But that’s something I don’t actually understand, since real estate would fall under the sunk cost fallacy. Ie, if you’ve invested in real estate, the cost is spent already, right?
Whether someone comes in that building is irrelevant.
The costs spent to maintain, heat, clean, power the buildings, on the other hand…
It’s just not really obvious to me. Seems like fewer people would cost cheaper, no?
The deals they had with various governments to get tax breaks if they built the office in their city are still a consideration. Amazon put governments of municipalities into a bidding war so they could have highly paid software engineers working in their city. They probably aren’t going to get those tax breaks any more if most of those offices are empty.
The cost is spent, but the offices are still assets on the balance sheet.
If demand for offices is lower then all companies that own offices will have to revalue theirs downwards. These impairments have a direct impact on the P&L of the company accounts. Better to force employees to use these assets (and pay their own costs to do so) than show a (greater) accounting loss.
If a company has a lot of money in assets and those assets are worth less than before, the valuation of the company drops. This should mean lower share prices, which is basically the only thing a company cares about.
But that’s something I don’t actually understand, since real estate would fall under the sunk cost fallacy. Ie, if you’ve invested in real estate, the cost is spent already, right? Whether someone comes in that building is irrelevant. The costs spent to maintain, heat, clean, power the buildings, on the other hand… It’s just not really obvious to me. Seems like fewer people would cost cheaper, no?
The deals they had with various governments to get tax breaks if they built the office in their city are still a consideration. Amazon put governments of municipalities into a bidding war so they could have highly paid software engineers working in their city. They probably aren’t going to get those tax breaks any more if most of those offices are empty.
If you’re using that real estate as collateral for loans, it needs to maintain its value, or you’ll have to put up more collateral
The cost is spent, but the offices are still assets on the balance sheet.
If demand for offices is lower then all companies that own offices will have to revalue theirs downwards. These impairments have a direct impact on the P&L of the company accounts. Better to force employees to use these assets (and pay their own costs to do so) than show a (greater) accounting loss.
If a company has a lot of money in assets and those assets are worth less than before, the valuation of the company drops. This should mean lower share prices, which is basically the only thing a company cares about.