💼 TGI Friday Thursday

briefcase | invest smarter | Issue #120

A big shout out to the Real Estate Espresso podcast, who recently interviewed briefcase co-founder Brad Cartier, talking about multifamily and the power of missing middle. Check it out…

🗓️ The New Retirement

“A 4-day workweek? Sounds about as smart as bacon-flavored coca-cola.” — Peter the Intern’s Grampy

Well, briefcase readers disagree…

We know, just what the office sector needed, fewer workers.

Record office vacancies were bad enough, now this commercial real estate asset class has a new nemesis: the 4-day work week.

This idea, aka Thank Gawd It’s Thursday (TGIT), has been gaining momentum, with companies and governments alike exploring its potential benefits.

A recent study conducted in the UK found that a significant number of employers are shifting towards a 4-day workweek, with almost all reporting increased productivity, lower absenteeism, and improved staff morale. Per Bloomberg:

Women, in particular, benefitted from the 4-day workweek. While both genders reported optimal outcomes, women cited greater life and job satisfaction boosts.

More hours worked doesn’t necessarily mean more productivity, and technology is accelerating the negative correlation between the two.

Less commuting, more time for family, fewer childcare expenses, reduced burnout, and increased business output were just a few of the benefits cited by the study participant employees and businesses. In fact, in response to a question about how the trial affected their company’s productivity, the average score was 7.5 out of 10.

And, of the companies that participated in the trial, an astounding 92% said they were continuing TGIT beyond the study.

The above study, which involved 60 companies and 2,500+ employees, found that the 4-day week also positively impacted the environment, reducing carbon emissions from commuting and office energy use. On average, the study saw a 21% reduction in the number of miles traveled by car.

Let that sink in for a moment.

While the concept of a 4-day workweek has been around for some time, the COVID-19 pandemic accelerated its adoption. With remote work becoming the norm for many, there has been a growing interest in flexible work arrangements prioritizing work-life balance for employees and business cost savings.

That second point is key, as businesses everywhere engage in layoffs and optimize expenses as we enter troubled economic times.

Across the pond, things aren’t much different. A US-based study of the 4-day work week found that remote workers are generally more productive and have a better work-life balance than those who work in an office. It also found the commute time decline was larger, dropping 27%.

And it was good for the bottom line. The same study found that the average revenue for these TGIT companies increased by 38% compared to the same period the previous year.

TGIT + Real Estate = ???

So what’s the point for real estate? One of the potential real estate effects of a 4-day workweek is de-urbanization. As fewer people commute to the office, there is less of a need for large office spaces in city centers. This would lead to a reduction in the cost of living and housing in urban areas.

This, in turn, could encourage more people to move out of the city and into more affordable, rural areas. For the office sector, this will lead to a shift towards smaller, more flexible workspaces that are designed to accommodate fewer workers.

Big cities like New York City and San Francisco are already experiencing the pain of exodus, with Bloomberg reporting that the former’s “tax revenue would decline by 7% and that the overall deficit would hit $2.9 billion in 2023.” Further, San Francisco’s tax coffers are projected to drop by a cool billion dollars over the next six years.

Another potential tailwind for this trend is incentives. According to Propmodo:

So What? A 4-day workweek may not spread to North America, but investors and businesses should still consider the implications of improved worker morale and productivity, and what this means for larger office-centric markets.

At the very least, you’ll be able to use the term TGIT (teegit).

Also, today is Friday, so we’re working over the weekend. You’re welcome. Time to punch out.

Weekly Real Estate News

💰 Yikes! The federal government office sector is a $26B debt risk. Maybe a 4-day workweek? — CO

🏡 Hurray! Opponents of single-family zoning gained victories in Florida and Virginia — CoStar 

💻 Painful Proptech: VC Q1 funding for proptech plummeted 77% from $6.97B to $1.69 billion in 2023 — CO

🏢Painful Apartments: Building sales drop 74%, the most in 14 years — WSJ

🌄 Mountains Aren't The Only Thing Rising: YIMBY zoning reform takes root in the Mountain West amid rising housing costs — Bloomberg 

😤 Where's My Money Man: Brookfield's REIT reports redemptions of $4.5B in March alone — CO

👔 OK That Makes Sense: Brookfield REIT CEO resigns — TRD

🏠 Good Time For Agents: US home prices experience a 19.7% YoY increase in April 2023 — CoreLogic

💹 Rate Debate: Federal Reserve Bank of Cleveland President, Loretta Mester, suggests that interest rates need to increase — NMN

😲 $340 Billion: That’s how much Americans paid in property taxes in 2022 — ATTOM