‘Offices are toast’: Fundrise CEO is betting workers won’t return to city centers


For New Jersey-based tech consultant Simone, being able to work from home is a non-negotiable.

Saving money and time on a long commute to work “means a lot,” she told MarketWatch. Simone has been working from home since 2019, when she decided that being the only employee at her office didn’t make sense, particularly given that she was just on Zoom
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meetings all day with her team in California.

Driving to a job in New York City, where office occupancy is rising, according to data from Kastle Systems, which tracks key-card swipes, would be an hour-long journey door to door.

Simone’s preferred work setup is one that one real-estate company is banking on when it comes to investing in homes.

“Offices are in big trouble,” Ben Miller, co-founder and CEO of Fundrise, told MarketWatch.

Fundrise, a real estate startup that was founded 2011, manages a fund that allows users to invest small-dollar amounts in real estate to capture price appreciation. The company also acts as a landlord, and has invested in properties across the country.

In Miller’s view, the coronavirus pandemic stimulated a larger cultural awakening that questioned the efficiency of working in-person in an office after nationwide lockdowns didn’t deter white-collar workers from continuing to work from home.

Fundrise is now betting on the fact that more Americans will choose to live in the suburbs, and not return to big office-oriented city centers.

Miller said that he initially saw growth in markets like Brooklyn, Los Angeles, and Washington, D.C. But after five years, Fundrise decided to exit these markets.

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It’s expensive to live in a city, particularly with a growing family, Miller explained. It’s also expensive to live in the city itself, given how rents are rising. Rents are reaching new record highs, according to Realtor.com’s June report.

“Offices are toast. It’s like saying malls are going to come back,” Miller said. “Why would people work in offices? They didn’t exist 100 years ago. They came from the same mentality as industrial production.”

For Simone, the privacy of working from home matters significantly for multiple reasons. Working from home means “I manage my own schedule… make time for my family, for all the things I need to do,” Simone said.

And when things pop up, like an illness, or painful menstrual cramps, she doesn’t need to schedule time off from work. “When I was working my first job out of college, I used to bring my heating pads to my office and very discreetly use it at my desk, with a throw over it, so it wouldn’t be noticeable,” she recalled.

Fundrise has invested in apartments in the Sun Belt, owning up to 17,000 units, and then single-family housing. Now the company has 5,000 single-family homes and 17,200 apartments. The company is looking in the near-term to buy more single-family homes.

Not all agreed with Miller’s assessment of where Americans now prefer to live.

“[T]he affordability play is starting to go away in a lot of these areas,” Thomas LaSalvia, senior economist at Moody’s Analytics, told MarketWatch.

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LaSilva, who doesn’t agree that offices are “toast” just yet, said that based on Moody’s data, rents for apartments in central business districts have not only come back from pandemic-related decreases, but in fact have jumped past 2019 levels by 11%.

“Urban areas have rebounded tremendously from a demand and rent perspective and that’s not just New York City — that’s everywhere,” he said.

Office occupancy rates ticked up after the Fourth of July holiday by four points to 44.1% in the 10 biggest cities in the U.S., according to Kastle Systems.

Offices in San Francisco saw the biggest jump in occupancy, to 38.1%, “the highest since the pandemic started,” the company said. More than half of the offices in Austin, Dallas, and Houston, were occupied.

Even in markets like Chicago, the city that companies like Boeing
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Caterpillar
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and Citadel abandoned, LaSalvia is seeing “really, really strong” office leasing activity in the last few quarters.

And “there’s even emerging survey evidence that workers just starting their career actually want to be in the office a few days a week and want to live in cities still because they feel like there’s career advantages to doing that,” LaSalvia added. “Nobody has ever said college education is better online than in person.”

Write to MarketWatch reporter Aarthi Swaminathan at aarthi@marketwatch.com.



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