Remote-Work Trend Troubling Industries Up the Supply Chain
New York, NY, July 5, 2023-"Pain from the anemic return to the office is spilling over into architecture, construction, cleaning, brokerage, furniture and other industries that depend on thriving downtowns,” reports the Wall Street Journal.
“During good times, these firms generate tens of billions of dollars in revenue from the sale, development and leasing of U.S. office space. But the businesses, which employ tens of thousands of workers, are now shrinking owing to the pandemic-era sea change in office-space usage.
“Some companies in the office-industry ecosystem are contracting, laying off workers or even going out of business. In New York, for example, Henegan Construction, which has built office-interior space for tenants such as Morgan Stanley and the Ford Foundation, has laid off more than 50 workers, according to a filing with the state Department of Labor.
“Steelcase, one of the world’s largest manufacturers of office furniture, last month reported $751.9 million in revenue for its most recent quarter, down from $824.3 million during the comparable period in 2019. The Grand Rapids, Mich.-based company has taken numerous cost- and workforce-reduction steps, including closing a regional distribution center in Atlanta.
“It isn’t clear how many jobs are affected by the troubled office sector because many companies are able to pivot from office to other real-estate sectors, which are faring better. For example, the value of office construction is expected to decline to only $82.2 billion this year compared with $138.3 billion in 2019, according to Dodge Construction Network, a data and analytics firm.
“But employment in the sector this year was more than 7.9 million in May, up from 7.5 million in 2019. The rise was partly because of companies that shifted to more active sectors such as warehouses and healthcare facilities, according to Dodge.
“‘While the office sector may be down, there’s a lot of growth elsewhere that’s offsetting it,’ said Richard Branch, Dodge’s chief economist.
“Still, these cutbacks in the businesses that support office buildings are magnifying the broad economic repercussions resulting from remote work and hybrid workplace strategies. The brunt of the impact so far has been mostly felt by office landlords and their lenders as well as small businesses that depend on commuters.”