via the depreciation expense. Which is to say the more buildings you have for RTO the bigger the expense-and thus the lower the profit for the profit maximizing CEOs.

From a profit only perspective RTO makes sense only if the cities gave businesses tax breaks tied to business occupancy (the city’s math is they will get some of these taxes back when employees go and spend money in the city). And maybe cities are threatening to stop these taxes back until RTO.

In Microsoft’s case though people only spend some money at the cafeteria-because there is nothing else to spend money on their campus. How big could that tax break could be?

This RTO request from Microsoft does not make much sense.

You should also consider property taxes from where the employees live. In MS's case, plenty of the employees own or rent in the same town, or nearby. At least as a calculation/consideration of tax breaks. I can say that if it weren't for Intel, Wells Fargo and others deciding to build/employ in Chandler, AZ the town wouldn't be half that size in terms of residential population. I'm sure the same is true even for bigger cities relative to business size.

How would this be an incentive for Microsoft to require RTO though? Even if Microsoft would receive tax breaks from the city because employees own property and pay property taxes - the city would get the same amount of property taxes if employees work from home. Microsoft would receive the same tax breaks.

AFAIK Microsoft mandated RTO only for employees that live within 50 miles of an office. So far Microsoft does not require employees to move to a city - and bolster the property taxes the city collects.

I still do not understand the logic behind RTO.

I was stating that's a consideration of why a City/State offers the incentives... I can't speak to MS in this case in particular. It's far more likely a soft layoff strategy.

I'd also say, I've seen far more people just sandbag and slack off in WFH than in an actual office.

>How big could that tax break could be?

Many are asking this!

In the case of Microsoft, their main campus in a thriving suburb of the Seattle Eastside would be prime real estate even if they disappeared tomorrow. They have absolutely zero reason to worry about the value of their real estate regardless of occupancy.

It’s likely members of their company’s board cares.

With Microsoft specifically there's also the fact that it made a massive investment into rebuilding a large chunk of its campus in the last few years (IIRC it began before COVID). They demolished some of the oldest buildings - the ones that were done back when every senior engineer was entitled to an office of their own - and replaced them with "open office" cubicle farms.

Now, I would imagine that there are quite a few in the top management who originally signed off on that expense. Probably the same people who were talking about replacing offices with cubicles since 2015, which means Satya and his inner circle. So now they've spent a lot of money, they have to do something to show to the board that it wasn't wasted. Which means filling those buildings with employees, whether they like it or not.

Consider the networks of friends and acquaintances the top-level decision makers are likely to be part of. Talking about how they're divesting big corporate dollars from the real estate market probably wouldn't make them more popular at cocktail parties.

You're right that it probably doesn't apply to Microsoft, but some companies were granted tax breaks by the local city, but on the condition they brought a certain number of jobs to the city.

Microsoft owns a lot of commercial real estate. The people who manage the commercial real estate within Microsoft certainly care about the value of those investments.

They care insofar as the collapse of commercial real estate is cited as a social harm of WFH by the elite classes outside the business that push RTO.

It's not an explicit decision making factor, just something that's in the background that has contributed to the overall idea that "RTO = good"

These decisions are all being made by vibes, after all, not by a cold rational analysis

If I would be a commercial real estate mogul, I would invest at least hundreds of millions into covert PR campaigns in various media (including here on HN) to nudge the perception via exactly these sort of claims. And who wants to be seen as anti-business, right?

Just follow the money, it usually works very well. Sometimes, people are just dumb on their own and/or as a group but I don't think thats the case here. Tens of billions if not more in lucrative real estate is at stake.

These executives, though, also made billions in investments themselves in Microsoft's Redmond Campus, which mostly otherwise will stand empty.

These executives don't like looking dumb and these billions in useless investment are statues to them looking stupid otherwise.

Those investments would be a matter of public record, either directly or through real estate companies. Any investigator who found these hypothetical investments would get a lot if clicks and eyeballs so there is a hell of a lot of incentive. So where's the proof?

Nit: current market cap is ~$3.7T

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