6 ms·

Not could be, as in the future, but currently is, as in right now. As long-term leases expire, more tenants are giving notice of non-renewal, because they're n

by cs702 4y ago

Not could be, as in the future, but currently is, as in right now. As long-term leases expire, more tenants are giving notice of non-renewal, because they're not using all the space they have. Many office buildings are facing declining revenues in the near term. Most cannot fulfill their monthly debt service obligations if tenant collections drop below ~80% leased, give or take. Many regional banks, in particular, are loaded up with loans to office buildings.

mattbrewsbytes 4y ago
This could spiral as a corporate landlord will need to raise lease charges to compensate which might cause more tenants to leave. I've seen this tactic used when they want turnover on tenants.
- toomuchtodo 4y ago
  Good! Those who must have office space will grit their teeth and eat the cost, those who want it for non essential reasons will be forced to divest as the death spiral picks up speed.
- coldtea 4y ago
  >This could spiral as a corporate landlord will need to raise lease charges to compensate Supply and demand works the opposite way.
  - toomuchtodo 4y ago
    As demand dries up, debt must continued to be serviced. If unable to, there will be defaults. Some office space will remain in service after the current debt holders take a haircut. Other office space will be taken out of service for other uses, constraining go forward supply and increasing what landlords can charge for remaining inventory. We haven’t even touched on all the Boomers retiring and zombie companies that’ll be flushed out of the economy by the Fed holding the benchmark rate up.
    - hot_gril 4y ago
      Raising rents above market price won't bring in more rent. The companies that are screwed either way default, and that's it. At the end of the day, there will still be the same amount of land/offices and similar costs but less demand for them.
      - mattbrewsbytes 4y ago
        Yeah I might be off on my comment thinking from the perspective of how sometimes they’ll jack rent up to flip tenants to bigger businesses with bigger wallets. Like if a few tenants don’t renew on a 15 story bldg then jack the rates up to get the rest out and hope for a larger company to lease the full building since they won’t want to build in this economy.
        hot_gril 4y ago
        Yeah, I can see that.
    - syntheweave 4y ago
      We're in for a period of stranded assets any way you slice it - if it's not the demographics or central bank moves, it's the technology. A lot of atoms in the economy are on their way to finding substitutes, and it's disruptive to our understanding of where economic wealth is - valuation of land, raw materials, intellectual property. Those are things I don't want to hold during a restructuring because I won't have a clear view of where they ultimately land. My portfolio focus has gone towards embracing new/emerging asset classes, as those are proven survivors when the economy undergoes structural change. Just a matter of spreading risk so that the ones that go to zero are cancelled out by the 10x'ers. Crypto is a big one in that portfolio - for as much as I complain about how misguided it can be, there's a there there, and the political tension around it reflects the fact that its adoption would be part of a major structural shift. The current wave of generative AI is also that, and EVs, self-driving, and other disruptive tech. All the stuff that gets people really hot and bothered.
      - 4y ago
  - emodendroket 4y ago
    Yeah man that's why the tenants refuse to renew. Even the crudest model of markets allows for someone to attempt to set prices that the market will not bear.
UncleOxidant 4y ago
Quick, everyone return to working in an office to save the banks! /s
- Haga 4y ago
  [dead]
jc_811 4y ago
Are there any metrics, numbers, or charts that paint the picture of just how exposed regional banks are to commercial office loans?
- toomuchtodo 4y ago
  https://www.axios.com/2023/03/21/small-bank-struggles-could-hit-the-real-estate-market-hard https://www.axios.com/2023/03/21/small-bank-struggles-could-...

by cs702 4y ago

mattbrewsbytes 4y ago

This could spiral as a corporate landlord will need to raise lease charges to compensate which might cause more tenants to leave. I've seen this tactic used when they want turnover on tenants.

toomuchtodo 4y ago
Good! Those who must have office space will grit their teeth and eat the cost, those who want it for non essential reasons will be forced to divest as the death spiral picks up speed.
coldtea 4y ago
>This could spiral as a corporate landlord will need to raise lease charges to compensate Supply and demand works the opposite way.
- toomuchtodo 4y ago
  As demand dries up, debt must continued to be serviced. If unable to, there will be defaults. Some office space will remain in service after the current debt holders take a haircut. Other office space will be taken out of service for other uses, constraining go forward supply and increasing what landlords can charge for remaining inventory. We haven’t even touched on all the Boomers retiring and zombie companies that’ll be flushed out of the economy by the Fed holding the benchmark rate up.
  - hot_gril 4y ago
    Raising rents above market price won't bring in more rent. The companies that are screwed either way default, and that's it. At the end of the day, there will still be the same amount of land/offices and similar costs but less demand for them.
    - mattbrewsbytes 4y ago
      Yeah I might be off on my comment thinking from the perspective of how sometimes they’ll jack rent up to flip tenants to bigger businesses with bigger wallets. Like if a few tenants don’t renew on a 15 story bldg then jack the rates up to get the rest out and hope for a larger company to lease the full building since they won’t want to build in this economy.
      - hot_gril 4y ago
        Yeah, I can see that.
  - syntheweave 4y ago
    We're in for a period of stranded assets any way you slice it - if it's not the demographics or central bank moves, it's the technology. A lot of atoms in the economy are on their way to finding substitutes, and it's disruptive to our understanding of where economic wealth is - valuation of land, raw materials, intellectual property. Those are things I don't want to hold during a restructuring because I won't have a clear view of where they ultimately land. My portfolio focus has gone towards embracing new/emerging asset classes, as those are proven survivors when the economy undergoes structural change. Just a matter of spreading risk so that the ones that go to zero are cancelled out by the 10x'ers. Crypto is a big one in that portfolio - for as much as I complain about how misguided it can be, there's a there there, and the political tension around it reflects the fact that its adoption would be part of a major structural shift. The current wave of generative AI is also that, and EVs, self-driving, and other disruptive tech. All the stuff that gets people really hot and bothered.
    - 4y ago
- emodendroket 4y ago
  Yeah man that's why the tenants refuse to renew. Even the crudest model of markets allows for someone to attempt to set prices that the market will not bear.

UncleOxidant 4y ago

Quick, everyone return to working in an office to save the banks! /s

Haga 4y ago
[dead]

jc_811 4y ago

Are there any metrics, numbers, or charts that paint the picture of just how exposed regional banks are to commercial office loans?

toomuchtodo 4y ago
https://www.axios.com/2023/03/21/small-bank-struggles-could-hit-the-real-estate-market-hard https://www.axios.com/2023/03/21/small-bank-struggles-could-...