Employers demanding workers return to centralized offices are being hit with a growing number of charges that they discriminate against employees with disabilities.
In this case, the disability claims are largely related to mental health.
Workers are claiming they suffer from anxiety, depression, and post-traumatic stress disorder, among other ailments, many apparently brought on by demands that they return to their centralized work locations.
They also complain that companies are not accommodating their various requests for exemptions.
Job-related discrimination claims for each of those three conditions jumped 16 percent in 2022, the Equal Opportunity Employment Commission reported.
“Mental illness is at an all-time high and COVID was a huge contributor,” CEO Hannah Olson of Disclo, a software firm helping companies manage disability claims, told The Wall Street Journal. “The other piece is return-to-the-office. People are asking for more things and companies don’t know how to manage this.”
Under the 1990 Americans With Disabilities Act, workers have the right to ask for special accommodations for their disabilities; employers have the right to require documentation of the employee’s claimed condition.
While many, if not most, employers have adopted a hybrid work model, many companies contend that workers are more collaborative, innovative, and productive when they work together in the same place.
TREND FORECAST: Getting dressed, commuting to work, and spending time with coworkers in a centralized office may not be everyone’s favorite way to spend time but it does not necessarily qualify as a threat to one’s mental or emotional well-being.
Some workers’ claims are frivolous or self-indulgent; others are not.
Regardless, the rise in such claims will cause more employers to throw in the towel and skew work models to better accommodate remote work for more workers.
That will ensure that the old model of “40 hours and five days” in a central office is gone for good, sealing the fate of more landlords who will be unable to service debt on their office buildings and also pay taxes and keep up their properties.
As much as 25 percent of current office space in Western economies will become redundant over the next 10 years.
Many of those buildings will be taken by lenders and many will be seized by municipalities for back taxes.
However, banks and towns will be reluctant to own properties that are liabilities instead of assets.
Lenders and cities will work with office building owners, adjusting loan terms and rates and varying zoning and occupancy requirements to keep as many of the buildings in productive use as possible.
Still, a number of buildings will become worthless. Those will be sold for the value of the building lots they occupy or be taken by local governments for use as schools, storage space, or refurbished for office use.
Ultimately, the loss of tax revenue from failed office buildings will eat into cities’ budgets. As cities cut public services to fit their revenue, cities will become even less pleasant places to live. More people will migrate outward, creating a downward spiral of shrinking municipal revenue.
We were the first to call the Office Building Bust and have greatly detailed its implications in articles including:
● “THE NEW LIFE OF LOCKDOWN” (19 May 2020)
● “REMOTE WORK = COMMERCIAL BUST” (2 Jun 2020)
● “SLIDING VALUE OF OFFICE SPACE HITS URBAN CENTERS” (11 Aug 2020)
● “WORK FROM HOME, CITY REAL ESTATE DOWN” (20 Oct 2020)
● “COMMERCIAL REAL ESTATE IN A TAILSPIN” (20 Oct 2020)
● “OFFICE WORKERS STAY HOME” (8 Dec 2020)
● “RETURN TO OFFICES POSTPONED: COMMERCIAL REAL ESTATE BUST?” (14 Sep 2021)
● “WORKERS STAYING HOME, COMMERCIAL REAL ESTATE DISASTER LOOMING” (19 Oct 2021)
● “COVID WAR KEEPING WORKERS OUT OF THE OFFICE” (16 Nov 2021)
● “NYC BUSINESSES: BYE, BYE NYC” (16 Nov 2021)
● “DELOITTE ABANDONS MORE LONDON OFFICE SPACE” (26 Apr 2022)
● “BUSINESS OFFICE BUST BEGINS TO BITE” (20 Dec 2022)
● “NEW YORK CITY’S WORKFORCE SHARPLY SHRINKING” (24 Jan 2023)
● “OFFICE OCCUPANCY HALF OF WHAT IT USED TO BE” (7 Feb 2023)
● “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (11 Jul 2023)
● “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (25 Jul 2023)
● “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (1 Aug 2023)
● “COMMERCIAL REAL ESTATE TIME BOMB” (15 Aug 2023)
● “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (3 Oct 2023)
COMMERCIAL REAL ESTATE LENDING CONTINUES TO SLUMP
During the first two weeks of October, the dollar volume of commercial real estate loans held by banks contracted, according to U.S. Federal Reserve data.
The volume has declined for only two months since 2014.
Other lenders besides banks also have scaled back.
Commercial mortgages bundled into securities have raised only $28.2 billion this year, the least since 2011, data service Trepp reported.
The largest mortgage real estate investment trusts declined all new borrowers during this year’s first six months.
Private equity and debt funds had boosted their lending in the past two years but now have trouble raising money from investors and are putting much of their effort into finding affordable loans for their existing projects.
Commercial real estate debt overall grew by less than 1 percent in the second quarter, the least since the first quarter of 2014, Trepp said.
Loans for construction of new commercial space also have declined. This year will see about 935 million square feet of commercial building starts, 17 percent less than last year and the sharpest yearly drop since 2007, data service Dodge Construction Network reported.
In the third quarter, just $89.2 billion in commercial property was purchased, 53 percent below the same period in 2022, MSCI Real Assets said.
Interest on commercial real estate loans is aligned with yields on treasury securities due to mature in less than 10 years. The Fed’s steady rise in interest rates rattled already-nervous investors, The Wall Street Journal reported, and led them to wonder if commercial properties are overvalued.
The spike in 10-year treasury yields “spooked the marketplace,” CEO Michael Levy of Crow Holdings, a large national developer of apartments and industrial space, told The Wall Street Journal. “Capital market malaise is crushing everybody.”
Although all segments of the market are crimped, office buildings have suffered most as landlords have needed to refinance their loans at sharply higher interest rates, the WSJ noted.
As new lending slows, old loans are making trouble as well.
At the beginning of this month, PNC Financial Group reported that the value of its commercial real estate loans in trouble rose to $723 million in the third quarter, more than twice the second quarter’s $350 million.
TREND FORECAST: The Office Building Bust could give rise to the Office Building Bank Bust.
More than 60 percent of U.S. commercial real estate loans are held, in whole or part, by small and regional banks. As defaults on office block loans rise, more of those banks will be nudged closer to insolvency.
Also, banks are holding as much as $500 billion in unrealized losses on low-yield bonds they bought during the COVID War as safe places to store the flood of cash customers deposited during the lockdown.
Those losses, combined with rising red ink from real estate loans, will force dozens of small and regional banks to merge with healthier—and probably bigger—banks. A significant number of local banks will disappear, leaving customers to deal with large financial bureaucracies that are unfamiliar with local markets.
That lack of familiarity will be one among several factors that cause fewer loans to be made, hampering economic growth in the months and years ahead.
Again, we were the first to forecast the downward pressures on commercial real estate and the Office Building Bust… indeed, the worst is yet to come. A crisis that will crash much of the banking sector is on the near horizon:
- “THE NEW LIFE OF LOCKDOWN” (19 May 2020)
- “REMOTE WORK = COMMERCIAL BUST” (2 Jun 2020)
- “SLIDING VALUE OF OFFICE SPACE HITS URBAN CENTERS” (11 Aug 2020)
- “WORK FROM HOME, CITY REAL ESTATE DOWN” (20 Oct 2020)
- “COMMERCIAL REAL ESTATE IN A TAILSPIN” (20 Oct 2020)
- “OFFICE WORKERS STAY HOME” (8 Dec 2020)
- “RETURN TO OFFICES POSTPONED: COMMERCIAL REAL ESTATE BUST?” (14 Sep 2021)
- “WORKERS STAYING HOME, COMMERCIAL REAL ESTATE DISASTER LOOMING” (19 Oct 2021)
- “COVID WAR KEEPING WORKERS OUT OF THE OFFICE” (16 Nov 2021)
- “NYC BUSINESSES: BYE, BYE NYC” (16 Nov 2021)
- “DELOITTE ABANDONS MORE LONDON OFFICE SPACE” (26 Apr 2022)
- “GM SOFTENS BACK-TO-THE-OFFICE REQUIREMENT AFTER WORKER BACKLASH” (4 Oct 2022)
- “BUSINESS OFFICE BUST BEGINS TO BITE” (20 Dec 2022)
- “NEW YORK CITY’S WORKFORCE SHARPLY SHRINKING” (24 Jan 2023)
- “OFFICE OCCUPANCY HALF OF WHAT IT USED TO BE” (7 Feb 2023)
- “TOP TREND 2023, OFFICE BUILDING BUST: THE COMMERCIAL REAL ESTATE FACE OFF” (28 Mar 2023)
- “TOP TREND 2023, OFFICE BUILDING BUST: INVESTORS BACK AWAY FROM DOWNTOWN PROJECTS” (27 Jun 2023)
- “TOP TREND 2023, OFFICE BUILDING BUST: EMPTY OFFICES MULTIPLY IN SILICON VALLEY” (27 Jun 2023)
- “TOP TREND 2023: OFFICE BUILDING BUST, HSBC LATEST TO FLEE LONDON’S CANARY WHARF” (5 Jul 2023)
- “TOP TREND 2023, OFFICE BUILDING BUST: OREGON’S LARGEST CITY LOSING POPULATION” (5 Jul 2023)
- “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (11 July 2023)
- “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (25 July 2023)
- “SPOTLIGHT, TOP TREND 2023: OFFICE BUILDING BUST” (1 Aug 2023)
- “COMMERCIAL REAL ESTATE TIME BOMB” (15 Aug 2023)