26 ms·

Nearly 12M Square Feet of Vacant Office Space in S.F

396 points by kyleblarson 6y ago

sebmellen 6y ago
A close relative of mine is a top real estate appraiser based in San Francisco, and she's terrified about what happens in Q2 2021, when leases will start terminating en masse. She's had a call with the St. Louis Fed, as they're trying to get an idea of what this will look like. She thinks it will be a bloodbath, and deal a death blow to corporate real estate (and other capital markets by extension).
- antognini 6y ago
  Why will leases be terminating in Q2 2021 in particular?
  - sebmellen 6y ago
    This is mainly a concern for one year leases that were renewed this March/April/May, which won't be renewed in 2021. There are many companies which budgeted for a few weeks or months of work from home, now they're transitioning permanently and the office space they were using is no longer needed.
    - gruez 6y ago
      >This is mainly a concern for one year leases that were renewed this March/April/May, which won't be renewed in 2021 Do leases tend to get renewed in Q2?
      - sebmellen 6y ago
        It depends on when the lease was signed. AFAIK there's a pretty even distribution between quarters. Here's an article from this year (2020) about notable leases signed in Q2: https://www.bizjournals.com/sanjose/news/2020/07/10/six-notable-cre-leases-signed-in-silicon-valley-q2.html https://www.bizjournals.com/sanjose/news/2020/07/10/six-nota....
      - freehunter 6y ago
        If they signed a 12 month lease in Q2, then yes.
        bobbyi_settv 6y ago
        A 12 month lease for commercial real estate in SF?
        dguaraglia 6y ago
        That's not uncommon. Our office in North Beach was a 12-month deal. In fact, contracts tend to be longer (24 months or so).
        ComputerGuru 6y ago
        I think that was the point. 12 months is atypically short.
        rightbyte 6y ago
        Of leases 24 months long the average lease should be 12 months in right now (given steady state). I.e half of them expire in a year. Lets say that they realised this summer that things will be different then the effect should gradually start to show almost immediately.
        sokoloff 6y ago
        I think that was GP’s point. We have a few one-year leases on small spaces, but most of ours are 5 year leases, usually with renewal options, sometimes with break options (for $$) at 3 years.
        freehunter 6y ago
        Or anything that‘s a multiple of 12. If the lease was signed in Q2 of any year, it will be up for renewal in Q2.
        astura 6y ago
      - enigmo 6y ago
        the scope of the pandemic wasn't yet clear in Q1
        nostrademons 6y ago
        But the decision to terminate happens when the lease expires at any point after the pandemic happened, not exactly as the pandemic started. If you signed a 1-year lease in 2019Q3 and then realized that you're going to permanent WFH in 2020Q2, you let the lease expire in 2020Q3 and count yourself lucky. So the impact of this should be spread across the year following lockdowns/wfh, not all concentrated in 2021Q2.
    - antognini 6y ago
      Shouldn't we already be seeing this from leases that were signed in Q3 2019?
      - sebmellen 6y ago
        Yes, and we are seeing it, but there are many leases continuing until Q2 2021 (and beyond). The past few months have seen a slow and gradual decline, but a fair number of leases are still being paid and are locked in. Q2 2021 is when that decline accelerates and drops off a cliff.
    - cure 6y ago
      One year leases on commercial office real estate?!? That's unheard of around here (Boston). You'll be lucky if you find a commercial landlord who will rent to you for 5 years instead of the more usual 7, 10 or 20. Subleases are a different story, of course.
      - sebmellen 6y ago
        Sorry for my lack of semantic nuance. Most of the leasers rely on payments from their subletters to pay their leases, so the effects will translate over in either case, just with more "buffer time". There are also a fair amount of 1-year direct commercial leases, depending on the area.
  - CamperBob2 6y ago
    Because that's when businesses stopped signing new ones, I imagine.
  - faeyanpiraat 6y ago
    Edit: Deleted: realized I replied to old comment
- hogFeast 6y ago
  This has happened every few years in corporate real estate for the past half century (Sam Zell's biography is a good take). Every. Single. Time. Valuations too high. Debt too high. Equity too low. I am pretty cynical because I have read a bit too much history and seen this so many times working in investment management but...so what? Some rich people lose a ton of money...okay? Capitalism has losers. You lose. Also, in the last crisis, a ton of people (particularly Blackstone) made a ton of money buying huge deals at the very top of the market. None of this excess came out of the market. Lots of people who borrowed tons of money were just able to take their paper to the Fed, and keep playing.
  - sebmellen 6y ago
    Point taken, but I don't think you're taking into account the monumental impact of COVID-19. We've never had such a large, immediate, and impactful shift to work culture. Working remote was still a niche idea at the beginning of 2020, now it's ubiquitous. That has never happened before.
    - hogFeast 6y ago
      Agreed. Very hard to estimate that effect. With corporate real estate, it is inherently local (you cannot export an office) so the question is about the swings in vacancies. Have some markets seen ~15% vacancies before? Yes, corporate real estate is very cyclical, no-one builds for years, and then the market adds 40-50% in a few years. But when it gets to 30-40% then you are probably looking for examples outside the US...and SF will be the worst-hit market, others should be less. But...the world will move on, write down the value of property, assign losses, pay off remaining creditors, the world moves on...I don't think anyone could say a fault of the last ten years has been that shareholders/creditors were forced to swallow too many losses. The strength of a capitalist economy is that losses can be assigned quickly, and everyone moves on...in theory.
      - sebmellen 6y ago
        You're right, things will move on, and I am not (personally) all that worried. Nor are the creditors who can afford to eat a loss. My concern is more about the ripple effects. Many low-skilled workers rely on service work, and servicing corporate real estate is a real industry (janitorial services, managerial duties, parking lot attendants, plumbers, even construction). They are already having a pretty hard time of it, and if this industry vanishes, "moving on" may mean going out on the streets. San Francisco, Los Angeles, New York, and San Diego have enough homeless already.
- marinhero 6y ago
  My friend who’s also a realtor in The Bay says the exact same thing. I hope they are wrong and just being fatalists!
- api 6y ago
  There is a mass exodus of people from HCOL cities as jobs go virtual as well as a massive amount of office downsizing. Residential real estate may be okay in the cities receiving this exodus in the South, Midwest, Texas, Idaho, etc. but as for HCOL cities I’m just not sure. There may be enough demand to at least cushion it. Commercial will definitely be a bloodbath of epic proportions, especially in formerly hot markets. Edit: too early for good stats but here are some cities that seem to be receiving HCOL expats as determined by the highly scientific process of observing anecdotes: Phoenix, Santa Fe, Boise, Denver, Dallas, San Antonio, Austin, Atlanta, Cincinnati, Pittsburgh, Chicago... I’m sure that list is not exhaustive. Those are just some I have seen. Those vary in terms of how not-HCOL they are but all of them are much less expensive than California, NYC, or the Seattle area. Much better places to live if you don’t have to live somewhere with $500k to $1.5m “starter homes” and other absurdities. Now that we are discovering that we can actually use this Internet thing, good riddance to that madness.
  - brian-armstrong 6y ago
    Housing prices are actually already trending back upward in the bay area. I don't think there will really be that much of an exodus. Your company might let you retain most of your salary post-relocation but once you change jobs you'll have far fewer prospects. Also the internet doesn't help with timezone differences.
    - cm2187 6y ago
      Might be offset by money printing
    - api 6y ago
      House prices are being buoyed by insanely low rates, but if offices are downsizing CRE is toast. As for tech hubs, they are now only economically rational if you are high up at a large FAANG or similar company that is able and willing to pay huge salaries. Startups, bootstrappers, and labors of love are not going to happen there unless they are lavishly funded or only comprised of straight out of college folks willing to live on couches.
    - 6y ago
- erosenbe0 6y ago
  In terms of suffering, I'm more worried about the loss of support workers and supporting businesses over the long-term. Especially in a place like Chicago where the installed base of offices is much much larger than SF, and where portions of the future sales tax revenue has already been securitized and sold to investors.
  - deleted 6y ago
    [deleted]
  - reaperducer 6y ago
    Developers in Chicago are building as fast as they can right now. It's counterintuitive to people on the outside, but from what I read, it's because labor, material, and capital are dirt cheap. So the developers are putting up new skyscrapers and other mega-developments so they're in a good position to take advantage of the recovery. A new 57-story office tower opened just last week: https://www.chicagoarchitecture.org/2020/10/18/a-new-skyscraper-opens-in-the-loop/ https://www.chicagoarchitecture.org/2020/10/18/a-new-skyscra... Dozens of new residential towers have been announced, and at least a dozen are under construction, including one that's almost finished at 101 stories tall. https://www.chicagoarchitecture.org/2020/10/05/sit-back-breathe-deep-and-enjoy-the-vista/ https://www.chicagoarchitecture.org/2020/10/05/sit-back-brea...
    - jtbayly 6y ago
      I was under the impression that building materials are very expensive right now.
      - lotsofpulp 6y ago
        You are correct, metal prices are up 3x and wood at least 2x. Building might be happening due to demand, but not because the materials are cheap. It might be possible that labor in big cities might be cheaper, but I doubt it.
      - swsh 6y ago
        I think you will find that material prices are <20% of the capital cost.
- Spooky23 6y ago
  I wouldn’t. Better to run it into the ground — this stuff will get bailed out to protect the banks.
- ChuckMcM 6y ago
  This is a good point. I explained it to my mother with an analogy to a cruise ship heading toward shore at full speed. Everyone knows this means the ship will run aground, but few appreciate that given the mass (and thus momentum) the ship would travel far inland just scraping across the ground. The coming economic response to the pandemic has the potential to be like that, basically 10x the 2009 "great recession" and a lot of second and third order effects. Hard to predict what to do and it's nice to hear the Fed doing their research. The TARP program in 2009 was pretty creative and managed a pretty big thwack without nearly as much pain as their could have been.
  - deleted 6y ago
    [deleted]
  - vpass10 6y ago
    Videos on YouTube actually show that large ships stop astonishingly quickly when driven onto shore (mostly scrap yards).
    - ChuckMcM 6y ago
      (mostly scrap yards) -- generally much less mass than a ship that is more seaworthy (a lot of early salvage happens before they get to the scrap shore, ships aren't fully loaded, look at their waterline in the videos). And most importantly much much less velocity (1/2mv^2 goes down rapidly with slower velocity). What is is truly impressive is that they estimate the mass, and know very closely what speed to get them too in order to solidly ground them without wasting a lot of energy getting them going faster than necessary.
  - Moru 6y ago
    The analogy fails to account for the captains investment in wings that makes the ship fly over land (remake offices into appartments with dirt cheap labour).
  - jsjohnst 6y ago
    > analogy to a cruise ship heading toward shore at full speed. Everyone knows this means the ship will run aground, but few appreciate that given the mass (and thus momentum) the ship would travel far inland just scraping across the ground. Are you sure you aren’t basing that analogy on the movie Speed 2?
- kristopolous 6y ago
  The other week I was on real estate sites and I saw a bunch of "apartments" in SOMA that just looked like offices with some hastily slapped on anemities, as if there was some "wink wink nudge nudge" going on and they had to call the place an "apartment" for some city ordinance but everyone knew it was an office. However, I realized it was exactly the opposite. These people were taking their office spaces and desperately chopping them up and getting up to code so they could be leased as apartments.
  - FreakyT 6y ago
    That actually seems like a really good idea — I’d love to see more housing in the “downtown core” areas of SF, which are like 95% office space.
    - throwaway9980 6y ago
      Especially good if the converted office space also provides a good work from home environment. Everyone is working from home and those that can are scrambling to expand their houses to suit a new lifestyle.
      - bergstromm466 6y ago
        > Especially good if the converted office space also provides a good work from home environment. Or... you know... just give homeless people housing?
        adrianN 6y ago
        Is there data supporting the conclusion that lack of housing is what causes homelessness? I always thought that it was more of a failure of the social safety net.
        throwaway3699 6y ago
        Lack of jobs and crushing taxes more like. Social safety nets aren't all they're cracked up to be, and leaves people trapped in that system forever.
- hn_throwaway_99 6y ago
  I think the data from the article on subleasing really supports this. The absolute explosion of all this unused office space available for sublease means there are already loads of companies who wish they could escape their rent payments, and very few of them will probably want additional space any time soon.
- arbuge 6y ago
  > and she's terrified about what happens in Q2 2021, when leases will start terminating en masse. I thought the general expectation, or at least the hope, is that that's about when things start to go back to normal.
  - uptown 6y ago
    What is normal? If companies can be as productive (or close ) without the expensive office space - would they all go back to what had been considered “normal”? I doubt it.
- baby 6y ago
  turn it into affordable housing :) ?
- SilasX 6y ago
  At risk of extreme naivety, why do failed real estate investments merit Fed support and attention? I thought they were just for maintaining a sound dollar and liquidity and the financial system, not charity for real estate kings.
  - scarmig 6y ago
    The central component of the American Dream is that, once you're rich, the government will do everything in its power to make sure you remain rich.
    - deleted 6y ago
      [deleted]
    - greesil 6y ago
      The best government money can buy.
    - tomcam 6y ago
      Please describe that mechanism for me.
      - greesil 6y ago
        Wall Street bailouts, letting corporations exfiltrate revenue to off shore tax havens, defunding the IRS, oddly specific tax loopholes, tax cuts on the wealthy, letting lobbyists write the laws. That's just from thinking about it for ten seconds.
      - TearsInTheRain 6y ago
        It's known as "the Fed put". Whenever rich people have taken on too much risk the fed has been printing money to keep asset prices high so no one gets hurt. Im sure you know that the Fed is even directly buying corporate bonds now. This is paid for by main street through the inflation tax.
  - KenoFischer 6y ago
    The Fed does a lot of macroeconomic modeling and forecasting, so their analysts being interested in the effects of the pandemic on particular sectors of the economy doesn't sound particularly unusual (I have no insight in the the particular circumstances referenced in the parent comment of course).
- ryanmarsh 6y ago
  I’d she’s based in SF why didn’t she contact the SF Fed?
  - culopatin 6y ago
    Different Feds do different things. St Louis Fed I believe is strong in data analysis and forecasting.
    - dredmorbius 6y ago
      This. I looked at various online domains a few years back, and STL Fed publishes far more articles than the rest of the Federal Reserve branches. ~106k STL vs. 6--8k for others. federalreserve.gov publishes about 1/2 what stlouisfed.org does. https://old.reddit.com/r/dredmorbius/comments/3hp41w/tracking_the_conversation_fp_global_100_thinkers/ https://old.reddit.com/r/dredmorbius/comments/3hp41w/trackin...
  - sebmellen 6y ago
    She was contacted by them based on an article she wrote, she didn't contact them.
- fred_is_fred 6y ago
  Oh relax. They're not going to implode the buildings and nobody is going too die. Rents will fall, some bond holders will default, but at some cost point that real estate has value to someone. Rents are not going to zero.
  - pbourke 6y ago
    Basically this. Lots of people leave. Lots of companies go fully remote or are wound up. Lots more people and companies get more bang for their buck in the real estate market. Some real estate businesses tank. The market finds a clearing price.
- LegitShady 6y ago
  we'll just have google/apple/etc buy out the whole city because they have the cash and nothing to do with it.
- deleted 6y ago
  [deleted]
- anigbrowl 6y ago
  I'm quite interested in what your relative thinks might be the impact of the looming property tax reform in CA; if the ballot initiative passes next month then commercial real estate will no longer be able to enjoy the prop13 caps by using pass-through entities to own the buildings, and changing the beneficial owner of the real estate holding corporation instead. Plunging rents plus escalating tax liabilities seem like a perfect financial storm.
- clams 6y ago
  I would love real estate markets to crash in SF and NYC. My body is fucking ready.
  - greesil 6y ago
    Commerical real estate != residential, I wouldn't get your hopes up unless demand drops, which it totally could.
    - JMTQp8lwXL 6y ago
      It seems unlikely that a commercial real estate crash wouldn't have second-order effects on residential. After all, if none of this commercial space is getting used, there is less of a reason to be interesting in the residential housing that surrounds said commercial space.
      - kelnos 6y ago
        Depends on what is meant by "commercial". If we're talking about retail and restaurants and bars, then sure, the loss of those things will make it less attractive to live in/near those locations. But if we're talking about office buildings, and the reason for the collapse is because people don't need/want offices at all (not because those offices are moving elsewhere), then I think it'll have a much smaller effect on the residential markets. What I think has a higher chance of hurting residential markets would be hiring moving away from HCoL areas because companies believe that most workers can be remote (and workers in LCoL areas are cheaper comp-wise). That hiring movement already seems to be happening, though SF home prices haven't changed much. There might just be a delayed response to that, though.
      - nostrademons 6y ago
        We're seeing a shift in demand across different sectors of the real estate market, not a destruction in demand. The market for office space is cratering, as is the market for 1BR apts/condos in dense urban cores. But most of the people who would've occupied those buildings are still working, they're just working from home. The market for SFHs (particularly large suburban ones with home offices) is exploding. I'm seeing some in Mountain View and the SF peninsula go for ~$350-500K (up to 15-18%) over asking.
- rhizome 6y ago
  I tell you what: if that comes to pass and I'm working remote, I'm looking forward to getting a sweet lease on a 150-200 sqft solo office with a nice view.
- javiramos 6y ago
  Same in Boston —- the office space market is a bloodbath. I have little knowledge of the commercial office space market but it’s not difficult to imagine how mass defaults in this sector could trigger a crisis.
- mattparcens 6y ago
  Don't know squat about corporate real estate, but why would lease terminations occur en masse in Q2 2021? I would expect that a sliding window of leases would be expiring all the time, and that the bloodbath would be slightly more gradually occurring right now.
andrewxdiamond 6y ago
If this trend continues, I wonder if these office spaces can be converted to apartments. SF is in desperate need of living space
- diebeforei485 6y ago
  Many of them can't because they don't have sufficient plumbing everywhere (apartments would have far more bathrooms and kitchens) and most buildings can't be retrofitted. Plus, land-use laws would have to change, which is also extremely difficult.
  - 908B64B197 6y ago
    I guess they could make bigger apartments if they are bottlenecked on plumbing. But I wonder what people could do with commercial office space so cheap? For startups that can't really go 100% remote (mostly hardware) that's a dream come true!
    - VectorLock 6y ago
      I wonder what it would be like to live in a 10k SF open-plan office with a single bathroom.
      - TeMPOraL 6y ago
        I wonder how it would be like to work there, because that already sounds like a sweatshop from my worst nightmares. (There are only 96 five-minutes bathroom breaks available during 8-hour work day, to share between all employees.)
  - Aeolun 6y ago
    > extremely difficult Right up until 50% of the city center is empty. You’ll see those laws changing real soon.
  - swiley 6y ago
    SF: shared bathrooms aren't ok, we'd rather have people use the sidewalk.
deleted 6y ago
[deleted]
OpticalWindows 6y ago
We haven't even seen the extent of the depression yet. Combined with congressional inaction on social spending a lot of people are going to be in very deep finanical issues. This is a systemic problem that we needed fixed 3 months ago.
- sebmellen 6y ago
  The lack of continued large-scale stimulus is tragic. We need a strong stimulus package with direct monetary relief (one $1200 check is not enough), and a program of structured financial relief / rent forgiveness. Unfortunately, I don't see it happening.
  - OpticalWindows 6y ago
    We should be reciving our 3rd and onto our 4th right now.
    - sebmellen 6y ago
      Really, it's an infrastructure problem. We don't have direct payment rails set up for something like UBI, and the political will to build this infrastructure is next to zero. Most of the companies receiving relief were badly managed before the pandemic, and they should be allowed to fail. But it's very hard to structure relief in a fair and effective way.
      - waheoo 6y ago
        In WW2 we transformed every industry overnight to be geared for war. I think we can handle setting up a payment system... Like what kind of weak ass excuse is that? You can't figure out how to pay everyone? Please. Give me a break. Ubi is the effective and fair way to stimulate the economy btw. All this stimulus aimed at businesses is absolutely moronic. If people know they have secure pay coming in they will spend the money. Its the uncertainty that causes people to hard cash. Businesses don't need the cash, if they can't stay afloat during this they shouldn't be allowed to make it through. I do believe they deserve some help,aybe tax breaks, maybe short term allowance to make people redundant / reduce so they can equalise the books but there is no fair way to give them money and not the people.
stellar678 6y ago
In other news, water is wet. Is it surprising to people who are working from home, that the office they used to work in and cannot yet return to is now vacant? People have been calling the collapse of San Francisco since the gold rush. It's clearly had its ups and downs, but the overall trend is clear too.
- rightbyte 6y ago
  I guess this number doesn't include vacant as in barely anyone actually using the office space but still leased. In that case 14% vacancy rate sounds low.
- quickthrower2 6y ago
  Well this isn't the collapse of San Fransisco - but rather the office rental market. Also interesting that people let go of the office space. Companies making a lot of money wouldn't do that they'd keep it for a year or so simply to have the continuity. They are too busy making money to worry about their rent. But if they are looking to cut back on rent costs it makes me think times are tough. That paying attention to cutting this cost (and the hassle it will cause now and when things return to normal), and taking that attention away from growth means that there is an issue. Obviously this isn't the permanent collapse of SF but it might be a nail in it's long term coffin. I can't imagine in 50 years time, with globalisation, with global currencies, remote working, VR etc. that you'd need to be tied to a physical location to innovate or get investment.
danpeddle 6y ago
Is this a worldwide trend? Wonder what it means for city tax incomes.
- gruez 6y ago
  Why would it matter? Do you not have to pay property taxes if the space isn't leased out?
- perardi 6y ago
  Meanwhile, in Canada… http://trreb.ca/index.php/market-news/market-stats#commercial-stats http://trreb.ca/index.php/market-news/market-stats#commercia... If leasing activity and sales volume are good indicators, it’s down. Though prices are up slightly… Also that data is nation-wide, and not specifically for Toronto, which is reasonable to assume would be the hardest hit. (Biggest city, and Ontario has not controlled this as well as British Columbia.)
  - tlear 6y ago
    I think aggregate for the country is almost meaningless, these things are very local. Toronto residential rentals are dropping but not that quickly. Construction has not slowed and condos are popping up like mushrooms. Prices seem stable for now There is A LOT of hiring by US companies. Canadian labor is so cheap compared to CA. Every startup past series A seems to be opening a Toronto branch. This is awesome news as it will drive salaries up. On another positive side we do not have homeless shitting on every corner. Drug addict camps are pretty small and localized and Winter is Coming. Plus courts are actually letting city clear the encampments.
    - perardi 6y ago
      Fiiiine, I am projecting, I admit it. I still can’t believe people are paying $600,000+ CAD for a 533 square-foot condo, and yet, condo prices are even headed up a bit.
- franciscop 6y ago
  Purely incidental, but: I check housing prices in Tokyo every once in a while and I've found a lot more of what I'd consider "a good deal" in the last couple of months. Not buying a place anytime soon, just find it interesting to see. I also took a short trip to Okinawa (the beach islands of Japan) and the Airbnb prices were anomalously low, in fact it was more expensive renting a car for the time I was there than my stay. Not surprising, considering that last year ~31 million tourists visited Japan but this year that number must be very low.
jeffbee 6y ago
Keep in mind that the denominator is about 88 million square feet of total office capacity.
vmception 6y ago
Still not moving back. Seeing those empty Walgreens shelves was it for me. Even the social programs and tolerance of the squalor is not that real, it is simply that the transient population is not affected: students and programmers. The same population that just left. I appreciate all the optimism for San Francisco but it just seems to lack context from the mid-atlantic cities that are carcasses of an industrial era which never returned. The brick and mortar boutiques were struggling there during the best market in the history of man kind. This is more obvious to see when you leave. Its harder to see when your life is built around never acknowledging it and pouncing on everyone that says what they observe, on Nextdoor.
- digitaltrees 6y ago
  You seem to be hinting at interesting things here but its hard to follow, the writing feels like a disjointed short hand with unstated context that requires experience to unpack. What are "those empty Walgreens shelves", not having been there I don't know what you mean. Further, SF was not unique in experiencing that. I experienced it in North Carolina and Utah. What do you mean "squalor that is not that real?", what is the "context from mid-atlantic cities" and how is that relevant or informative to SF in particular? What is obvious when you leave? Where did you go and what did you experience?
  - flurben 6y ago
    I agree, linguistically that comment borders on gibberish.
    - dang 6y ago
      Please don't be rude in comments here, and please don't pile on. digitaltrees' reply gives vmception a nice invitation to expand, which would benefit all of us. Swipes like the one in your comment unfortunately have the opposite effect on conversation. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
      - 6y ago
paul_f 6y ago
That is 275 acres! Hard to even visualize
mancerayder 6y ago
Are Progressive mayorships in places like SF and New York the right mentality at the right time when it's an economic catastrophe to be averted? The Mayor of NYC said a few days ago, 'Midtown is not the center of the universe' when asked about sudden new squalor and economic catastrophe. Unfortunately it is the center of jobs for the region. Is SF run like this as well?
- Aeolun 6y ago
  > sudden new squalor and economic catastrophe Billionaires suddenly losing their tenants is now economic catastrophe? Is this another variant of ‘too big to fail’? Those buildings won’t be going anywhere regardless of anything else.
  - mancerayder 6y ago
    What do you mean, billionaires? What about all the small businesses who used to get daily business from those office workers who bought coffee, lunch, drinks, and so forth? The hubris and myopia of the 'eat the rich' mentality is galling and a little depressing.
    - Aeolun 6y ago
      > What about all the small businesses who used to get daily business from those office workers who bought coffee, lunch, drinks, and so forth My expectation is that they’re pretty much dead already (after 6 months of this). Even if not, while it sucks for them, I don’t think it will necessarily kill them, more vacancy may mean less customers, but it also means lower prices. Presumably there were shops before SF became juppy heaven, so it will have them after.
    - Apocryphon 6y ago
      Small businesses are hurting everywhere, what can mayorships in large cities do any differently from those in small towns?
  - deleted 6y ago
    [deleted]
christiansakai 6y ago
How relevant is this to average people? I.e., seems this only affect the rich?
- Aeolun 6y ago
  I like how most of HN is probably comfortably within the 1%, but as soon as we start talking about ‘owners of real estate in SF’, we are easily able to call them ‘the rich’, because the wealth is on a completely different level.
  - Texasian 6y ago
    Most? You’ve gotta be earning more than 400k to get into the 1%. Top 10% maybe, since that’s around 125-150k.
    - onecommentman 6y ago
      According to this, in 2008 UN researcher determined the 10% threshold was $61K in 2000 dollars. It’s now 2020... https://www.mic.com/articles/2636/compared-to-the-rest-of-the-world-americans-are-all-the-1 https://www.mic.com/articles/2636/compared-to-the-rest-of-th...
    - Aeolun 6y ago
      That’s a very US centric view.
  - nemothekid 6y ago
    Most of HN is in the 1%? Maybe globally, but I doubt most of HN is in the 1% of America. A couple of two, both making $200k/year is outside the 1%.
- quickthrower2 6y ago
  It might be a canary for the general state of the economy. It might not though!
- patrickthebold 6y ago
_Microft 6y ago
That's 1.1M m^2, so a bit over 1 km^2.
InTheArena 6y ago
I live in a state where we are suddenly inundated with California’s refugees, fleeing the state now that they don’t have to physically live there. Reasonable taxes, a much less stressful work-life balance, bigger homes all make it very appealing to ditch the once0golden state. Our company has decided not to reopen a majority of it’s office space. Ironically, the Bay Area office is remaining open while other offices are being closed, but even there it will be a shadow of it’s former self I would like local and federal governments to come up with a plan for the inevitable bail out that transforms some of this space into more livable space, more community access, and more on-demand office space. Apple’s HQ has turned into the worlds largest set piece for a iPhone ad. San Fran is going to come out of COVID dramatically weaker. That’s been inevitable for a while, the pandemic just accelerated it.
- nicktrocado 6y ago
  Which state? I thinking of moving and would like to know good states to move into
  - deleted 6y ago
    [deleted]
  - nwatson 6y ago
    North Carolina is decent. Made the move in 2013, been working for SF Bay Area companies since. Cost of living is very low, kids' education is decent (impacted by COVID-19 currently, of course).
    - bitcoinmoney 6y ago
      Did you maintain your salary ?
  - deleted 6y ago
    [deleted]
- jacobolus 6y ago
  The “reasonable taxes” in many places depend on large-scale transfers at the state/federal level from places like SF. But this pandemic is going to be crushing state and municipal budgets across the country, and many of the worst-hit places will be rural and exurban.
anonAndOn 6y ago
I really hope the creatives and studio types are taking advantage of this once-in-a-generation type opportunity to film in deserted SF neighborhoods. Post-apocalyptic, zombie or killer-virus* films could all be shot on location instead of some studio lot. *that may be a little too close to the truth
- ilaksh 6y ago
  Are they really deserted though? Did the homeless people also move to Texas?
albacur 6y ago
I'm excited by the idea of permanent remote work and moving somewhere more affordable. I moved to SF relatively late in my career, and only realized afterwards that I have nowhere near enough savings to own a nice home here. But most of my coworkers seem eager to return to the office. They miss the office environment, the perks and catered meals, and the socialization. And the managers, who subsist on meetings and in-person interaction, seem even more anxious to get everyone back to their desks. The powers-that-be probably have personal motivations for keeping everyone here as well (e.g., many millions of dollars tied up in their homes, which could lose significant value if the housing market deflates). All this is to say, I'm skeptical that workers won't be called back into the office as soon as leadership gets the chance.
- steelframe 6y ago
  > And the managers, who subsist on meetings and in-person interaction, seem even more anxious to get everyone back in their desks. I recently quit my job so I could stop being a manager and return to IC, exactly because of this. In a WFH climate managers have to work twice as hard to stay competitive in the political games.
  - threeqhan 6y ago
    Sounds like they're half as useful to the business rather than their jobs are twice as hard
    - mynegation 6y ago
      I used to think that before I became a manager.
    - deleted 6y ago
      [deleted]
    - Thorrez 6y ago
      Effort and business utility are not necessarily linear. For argument's sake let's assume they are. A manager affects the productivity of all of his/her reports. Let's say a manager has 10 reports. If the manager stops working twice as hard, maybe all of the manager's reports would become 1/2 as productive. That means the manager's 2x work provides the same business utility as 5 ICs.
softwaredoug 6y ago
On the flipside, I wonder how much of a market there will be to rent individual offices? Many like working at home, but a lot of us have rather ad-hoc situations. Even with a perfect home office, kids etc at home can make concentration tough. And the space separation and seeing other adults is very valuable.
- ilaksh 6y ago
  Should be an uptick in co-working businesses that would have offices.
justchilly 6y ago
Typical office leases are 3-5 years. This is just the tip of the iceberg. So far <20% have been up for renewal since the pandemic started, and even fewer since it became clear that things were not going back to normal within a few months.
donclark 6y ago
Related: NYC commercial mortgage backed securities are going to crash https://www.youtube.com/watch?v=RX1uzbAOnXc https://www.youtube.com/watch?v=RX1uzbAOnXc Is it possible to short mortgage backed securities?
- greenyoda 6y ago
  As someone living in NYC, his explanation of how NYC's tax revenue is heavily dependent on hugely inflated real estate valuations was pretty scary. Here's the WSJ article he was referring to: https://archive.is/QjPNf https://archive.is/QjPNf
- mortehu 6y ago
  > Is it possible to short mortgage backed securities Yes, you can buy a credit default swap. They might not be as underpriced as they were ahead of the financial crisis of 2007-2008.
- donclark 6y ago
  https://learn.robinhood.com/articles/5kokhg0zKwun440whmUweA/what-is-a-credit-default-swap/ https://learn.robinhood.com/articles/5kokhg0zKwun440whmUweA/... https://www.pimco.com/en-us/resources/education/understanding-credit-default-swaps https://www.pimco.com/en-us/resources/education/understandin... https://www.investopedia.com/articles/optioninvestor/08/cds.asp https://www.investopedia.com/articles/optioninvestor/08/cds.... https://www.quora.com/Can-retail-investors-buy-credit-default-swaps https://www.quora.com/Can-retail-investors-buy-credit-defaul...
mrb 6y ago
At about 150 sq.ft per employee (https://robinpowered.com/blog/new-office-determine-right-office-space-size/#:~:text=Figuring%20out%20standard%20office%20space,less%20at%20125%2D175%20sq https://robinpowered.com/blog/new-office-determine-right-off....) that means 80,000 employees vacated office space.
deleted 6y ago
[deleted]
pdx6 6y ago
For those that think this is the end of San Francisco, take a deep breath. The empty office space and worries about expiring leases only applies to companies that can't work remote. SF has a huge service industry, swaths of culture, and some pretty nice weather. A bunch of chair warmers and button pushers moved to Tahoe or Mazzula, so what? It is nice to have a huge house and some land, but city living is are a tradeoff. Living around a bunch of people means food, entertainment, and social options that simply can't be had from a Zoom room. If CRE prices drop, the offices will still get filled to the brim with new companies in a couple of years. Will there be some CRE bankruptcies? Certainly. But has anyone looked at on time payments of office REITs? Keep an eye on those for dividend cuts as a predictor. Thinking of starting a business here? I'll beat my drum once again -- it has never been a better time to setup shop here. Take risks when others panic.
- dannyw 6y ago
  I don’t think everyone who lives in San Fran wants do life in San Fran. They’re here because that’s where the jobs are.
  - ps747 6y ago
    Disagree. I love SF. The Symphony is phenomenal, love the Opera and Ballet too. The parks are beautiful, and you can get out into nature in about an hour's drive. Living in SF is expensive, but salaries are high too. Especially if you're in tech like most on HN, you can have a very nice lifestyle here.
    - ngokevin 6y ago
      I like SF, but symphonies, operas, ballets, and beautiful parks are like the common denominator of major US cities. But anyways I agree SF is beautiful in many areas, and no one should listen to any opinions of SF from anyone who calls it "San Fran" :)
      - ps747 6y ago
        Yes, I agree that most major cities have these things, but I truly believe the SF Symphony is special, almost as brilliant as the NY Philharmonic. They regularly host top performers from around the world -- Itzhak Perlman, Gustavo Dudamel, Yuja Wang, and so many more. And Michael Tilson Thomas is a treasure. Anyway, I can ramble about this forever and I appreciate the response :)
RyJones 6y ago
My employer had planned on not renewing our lease in San Francisco this year; I'll miss working in The Presidio when I'm in town, but I won't miss it much.
gumby 6y ago
How does this compare to 2001 when the dot-com neutron bomb his SF? Lots of empty real estate and huge construction projects continuing or starting (due to low interest rates and long lead times)?
- jeffbee 6y ago
  In 2003 SF office vacancy rate exceeded 20% with 17 million square feet available. This 12 million is smaller in absolute and relative terms (about 14%).
- octoberfranklin 6y ago
  Tech was not an existentially-huge fraction of SF's economy back then. The peninsula, where it always has been, got hammered. At the time I was commuting from SF to the mid-peninsula. I recall meeting with one of my clients in a field-house sized cubicle farm which must've had at least 300 desks, probably more. We were the only two people in there in the middle of the day on a weekday. Suburban office space gets spooky during recessions, due to its sheer bigness...
gumby 6y ago
This will (proportionately)happen to downtown Palo Alto when Palantir moves out, though that will probably be good for downtown. They had too large a percentage of the available real estate. The city council ought to find a way to stop this kind of monoculture though I’m not sure how it could reasonably be done.
- octoberfranklin 6y ago
  Graduated property tax.
  - gumby 6y ago
    Good idea, but not permitted under california constitution. Also Palantir is renting so the basis would presumably be set by the landlord’s overall bill. Have to say that that’s not itself bad: a small number of entities own a lot of the commercial real estate in the city.
rasz 6y ago
>And while landlords held firm through the second quarter of the year, asking rents for office space in the city dropped nearly 6 percent in the third quarter alone to $78.45 per square foot (per year) as expected, rents are still on the NY retail space level
glorppe 6y ago
I’m licking my chops and hoping the SF bay does get cheaper; I’d love to live in the city or in Berkeley if the prices dropped significantly. Especially if commuting isn’t a big part of my life. Meanwhile, you couldn’t pay me an extra 100k a year to consider moving to the Midwest or Texas. I just value weather and nature and outdoor activities far too much to deal with those places. I guess if your family is there or something, but most of the year is unbearable away from the west coast.
- minitoar 6y ago
  And so are all the other younger people who want to live in the urban environment. This is why it won't get significantly cheaper.
scarmig 6y ago
As a homeowner in San Francisco... this is great. The cost of living has been too high here for ages, and the prices distort both our society and the economy. It'll be rough for speculators, but in the medium term everyone will come out stronger. After the pandemic, we'll have the chance to see real businesses start here that don't rely on giant checks from VCs for viability; new restaurants will see more opportunities to take risks, as the cost to rent will collapse; and we'll end up with people moving here who want to live here, not those who despise the city but feel compelled to move here in pursuit of the almighty dollar. I encourage companies to continue to support remote work. And, if you do hate the city, please leave, move to Boise, and let people in who will appreciate it.
- stefco_ 6y ago
  It's funny you mention Boise; that city, and many parts of Idaho/the west, are undergoing their own insane housing price inflation at the moment that's surging through the pandemic; real estate prices are a serious problem in a lot of places that aren't SF/NYC.
- therockspush 6y ago
  100%. If you can live in SF and then decide during these times you want to live in Boise and be happier because of it bless your heart. I've lived in a lot of these other states, TX, NC, NV... No matter how big your backyard is, the grass isn't greener there.
- manquer 6y ago
  Only SF residents can say and mean this, no city wants jobs to go away. It is not just jobs you don't like that goes, those jobs support and pays for a lot of other jobs in the area. They also a pay lot in taxes which keeps the city running Ghost towns are not the same small towns. Larger cities become ghost cities not go back to being smaller. SF is lot more likely to become Detroit if businesses leave, everyone should worry about that.
  - naderkhalil 6y ago
    SF won’t become Detroit. I credit SFs culture for a lot of the innovation seen here. Not sure if it’s gold rush energy or what, but there’s an unparalleled optimism and just people looking to reinvent themselves.
Google234 6y ago
Good. The rent was too damn high anyway.
fizixer 6y ago
Fantastic. Can we have 24M next?
erentz 6y ago
Hopefully a lot of commercial office buildings will be able to convert to condos. We could use the extra housing.
GoodJokes 6y ago
something something homelessness
pugio 6y ago
Does anyone know of any good sites, podcasts, books, which have a good analysis of the current economic situation, and an idea of what may happen next? It's hard for me to follow every "big" story about all the crazy things happening right now.
stjohnswarts 6y ago
I'm certainly not going to cry about this. I'm all for a diaspora out of Silicon Valley/Bay Area for money and expertise. It's time.
narrator 6y ago
China investors will come in and buy it all up once the dust settles.
zwischenzug 6y ago
I ran the numbers in a related article on the London situation here: https://zwischenzugs.com/2020/07/25/the-halving-of-the-centre-covid-and-its-effect-on-london-property/ https://zwischenzugs.com/2020/07/25/the-halving-of-the-centr... The ramifications are pretty bad in London, but I imagine even worse in SF, where there's such a predominance of remote-friendly work.
baybal2 6y ago
What about converting those offices into apartments, and solving the California housing issue?
Sarbashish 6y ago
Only see this going up from a percentage standpoint. Due to the pandemic lot of these companies have/will move to a permanent WFH model.
chmaynard 6y ago
Why should the casual HN reader care about the ups and downs of commercial real estate in SF? Just asking..

396 points by kyleblarson 6y ago

A close relative of mine is a top real estate appraiser based in San Francisco, and she's terrified about what happens in Q2 2021, when leases will start terminating en masse. She's had a call with the St. Louis Fed, as they're trying to get an idea of what this will look like. She thinks it will be a bloodbath, and deal a death blow to corporate real estate (and other capital markets by extension).

antognini 6y ago
Why will leases be terminating in Q2 2021 in particular?
- sebmellen 6y ago
  This is mainly a concern for one year leases that were renewed this March/April/May, which won't be renewed in 2021. There are many companies which budgeted for a few weeks or months of work from home, now they're transitioning permanently and the office space they were using is no longer needed.
  - gruez 6y ago
    >This is mainly a concern for one year leases that were renewed this March/April/May, which won't be renewed in 2021 Do leases tend to get renewed in Q2?
    - sebmellen 6y ago
      It depends on when the lease was signed. AFAIK there's a pretty even distribution between quarters. Here's an article from this year (2020) about notable leases signed in Q2: https://www.bizjournals.com/sanjose/news/2020/07/10/six-notable-cre-leases-signed-in-silicon-valley-q2.html https://www.bizjournals.com/sanjose/news/2020/07/10/six-nota....
    - freehunter 6y ago
      If they signed a 12 month lease in Q2, then yes.
      - bobbyi_settv 6y ago
        A 12 month lease for commercial real estate in SF?
        dguaraglia 6y ago
        That's not uncommon. Our office in North Beach was a 12-month deal. In fact, contracts tend to be longer (24 months or so).
        ComputerGuru 6y ago
        I think that was the point. 12 months is atypically short.
        rightbyte 6y ago
        Of leases 24 months long the average lease should be 12 months in right now (given steady state). I.e half of them expire in a year. Lets say that they realised this summer that things will be different then the effect should gradually start to show almost immediately.
        sokoloff 6y ago
        I think that was GP’s point. We have a few one-year leases on small spaces, but most of ours are 5 year leases, usually with renewal options, sometimes with break options (for $$) at 3 years.
        freehunter 6y ago
        Or anything that‘s a multiple of 12. If the lease was signed in Q2 of any year, it will be up for renewal in Q2.
      - astura 6y ago
    - enigmo 6y ago
      the scope of the pandemic wasn't yet clear in Q1
      - nostrademons 6y ago
        But the decision to terminate happens when the lease expires at any point after the pandemic happened, not exactly as the pandemic started. If you signed a 1-year lease in 2019Q3 and then realized that you're going to permanent WFH in 2020Q2, you let the lease expire in 2020Q3 and count yourself lucky. So the impact of this should be spread across the year following lockdowns/wfh, not all concentrated in 2021Q2.
  - antognini 6y ago
    Shouldn't we already be seeing this from leases that were signed in Q3 2019?
    - sebmellen 6y ago
      Yes, and we are seeing it, but there are many leases continuing until Q2 2021 (and beyond). The past few months have seen a slow and gradual decline, but a fair number of leases are still being paid and are locked in. Q2 2021 is when that decline accelerates and drops off a cliff.
  - cure 6y ago
    One year leases on commercial office real estate?!? That's unheard of around here (Boston). You'll be lucky if you find a commercial landlord who will rent to you for 5 years instead of the more usual 7, 10 or 20. Subleases are a different story, of course.
    - sebmellen 6y ago
      Sorry for my lack of semantic nuance. Most of the leasers rely on payments from their subletters to pay their leases, so the effects will translate over in either case, just with more "buffer time". There are also a fair amount of 1-year direct commercial leases, depending on the area.
- CamperBob2 6y ago
  Because that's when businesses stopped signing new ones, I imagine.
- faeyanpiraat 6y ago
  Edit: Deleted: realized I replied to old comment
hogFeast 6y ago
This has happened every few years in corporate real estate for the past half century (Sam Zell's biography is a good take). Every. Single. Time. Valuations too high. Debt too high. Equity too low. I am pretty cynical because I have read a bit too much history and seen this so many times working in investment management but...so what? Some rich people lose a ton of money...okay? Capitalism has losers. You lose. Also, in the last crisis, a ton of people (particularly Blackstone) made a ton of money buying huge deals at the very top of the market. None of this excess came out of the market. Lots of people who borrowed tons of money were just able to take their paper to the Fed, and keep playing.
- sebmellen 6y ago
  Point taken, but I don't think you're taking into account the monumental impact of COVID-19. We've never had such a large, immediate, and impactful shift to work culture. Working remote was still a niche idea at the beginning of 2020, now it's ubiquitous. That has never happened before.
  - hogFeast 6y ago
    Agreed. Very hard to estimate that effect. With corporate real estate, it is inherently local (you cannot export an office) so the question is about the swings in vacancies. Have some markets seen ~15% vacancies before? Yes, corporate real estate is very cyclical, no-one builds for years, and then the market adds 40-50% in a few years. But when it gets to 30-40% then you are probably looking for examples outside the US...and SF will be the worst-hit market, others should be less. But...the world will move on, write down the value of property, assign losses, pay off remaining creditors, the world moves on...I don't think anyone could say a fault of the last ten years has been that shareholders/creditors were forced to swallow too many losses. The strength of a capitalist economy is that losses can be assigned quickly, and everyone moves on...in theory.
    - sebmellen 6y ago
      You're right, things will move on, and I am not (personally) all that worried. Nor are the creditors who can afford to eat a loss. My concern is more about the ripple effects. Many low-skilled workers rely on service work, and servicing corporate real estate is a real industry (janitorial services, managerial duties, parking lot attendants, plumbers, even construction). They are already having a pretty hard time of it, and if this industry vanishes, "moving on" may mean going out on the streets. San Francisco, Los Angeles, New York, and San Diego have enough homeless already.
marinhero 6y ago
My friend who’s also a realtor in The Bay says the exact same thing. I hope they are wrong and just being fatalists!
api 6y ago
There is a mass exodus of people from HCOL cities as jobs go virtual as well as a massive amount of office downsizing. Residential real estate may be okay in the cities receiving this exodus in the South, Midwest, Texas, Idaho, etc. but as for HCOL cities I’m just not sure. There may be enough demand to at least cushion it. Commercial will definitely be a bloodbath of epic proportions, especially in formerly hot markets. Edit: too early for good stats but here are some cities that seem to be receiving HCOL expats as determined by the highly scientific process of observing anecdotes: Phoenix, Santa Fe, Boise, Denver, Dallas, San Antonio, Austin, Atlanta, Cincinnati, Pittsburgh, Chicago... I’m sure that list is not exhaustive. Those are just some I have seen. Those vary in terms of how not-HCOL they are but all of them are much less expensive than California, NYC, or the Seattle area. Much better places to live if you don’t have to live somewhere with $500k to $1.5m “starter homes” and other absurdities. Now that we are discovering that we can actually use this Internet thing, good riddance to that madness.
- brian-armstrong 6y ago
  Housing prices are actually already trending back upward in the bay area. I don't think there will really be that much of an exodus. Your company might let you retain most of your salary post-relocation but once you change jobs you'll have far fewer prospects. Also the internet doesn't help with timezone differences.
  - cm2187 6y ago
    Might be offset by money printing
  - api 6y ago
    House prices are being buoyed by insanely low rates, but if offices are downsizing CRE is toast. As for tech hubs, they are now only economically rational if you are high up at a large FAANG or similar company that is able and willing to pay huge salaries. Startups, bootstrappers, and labors of love are not going to happen there unless they are lavishly funded or only comprised of straight out of college folks willing to live on couches.
  - 6y ago
erosenbe0 6y ago
In terms of suffering, I'm more worried about the loss of support workers and supporting businesses over the long-term. Especially in a place like Chicago where the installed base of offices is much much larger than SF, and where portions of the future sales tax revenue has already been securitized and sold to investors.
- deleted 6y ago
  [deleted]
- reaperducer 6y ago
  Developers in Chicago are building as fast as they can right now. It's counterintuitive to people on the outside, but from what I read, it's because labor, material, and capital are dirt cheap. So the developers are putting up new skyscrapers and other mega-developments so they're in a good position to take advantage of the recovery. A new 57-story office tower opened just last week: https://www.chicagoarchitecture.org/2020/10/18/a-new-skyscraper-opens-in-the-loop/ https://www.chicagoarchitecture.org/2020/10/18/a-new-skyscra... Dozens of new residential towers have been announced, and at least a dozen are under construction, including one that's almost finished at 101 stories tall. https://www.chicagoarchitecture.org/2020/10/05/sit-back-breathe-deep-and-enjoy-the-vista/ https://www.chicagoarchitecture.org/2020/10/05/sit-back-brea...
  - jtbayly 6y ago
    I was under the impression that building materials are very expensive right now.
    - lotsofpulp 6y ago
      You are correct, metal prices are up 3x and wood at least 2x. Building might be happening due to demand, but not because the materials are cheap. It might be possible that labor in big cities might be cheaper, but I doubt it.
    - swsh 6y ago
      I think you will find that material prices are <20% of the capital cost.
Spooky23 6y ago
I wouldn’t. Better to run it into the ground — this stuff will get bailed out to protect the banks.
ChuckMcM 6y ago
This is a good point. I explained it to my mother with an analogy to a cruise ship heading toward shore at full speed. Everyone knows this means the ship will run aground, but few appreciate that given the mass (and thus momentum) the ship would travel far inland just scraping across the ground. The coming economic response to the pandemic has the potential to be like that, basically 10x the 2009 "great recession" and a lot of second and third order effects. Hard to predict what to do and it's nice to hear the Fed doing their research. The TARP program in 2009 was pretty creative and managed a pretty big thwack without nearly as much pain as their could have been.
- deleted 6y ago
  [deleted]
- vpass10 6y ago
  Videos on YouTube actually show that large ships stop astonishingly quickly when driven onto shore (mostly scrap yards).
  - ChuckMcM 6y ago
    (mostly scrap yards) -- generally much less mass than a ship that is more seaworthy (a lot of early salvage happens before they get to the scrap shore, ships aren't fully loaded, look at their waterline in the videos). And most importantly much much less velocity (1/2mv^2 goes down rapidly with slower velocity). What is is truly impressive is that they estimate the mass, and know very closely what speed to get them too in order to solidly ground them without wasting a lot of energy getting them going faster than necessary.
- Moru 6y ago
  The analogy fails to account for the captains investment in wings that makes the ship fly over land (remake offices into appartments with dirt cheap labour).
- jsjohnst 6y ago
  > analogy to a cruise ship heading toward shore at full speed. Everyone knows this means the ship will run aground, but few appreciate that given the mass (and thus momentum) the ship would travel far inland just scraping across the ground. Are you sure you aren’t basing that analogy on the movie Speed 2?
kristopolous 6y ago
The other week I was on real estate sites and I saw a bunch of "apartments" in SOMA that just looked like offices with some hastily slapped on anemities, as if there was some "wink wink nudge nudge" going on and they had to call the place an "apartment" for some city ordinance but everyone knew it was an office. However, I realized it was exactly the opposite. These people were taking their office spaces and desperately chopping them up and getting up to code so they could be leased as apartments.
- FreakyT 6y ago
  That actually seems like a really good idea — I’d love to see more housing in the “downtown core” areas of SF, which are like 95% office space.
  - throwaway9980 6y ago
    Especially good if the converted office space also provides a good work from home environment. Everyone is working from home and those that can are scrambling to expand their houses to suit a new lifestyle.
    - bergstromm466 6y ago
      > Especially good if the converted office space also provides a good work from home environment. Or... you know... just give homeless people housing?
      - adrianN 6y ago
        Is there data supporting the conclusion that lack of housing is what causes homelessness? I always thought that it was more of a failure of the social safety net.
        throwaway3699 6y ago
        Lack of jobs and crushing taxes more like. Social safety nets aren't all they're cracked up to be, and leaves people trapped in that system forever.
hn_throwaway_99 6y ago
I think the data from the article on subleasing really supports this. The absolute explosion of all this unused office space available for sublease means there are already loads of companies who wish they could escape their rent payments, and very few of them will probably want additional space any time soon.
arbuge 6y ago
> and she's terrified about what happens in Q2 2021, when leases will start terminating en masse. I thought the general expectation, or at least the hope, is that that's about when things start to go back to normal.
- uptown 6y ago
  What is normal? If companies can be as productive (or close ) without the expensive office space - would they all go back to what had been considered “normal”? I doubt it.
baby 6y ago
turn it into affordable housing :) ?
SilasX 6y ago
At risk of extreme naivety, why do failed real estate investments merit Fed support and attention? I thought they were just for maintaining a sound dollar and liquidity and the financial system, not charity for real estate kings.
- scarmig 6y ago
  The central component of the American Dream is that, once you're rich, the government will do everything in its power to make sure you remain rich.
  - deleted 6y ago
    [deleted]
  - greesil 6y ago
    The best government money can buy.
  - tomcam 6y ago
    Please describe that mechanism for me.
    - greesil 6y ago
      Wall Street bailouts, letting corporations exfiltrate revenue to off shore tax havens, defunding the IRS, oddly specific tax loopholes, tax cuts on the wealthy, letting lobbyists write the laws. That's just from thinking about it for ten seconds.
    - TearsInTheRain 6y ago
      It's known as "the Fed put". Whenever rich people have taken on too much risk the fed has been printing money to keep asset prices high so no one gets hurt. Im sure you know that the Fed is even directly buying corporate bonds now. This is paid for by main street through the inflation tax.
- KenoFischer 6y ago
  The Fed does a lot of macroeconomic modeling and forecasting, so their analysts being interested in the effects of the pandemic on particular sectors of the economy doesn't sound particularly unusual (I have no insight in the the particular circumstances referenced in the parent comment of course).
ryanmarsh 6y ago
I’d she’s based in SF why didn’t she contact the SF Fed?
- culopatin 6y ago
  Different Feds do different things. St Louis Fed I believe is strong in data analysis and forecasting.
  - dredmorbius 6y ago
    This. I looked at various online domains a few years back, and STL Fed publishes far more articles than the rest of the Federal Reserve branches. ~106k STL vs. 6--8k for others. federalreserve.gov publishes about 1/2 what stlouisfed.org does. https://old.reddit.com/r/dredmorbius/comments/3hp41w/tracking_the_conversation_fp_global_100_thinkers/ https://old.reddit.com/r/dredmorbius/comments/3hp41w/trackin...
- sebmellen 6y ago
  She was contacted by them based on an article she wrote, she didn't contact them.
fred_is_fred 6y ago
Oh relax. They're not going to implode the buildings and nobody is going too die. Rents will fall, some bond holders will default, but at some cost point that real estate has value to someone. Rents are not going to zero.
- pbourke 6y ago
  Basically this. Lots of people leave. Lots of companies go fully remote or are wound up. Lots more people and companies get more bang for their buck in the real estate market. Some real estate businesses tank. The market finds a clearing price.
LegitShady 6y ago
we'll just have google/apple/etc buy out the whole city because they have the cash and nothing to do with it.
deleted 6y ago
[deleted]
anigbrowl 6y ago
I'm quite interested in what your relative thinks might be the impact of the looming property tax reform in CA; if the ballot initiative passes next month then commercial real estate will no longer be able to enjoy the prop13 caps by using pass-through entities to own the buildings, and changing the beneficial owner of the real estate holding corporation instead. Plunging rents plus escalating tax liabilities seem like a perfect financial storm.
clams 6y ago
I would love real estate markets to crash in SF and NYC. My body is fucking ready.
- greesil 6y ago
  Commerical real estate != residential, I wouldn't get your hopes up unless demand drops, which it totally could.
  - JMTQp8lwXL 6y ago
    It seems unlikely that a commercial real estate crash wouldn't have second-order effects on residential. After all, if none of this commercial space is getting used, there is less of a reason to be interesting in the residential housing that surrounds said commercial space.
    - kelnos 6y ago
      Depends on what is meant by "commercial". If we're talking about retail and restaurants and bars, then sure, the loss of those things will make it less attractive to live in/near those locations. But if we're talking about office buildings, and the reason for the collapse is because people don't need/want offices at all (not because those offices are moving elsewhere), then I think it'll have a much smaller effect on the residential markets. What I think has a higher chance of hurting residential markets would be hiring moving away from HCoL areas because companies believe that most workers can be remote (and workers in LCoL areas are cheaper comp-wise). That hiring movement already seems to be happening, though SF home prices haven't changed much. There might just be a delayed response to that, though.
    - nostrademons 6y ago
      We're seeing a shift in demand across different sectors of the real estate market, not a destruction in demand. The market for office space is cratering, as is the market for 1BR apts/condos in dense urban cores. But most of the people who would've occupied those buildings are still working, they're just working from home. The market for SFHs (particularly large suburban ones with home offices) is exploding. I'm seeing some in Mountain View and the SF peninsula go for ~$350-500K (up to 15-18%) over asking.
rhizome 6y ago
I tell you what: if that comes to pass and I'm working remote, I'm looking forward to getting a sweet lease on a 150-200 sqft solo office with a nice view.
javiramos 6y ago
Same in Boston —- the office space market is a bloodbath. I have little knowledge of the commercial office space market but it’s not difficult to imagine how mass defaults in this sector could trigger a crisis.
mattparcens 6y ago
Don't know squat about corporate real estate, but why would lease terminations occur en masse in Q2 2021? I would expect that a sliding window of leases would be expiring all the time, and that the bloodbath would be slightly more gradually occurring right now.

andrewxdiamond 6y ago

If this trend continues, I wonder if these office spaces can be converted to apartments. SF is in desperate need of living space

diebeforei485 6y ago
Many of them can't because they don't have sufficient plumbing everywhere (apartments would have far more bathrooms and kitchens) and most buildings can't be retrofitted. Plus, land-use laws would have to change, which is also extremely difficult.
- 908B64B197 6y ago
  I guess they could make bigger apartments if they are bottlenecked on plumbing. But I wonder what people could do with commercial office space so cheap? For startups that can't really go 100% remote (mostly hardware) that's a dream come true!
  - VectorLock 6y ago
    I wonder what it would be like to live in a 10k SF open-plan office with a single bathroom.
    - TeMPOraL 6y ago
      I wonder how it would be like to work there, because that already sounds like a sweatshop from my worst nightmares. (There are only 96 five-minutes bathroom breaks available during 8-hour work day, to share between all employees.)
- Aeolun 6y ago
  > extremely difficult Right up until 50% of the city center is empty. You’ll see those laws changing real soon.
- swiley 6y ago
  SF: shared bathrooms aren't ok, we'd rather have people use the sidewalk.

deleted 6y ago

[deleted]

OpticalWindows 6y ago

We haven't even seen the extent of the depression yet. Combined with congressional inaction on social spending a lot of people are going to be in very deep finanical issues. This is a systemic problem that we needed fixed 3 months ago.

sebmellen 6y ago
The lack of continued large-scale stimulus is tragic. We need a strong stimulus package with direct monetary relief (one $1200 check is not enough), and a program of structured financial relief / rent forgiveness. Unfortunately, I don't see it happening.
- OpticalWindows 6y ago
  We should be reciving our 3rd and onto our 4th right now.
  - sebmellen 6y ago
    Really, it's an infrastructure problem. We don't have direct payment rails set up for something like UBI, and the political will to build this infrastructure is next to zero. Most of the companies receiving relief were badly managed before the pandemic, and they should be allowed to fail. But it's very hard to structure relief in a fair and effective way.
    - waheoo 6y ago
      In WW2 we transformed every industry overnight to be geared for war. I think we can handle setting up a payment system... Like what kind of weak ass excuse is that? You can't figure out how to pay everyone? Please. Give me a break. Ubi is the effective and fair way to stimulate the economy btw. All this stimulus aimed at businesses is absolutely moronic. If people know they have secure pay coming in they will spend the money. Its the uncertainty that causes people to hard cash. Businesses don't need the cash, if they can't stay afloat during this they shouldn't be allowed to make it through. I do believe they deserve some help,aybe tax breaks, maybe short term allowance to make people redundant / reduce so they can equalise the books but there is no fair way to give them money and not the people.

stellar678 6y ago

In other news, water is wet. Is it surprising to people who are working from home, that the office they used to work in and cannot yet return to is now vacant? People have been calling the collapse of San Francisco since the gold rush. It's clearly had its ups and downs, but the overall trend is clear too.

rightbyte 6y ago
I guess this number doesn't include vacant as in barely anyone actually using the office space but still leased. In that case 14% vacancy rate sounds low.
quickthrower2 6y ago
Well this isn't the collapse of San Fransisco - but rather the office rental market. Also interesting that people let go of the office space. Companies making a lot of money wouldn't do that they'd keep it for a year or so simply to have the continuity. They are too busy making money to worry about their rent. But if they are looking to cut back on rent costs it makes me think times are tough. That paying attention to cutting this cost (and the hassle it will cause now and when things return to normal), and taking that attention away from growth means that there is an issue. Obviously this isn't the permanent collapse of SF but it might be a nail in it's long term coffin. I can't imagine in 50 years time, with globalisation, with global currencies, remote working, VR etc. that you'd need to be tied to a physical location to innovate or get investment.

danpeddle 6y ago

Is this a worldwide trend? Wonder what it means for city tax incomes.

gruez 6y ago
Why would it matter? Do you not have to pay property taxes if the space isn't leased out?
perardi 6y ago
Meanwhile, in Canada… http://trreb.ca/index.php/market-news/market-stats#commercial-stats http://trreb.ca/index.php/market-news/market-stats#commercia... If leasing activity and sales volume are good indicators, it’s down. Though prices are up slightly… Also that data is nation-wide, and not specifically for Toronto, which is reasonable to assume would be the hardest hit. (Biggest city, and Ontario has not controlled this as well as British Columbia.)
- tlear 6y ago
  I think aggregate for the country is almost meaningless, these things are very local. Toronto residential rentals are dropping but not that quickly. Construction has not slowed and condos are popping up like mushrooms. Prices seem stable for now There is A LOT of hiring by US companies. Canadian labor is so cheap compared to CA. Every startup past series A seems to be opening a Toronto branch. This is awesome news as it will drive salaries up. On another positive side we do not have homeless shitting on every corner. Drug addict camps are pretty small and localized and Winter is Coming. Plus courts are actually letting city clear the encampments.
  - perardi 6y ago
    Fiiiine, I am projecting, I admit it. I still can’t believe people are paying $600,000+ CAD for a 533 square-foot condo, and yet, condo prices are even headed up a bit.
franciscop 6y ago
Purely incidental, but: I check housing prices in Tokyo every once in a while and I've found a lot more of what I'd consider "a good deal" in the last couple of months. Not buying a place anytime soon, just find it interesting to see. I also took a short trip to Okinawa (the beach islands of Japan) and the Airbnb prices were anomalously low, in fact it was more expensive renting a car for the time I was there than my stay. Not surprising, considering that last year ~31 million tourists visited Japan but this year that number must be very low.

jeffbee 6y ago

Keep in mind that the denominator is about 88 million square feet of total office capacity.

vmception 6y ago

Still not moving back. Seeing those empty Walgreens shelves was it for me. Even the social programs and tolerance of the squalor is not that real, it is simply that the transient population is not affected: students and programmers. The same population that just left. I appreciate all the optimism for San Francisco but it just seems to lack context from the mid-atlantic cities that are carcasses of an industrial era which never returned. The brick and mortar boutiques were struggling there during the best market in the history of man kind. This is more obvious to see when you leave. Its harder to see when your life is built around never acknowledging it and pouncing on everyone that says what they observe, on Nextdoor.

digitaltrees 6y ago
You seem to be hinting at interesting things here but its hard to follow, the writing feels like a disjointed short hand with unstated context that requires experience to unpack. What are "those empty Walgreens shelves", not having been there I don't know what you mean. Further, SF was not unique in experiencing that. I experienced it in North Carolina and Utah. What do you mean "squalor that is not that real?", what is the "context from mid-atlantic cities" and how is that relevant or informative to SF in particular? What is obvious when you leave? Where did you go and what did you experience?
- flurben 6y ago
  I agree, linguistically that comment borders on gibberish.
  - dang 6y ago
    Please don't be rude in comments here, and please don't pile on. digitaltrees' reply gives vmception a nice invitation to expand, which would benefit all of us. Swipes like the one in your comment unfortunately have the opposite effect on conversation. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    - 6y ago

paul_f 6y ago

That is 275 acres! Hard to even visualize

mancerayder 6y ago

Are Progressive mayorships in places like SF and New York the right mentality at the right time when it's an economic catastrophe to be averted? The Mayor of NYC said a few days ago, 'Midtown is not the center of the universe' when asked about sudden new squalor and economic catastrophe. Unfortunately it is the center of jobs for the region. Is SF run like this as well?

Aeolun 6y ago
> sudden new squalor and economic catastrophe Billionaires suddenly losing their tenants is now economic catastrophe? Is this another variant of ‘too big to fail’? Those buildings won’t be going anywhere regardless of anything else.
- mancerayder 6y ago
  What do you mean, billionaires? What about all the small businesses who used to get daily business from those office workers who bought coffee, lunch, drinks, and so forth? The hubris and myopia of the 'eat the rich' mentality is galling and a little depressing.
  - Aeolun 6y ago
    > What about all the small businesses who used to get daily business from those office workers who bought coffee, lunch, drinks, and so forth My expectation is that they’re pretty much dead already (after 6 months of this). Even if not, while it sucks for them, I don’t think it will necessarily kill them, more vacancy may mean less customers, but it also means lower prices. Presumably there were shops before SF became juppy heaven, so it will have them after.
  - Apocryphon 6y ago
    Small businesses are hurting everywhere, what can mayorships in large cities do any differently from those in small towns?
- deleted 6y ago
  [deleted]

christiansakai 6y ago

How relevant is this to average people? I.e., seems this only affect the rich?

Aeolun 6y ago
I like how most of HN is probably comfortably within the 1%, but as soon as we start talking about ‘owners of real estate in SF’, we are easily able to call them ‘the rich’, because the wealth is on a completely different level.
- Texasian 6y ago
  Most? You’ve gotta be earning more than 400k to get into the 1%. Top 10% maybe, since that’s around 125-150k.
  - onecommentman 6y ago
    According to this, in 2008 UN researcher determined the 10% threshold was $61K in 2000 dollars. It’s now 2020... https://www.mic.com/articles/2636/compared-to-the-rest-of-the-world-americans-are-all-the-1 https://www.mic.com/articles/2636/compared-to-the-rest-of-th...
  - Aeolun 6y ago
    That’s a very US centric view.
- nemothekid 6y ago
  Most of HN is in the 1%? Maybe globally, but I doubt most of HN is in the 1% of America. A couple of two, both making $200k/year is outside the 1%.
quickthrower2 6y ago
It might be a canary for the general state of the economy. It might not though!
patrickthebold 6y ago

_Microft 6y ago

That's 1.1M m^2, so a bit over 1 km^2.

InTheArena 6y ago

I live in a state where we are suddenly inundated with California’s refugees, fleeing the state now that they don’t have to physically live there. Reasonable taxes, a much less stressful work-life balance, bigger homes all make it very appealing to ditch the once0golden state. Our company has decided not to reopen a majority of it’s office space. Ironically, the Bay Area office is remaining open while other offices are being closed, but even there it will be a shadow of it’s former self I would like local and federal governments to come up with a plan for the inevitable bail out that transforms some of this space into more livable space, more community access, and more on-demand office space. Apple’s HQ has turned into the worlds largest set piece for a iPhone ad. San Fran is going to come out of COVID dramatically weaker. That’s been inevitable for a while, the pandemic just accelerated it.

nicktrocado 6y ago
Which state? I thinking of moving and would like to know good states to move into
- deleted 6y ago
  [deleted]
- nwatson 6y ago
  North Carolina is decent. Made the move in 2013, been working for SF Bay Area companies since. Cost of living is very low, kids' education is decent (impacted by COVID-19 currently, of course).
  - bitcoinmoney 6y ago
    Did you maintain your salary ?
- deleted 6y ago
  [deleted]
jacobolus 6y ago
The “reasonable taxes” in many places depend on large-scale transfers at the state/federal level from places like SF. But this pandemic is going to be crushing state and municipal budgets across the country, and many of the worst-hit places will be rural and exurban.

anonAndOn 6y ago

I really hope the creatives and studio types are taking advantage of this once-in-a-generation type opportunity to film in deserted SF neighborhoods. Post-apocalyptic, zombie or killer-virus* films could all be shot on location instead of some studio lot. *that may be a little too close to the truth

ilaksh 6y ago
Are they really deserted though? Did the homeless people also move to Texas?

albacur 6y ago

I'm excited by the idea of permanent remote work and moving somewhere more affordable. I moved to SF relatively late in my career, and only realized afterwards that I have nowhere near enough savings to own a nice home here. But most of my coworkers seem eager to return to the office. They miss the office environment, the perks and catered meals, and the socialization. And the managers, who subsist on meetings and in-person interaction, seem even more anxious to get everyone back to their desks. The powers-that-be probably have personal motivations for keeping everyone here as well (e.g., many millions of dollars tied up in their homes, which could lose significant value if the housing market deflates). All this is to say, I'm skeptical that workers won't be called back into the office as soon as leadership gets the chance.

steelframe 6y ago
> And the managers, who subsist on meetings and in-person interaction, seem even more anxious to get everyone back in their desks. I recently quit my job so I could stop being a manager and return to IC, exactly because of this. In a WFH climate managers have to work twice as hard to stay competitive in the political games.
- threeqhan 6y ago
  Sounds like they're half as useful to the business rather than their jobs are twice as hard
  - mynegation 6y ago
    I used to think that before I became a manager.
  - deleted 6y ago
    [deleted]
  - Thorrez 6y ago
    Effort and business utility are not necessarily linear. For argument's sake let's assume they are. A manager affects the productivity of all of his/her reports. Let's say a manager has 10 reports. If the manager stops working twice as hard, maybe all of the manager's reports would become 1/2 as productive. That means the manager's 2x work provides the same business utility as 5 ICs.

softwaredoug 6y ago

On the flipside, I wonder how much of a market there will be to rent individual offices? Many like working at home, but a lot of us have rather ad-hoc situations. Even with a perfect home office, kids etc at home can make concentration tough. And the space separation and seeing other adults is very valuable.

ilaksh 6y ago
Should be an uptick in co-working businesses that would have offices.

justchilly 6y ago

Typical office leases are 3-5 years. This is just the tip of the iceberg. So far <20% have been up for renewal since the pandemic started, and even fewer since it became clear that things were not going back to normal within a few months.

donclark 6y ago

Related: NYC commercial mortgage backed securities are going to crash https://www.youtube.com/watch?v=RX1uzbAOnXc https://www.youtube.com/watch?v=RX1uzbAOnXc Is it possible to short mortgage backed securities?

greenyoda 6y ago
As someone living in NYC, his explanation of how NYC's tax revenue is heavily dependent on hugely inflated real estate valuations was pretty scary. Here's the WSJ article he was referring to: https://archive.is/QjPNf https://archive.is/QjPNf
mortehu 6y ago
> Is it possible to short mortgage backed securities Yes, you can buy a credit default swap. They might not be as underpriced as they were ahead of the financial crisis of 2007-2008.
donclark 6y ago
https://learn.robinhood.com/articles/5kokhg0zKwun440whmUweA/what-is-a-credit-default-swap/ https://learn.robinhood.com/articles/5kokhg0zKwun440whmUweA/... https://www.pimco.com/en-us/resources/education/understanding-credit-default-swaps https://www.pimco.com/en-us/resources/education/understandin... https://www.investopedia.com/articles/optioninvestor/08/cds.asp https://www.investopedia.com/articles/optioninvestor/08/cds.... https://www.quora.com/Can-retail-investors-buy-credit-default-swaps https://www.quora.com/Can-retail-investors-buy-credit-defaul...

mrb 6y ago

At about 150 sq.ft per employee (https://robinpowered.com/blog/new-office-determine-right-office-space-size/#:~:text=Figuring%20out%20standard%20office%20space,less%20at%20125%2D175%20sq https://robinpowered.com/blog/new-office-determine-right-off....) that means 80,000 employees vacated office space.

deleted 6y ago

[deleted]

pdx6 6y ago

For those that think this is the end of San Francisco, take a deep breath. The empty office space and worries about expiring leases only applies to companies that can't work remote. SF has a huge service industry, swaths of culture, and some pretty nice weather. A bunch of chair warmers and button pushers moved to Tahoe or Mazzula, so what? It is nice to have a huge house and some land, but city living is are a tradeoff. Living around a bunch of people means food, entertainment, and social options that simply can't be had from a Zoom room. If CRE prices drop, the offices will still get filled to the brim with new companies in a couple of years. Will there be some CRE bankruptcies? Certainly. But has anyone looked at on time payments of office REITs? Keep an eye on those for dividend cuts as a predictor. Thinking of starting a business here? I'll beat my drum once again -- it has never been a better time to setup shop here. Take risks when others panic.

dannyw 6y ago
I don’t think everyone who lives in San Fran wants do life in San Fran. They’re here because that’s where the jobs are.
- ps747 6y ago
  Disagree. I love SF. The Symphony is phenomenal, love the Opera and Ballet too. The parks are beautiful, and you can get out into nature in about an hour's drive. Living in SF is expensive, but salaries are high too. Especially if you're in tech like most on HN, you can have a very nice lifestyle here.
  - ngokevin 6y ago
    I like SF, but symphonies, operas, ballets, and beautiful parks are like the common denominator of major US cities. But anyways I agree SF is beautiful in many areas, and no one should listen to any opinions of SF from anyone who calls it "San Fran" :)
    - ps747 6y ago
      Yes, I agree that most major cities have these things, but I truly believe the SF Symphony is special, almost as brilliant as the NY Philharmonic. They regularly host top performers from around the world -- Itzhak Perlman, Gustavo Dudamel, Yuja Wang, and so many more. And Michael Tilson Thomas is a treasure. Anyway, I can ramble about this forever and I appreciate the response :)

RyJones 6y ago

My employer had planned on not renewing our lease in San Francisco this year; I'll miss working in The Presidio when I'm in town, but I won't miss it much.

gumby 6y ago

How does this compare to 2001 when the dot-com neutron bomb his SF? Lots of empty real estate and huge construction projects continuing or starting (due to low interest rates and long lead times)?

jeffbee 6y ago
In 2003 SF office vacancy rate exceeded 20% with 17 million square feet available. This 12 million is smaller in absolute and relative terms (about 14%).
octoberfranklin 6y ago
Tech was not an existentially-huge fraction of SF's economy back then. The peninsula, where it always has been, got hammered. At the time I was commuting from SF to the mid-peninsula. I recall meeting with one of my clients in a field-house sized cubicle farm which must've had at least 300 desks, probably more. We were the only two people in there in the middle of the day on a weekday. Suburban office space gets spooky during recessions, due to its sheer bigness...

gumby 6y ago

This will (proportionately)happen to downtown Palo Alto when Palantir moves out, though that will probably be good for downtown. They had too large a percentage of the available real estate. The city council ought to find a way to stop this kind of monoculture though I’m not sure how it could reasonably be done.

octoberfranklin 6y ago
Graduated property tax.
- gumby 6y ago
  Good idea, but not permitted under california constitution. Also Palantir is renting so the basis would presumably be set by the landlord’s overall bill. Have to say that that’s not itself bad: a small number of entities own a lot of the commercial real estate in the city.

rasz 6y ago

>And while landlords held firm through the second quarter of the year, asking rents for office space in the city dropped nearly 6 percent in the third quarter alone to $78.45 per square foot (per year) as expected, rents are still on the NY retail space level

glorppe 6y ago

I’m licking my chops and hoping the SF bay does get cheaper; I’d love to live in the city or in Berkeley if the prices dropped significantly. Especially if commuting isn’t a big part of my life. Meanwhile, you couldn’t pay me an extra 100k a year to consider moving to the Midwest or Texas. I just value weather and nature and outdoor activities far too much to deal with those places. I guess if your family is there or something, but most of the year is unbearable away from the west coast.

minitoar 6y ago
And so are all the other younger people who want to live in the urban environment. This is why it won't get significantly cheaper.

scarmig 6y ago

As a homeowner in San Francisco... this is great. The cost of living has been too high here for ages, and the prices distort both our society and the economy. It'll be rough for speculators, but in the medium term everyone will come out stronger. After the pandemic, we'll have the chance to see real businesses start here that don't rely on giant checks from VCs for viability; new restaurants will see more opportunities to take risks, as the cost to rent will collapse; and we'll end up with people moving here who want to live here, not those who despise the city but feel compelled to move here in pursuit of the almighty dollar. I encourage companies to continue to support remote work. And, if you do hate the city, please leave, move to Boise, and let people in who will appreciate it.

stefco_ 6y ago
It's funny you mention Boise; that city, and many parts of Idaho/the west, are undergoing their own insane housing price inflation at the moment that's surging through the pandemic; real estate prices are a serious problem in a lot of places that aren't SF/NYC.
therockspush 6y ago
100%. If you can live in SF and then decide during these times you want to live in Boise and be happier because of it bless your heart. I've lived in a lot of these other states, TX, NC, NV... No matter how big your backyard is, the grass isn't greener there.
manquer 6y ago
Only SF residents can say and mean this, no city wants jobs to go away. It is not just jobs you don't like that goes, those jobs support and pays for a lot of other jobs in the area. They also a pay lot in taxes which keeps the city running Ghost towns are not the same small towns. Larger cities become ghost cities not go back to being smaller. SF is lot more likely to become Detroit if businesses leave, everyone should worry about that.
- naderkhalil 6y ago
  SF won’t become Detroit. I credit SFs culture for a lot of the innovation seen here. Not sure if it’s gold rush energy or what, but there’s an unparalleled optimism and just people looking to reinvent themselves.

Google234 6y ago

Good. The rent was too damn high anyway.

fizixer 6y ago

Fantastic. Can we have 24M next?

erentz 6y ago

Hopefully a lot of commercial office buildings will be able to convert to condos. We could use the extra housing.

GoodJokes 6y ago

something something homelessness

pugio 6y ago

Does anyone know of any good sites, podcasts, books, which have a good analysis of the current economic situation, and an idea of what may happen next? It's hard for me to follow every "big" story about all the crazy things happening right now.

stjohnswarts 6y ago

I'm certainly not going to cry about this. I'm all for a diaspora out of Silicon Valley/Bay Area for money and expertise. It's time.

narrator 6y ago

China investors will come in and buy it all up once the dust settles.

zwischenzug 6y ago

I ran the numbers in a related article on the London situation here: https://zwischenzugs.com/2020/07/25/the-halving-of-the-centre-covid-and-its-effect-on-london-property/ https://zwischenzugs.com/2020/07/25/the-halving-of-the-centr... The ramifications are pretty bad in London, but I imagine even worse in SF, where there's such a predominance of remote-friendly work.

baybal2 6y ago

What about converting those offices into apartments, and solving the California housing issue?

Sarbashish 6y ago

Only see this going up from a percentage standpoint. Due to the pandemic lot of these companies have/will move to a permanent WFH model.

chmaynard 6y ago

Why should the casual HN reader care about the ups and downs of commercial real estate in SF? Just asking..