Americans Consider RTO and Think, How About Never?: Joe Mysak

(Bloomberg) -- There’s a famous old New Yorker cartoon of an executive on the phone trying to schedule a lunch date. “No, Thursday’s out,” he says. “How about never – is never good for you?” This is where we are in Return to Office.

In the spring and early summer, before the “highly contagious delta variant” took off, we’d all been counting on returning to a semblance of normality in September. Numerous companies seemed inclined to let their employees have one last summer fling of working from home before a return to the office.

And then came delta, and with it, the abrupt cancellation of the march back to the office -- at least by firms such as Apple Inc., Amazon.com Inc., Facebook Inc., Charles Schwab and American Express, some of whom are saying, Well, maybe January will be better. Microsoft Corp. on Thursday said its RTO in the U.S. was delayed indefinitely.   

Is January no good for you? How about never?

This delay has profound implications for state and local finance in general, and for big pockets of the municipal bond market in particular. No office workers dooms downtown and public transportation; no travel dooms airports, hotels, convention centers and tourism; no international tourism dooms all of the above. I thought of this as I walked around New York City this week observing its underwhelming September reopening.  

Occupancy Ebbs

Consider those office workers. Office occupancy in 10 major metro areas was down to 31.6% in the week through Sept. 1, according to the latest data from security company Kastle Systems, from 33.1% the week before. In New York, it fell to 20.9% from 22.3%. I was in the office both last week and this week, and I didn’t see a whole lot of difference. 

International tourism still hasn’t opened up in any major way, and when you’re walking in Midtown, you can sense the city is operating at less than half-strength. Delicatessens and clothing stores and everything in between -- those that remain, that is -- probably can’t operate for long on such margins. 

Then there’s New York’s Metropolitan Transportation Authority. The subway carried about 2.5 million riders on Wednesday -- well above the 2021 average of around 1.8 million -- but still down more than 50% from the equivalent pre-pandemic day, depriving the authority of much-needed cash with deficits looming in the years ahead.

Las Vegas is a good proxy for tourism. In July, the city posted a seventh consecutive month of gains, but that’s still down more than 10% from before the pandemic. The convention business has just started up, and I can’t help but think that it’s a slow build. It takes months, even years, to plan a big event.

There’s no reason for this self-imposed slowdown. Not now, not with 75% of the country’s adults having received at least one dose of the vaccination. 

Fear Factor

But there is fear, I hear you say. I know there may be some fully inoculated people who still fear getting sick, or fear infecting their unvaccinated children. But I suspect that there are more employees who abhor the commutes they’ve built for themselves, or the chatty disruptiveness of the open-plan office. 

“There is no perfect time to start going back to the office during a pandemic,” wrote my colleague Justin Fox this week. “Trying to wait out the pandemic seems to be a recipe for never going back to the office at all.” 

The public goal now is reopening the country. 

Wall Street was actually showing the way on the return-to-office front, with a number of banks insisting on it this summer. This week we saw two more signs of pushback against indefinite WFH. 

Goldman Sachs Group Inc. “is dropping social distancing rules in its London office and will return to full occupancy starting next week,” my colleague Marion Dakers reported. Separately, a Deutsche Bank AG analyst said in a report to clients that “our honeymoon with work-from-home is drawing to a close.” The report said the firm expects offices in major financial centers to refill quickly.

More big companies will need to change tack for that to prove true.

(Joe Mysak is a municipal market columnist who writes for Bloomberg. His opinions do not necessarily reflect those of Bloomberg LP and its owner, and his observations are not intended as investment advice.) 

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