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The asking rent chart shows its been flat for the last 2+ years with only a bump before the pandemic. Is this a case also of landlords not being realistic? I d

by jarym 3y ago

The asking rent chart shows its been flat for the last 2+ years with only a bump before the pandemic. Is this a case also of landlords not being realistic? I do think plenty of startups would love an 'office' but the costs are quite high while remote work has much lower overheads and keeps more staff happy.

xwdv 3y ago
We have stopped investing in startups that have offices for no good reason. It is often a sign that they don’t have ways to measure their employee progress and productivity, and that they are wasteful with money. Scalability of startups that cling to physical office culture is also poor, as they lack experience tapping into the global market of talent, artificially constraining themselves to locals or those employees willing to relocate. Offices are a big corp’s game, not fledgling startups.
- throwaway20222 3y ago
  What is a “good reason” in your classification?
  - bitwidget 3y ago
    [dead]
  - password-234 3y ago
    Probably collaboration hubs, client meetings etc.
  - mschuster91 3y ago
    Not the OP but something like a hardware / chemistry lab or the need to comply with government-classified secret protection would be a good reason. Basically, stuff that you can't legally and/or reasonably do from home, or from other countries. Additionally, in some jurisdictions regulations require that certain kinds of documents - mostly HR and finance - are to be kept in offices as well.
  - gumby 3y ago
    Not the GP but our example is we have a lab (chemistry lab with fume hood etc). But nobody has to go there every day; it’s used 2-3 days a week. The facility has some cubicles and conference rooms as well. I go in when someone’s in the lab and work in one of the cubes (sometimes I assist in the lab since I’m qualified to do so). But most of the work can be done remotely (including data analysis, so why drive in? We have a remote culture that works for us so going in isn’t that different than going to a field site.
  - LeifCarrotson 3y ago
    If you need manufacturing facilities, a workshop, or a lab, having a central office still makes a lot of sense. You can't ship every engineer tooling and equipment that costs 5x their annual salary, and they probably can't bolt it down or power it up in their home office. I do prefer working remotely when possible, and can do so ~30% of the time, but when I'm needing to cause motion in a $500k CNC or $50k robot I really ought to be on-site, physically watching the equipment and physically checking wires. But if I'm just copying data from a PDF to Excel, just writing emails or sending Teams messages, or just programming a PLC or HMI (or, like most startup devs, programming a cloud-based webserver), I don't need to be physically present until the final commissioning. Send engineers home with a laptop and maybe a test bench or dev kit, don't expect them to have a full manufacturing office. But hardware is hard and hardware startups are relatively rare.
  - nradov 3y ago
    If you're doing any work on classified (secret) materials then those have to be kept inside a secured facility. HN comments tend to ignore such issues but in the real world this is a huge industry.
- ramraj07 3y ago
  OpenAI has an office, what do you think about that?
  - xwdv 3y ago
    Completely unnecessary if they’re not maintaining some kind of physical infrastructure in those offices.
    - ramraj07 3y ago
      Reading “How Google Works” which came out before the pandemic and it emphasizes the true reason for radical innovation in early days of Google was putting truly intelligent people together in a closed space. Is there an example of a fully remote company doing generationally transformative innovation in the past few years? And no, VPN and git companies don’t count IMO. My take is for “regular” tech work remote is perfectly fine but if you’re trying to do something magical it’s not.
      - nradov 3y ago
        Perhaps, but those sort of case studies don't really establish causality and tend to reflect confirmation biases from the authors and interview subjects rather than providing really rigorous evidence. There were plenty of other startups which also put truly intelligent people together in a closed space yet still failed to deliver radical innovation. Was the office space really the key factor in Google's success or just an irrelevant detail?
      - hurrrr 3y ago
        Remote work became mainstream only 3 years ago. It's early for this kind of considerations. Let's see in 5 years how many remote first unicorn there are going to be.
zxcvbn4038 3y ago
Everybody is hoping they can cash out at pre-pandemic prices before it all comes crashing down. The real estate valuations are mostly wishful thinking at this point. Only question is how long the bluff plays out.
randomifcpfan 3y ago
Under US accounting rules, it is much better for a landlord to leave a property unrented at a higher price than to rent it at a lower price. If the property is unrented, the landlord can use the proposed rental price in calculating the value of the property. If the landlord accepted the lower rent, they would have to use that lower price in calculating the value of the property. That could cause all sorts of problems with any loans that the landlord has on the property that are secured by the value of the property.
- deleted 3y ago
  [deleted]
- deleted 3y ago
  [deleted]
- nradov 3y ago
  Which specific "US accounting rules" are you referring to? I'm not aware of anything in GAAP to justify your claim. There may be covenants in certain mortgage agreements related to lease rates and occupancy levels, but those are terms negotiated individually with lenders rather than being dictated by accounting rules.
  - RestlessMind 3y ago
    I think GP meant mortgage terms (or covenants). Accepting a lower rate will trigger all sorts of cascading effects. This article covers some aspects: https://www.horizoncreok.com/post/why-is-it-better-to-leave-a-commercial-property-vacant-rather-than-reduce-the-rent https://www.horizoncreok.com/post/why-is-it-better-to-leave-...
- BurningFrog 3y ago
  That may well be true, but the downside of not renting the property out is that you get zero income. That has to be more important in the long run at least?
  - lamontcg 3y ago

by jarym 3y ago

xwdv 3y ago

We have stopped investing in startups that have offices for no good reason. It is often a sign that they don’t have ways to measure their employee progress and productivity, and that they are wasteful with money. Scalability of startups that cling to physical office culture is also poor, as they lack experience tapping into the global market of talent, artificially constraining themselves to locals or those employees willing to relocate. Offices are a big corp’s game, not fledgling startups.

throwaway20222 3y ago
What is a “good reason” in your classification?
- bitwidget 3y ago
  [dead]
- password-234 3y ago
  Probably collaboration hubs, client meetings etc.
- mschuster91 3y ago
  Not the OP but something like a hardware / chemistry lab or the need to comply with government-classified secret protection would be a good reason. Basically, stuff that you can't legally and/or reasonably do from home, or from other countries. Additionally, in some jurisdictions regulations require that certain kinds of documents - mostly HR and finance - are to be kept in offices as well.
- gumby 3y ago
  Not the GP but our example is we have a lab (chemistry lab with fume hood etc). But nobody has to go there every day; it’s used 2-3 days a week. The facility has some cubicles and conference rooms as well. I go in when someone’s in the lab and work in one of the cubes (sometimes I assist in the lab since I’m qualified to do so). But most of the work can be done remotely (including data analysis, so why drive in? We have a remote culture that works for us so going in isn’t that different than going to a field site.
- LeifCarrotson 3y ago
  If you need manufacturing facilities, a workshop, or a lab, having a central office still makes a lot of sense. You can't ship every engineer tooling and equipment that costs 5x their annual salary, and they probably can't bolt it down or power it up in their home office. I do prefer working remotely when possible, and can do so ~30% of the time, but when I'm needing to cause motion in a $500k CNC or $50k robot I really ought to be on-site, physically watching the equipment and physically checking wires. But if I'm just copying data from a PDF to Excel, just writing emails or sending Teams messages, or just programming a PLC or HMI (or, like most startup devs, programming a cloud-based webserver), I don't need to be physically present until the final commissioning. Send engineers home with a laptop and maybe a test bench or dev kit, don't expect them to have a full manufacturing office. But hardware is hard and hardware startups are relatively rare.
- nradov 3y ago
  If you're doing any work on classified (secret) materials then those have to be kept inside a secured facility. HN comments tend to ignore such issues but in the real world this is a huge industry.
ramraj07 3y ago
OpenAI has an office, what do you think about that?
- xwdv 3y ago
  Completely unnecessary if they’re not maintaining some kind of physical infrastructure in those offices.
  - ramraj07 3y ago
    Reading “How Google Works” which came out before the pandemic and it emphasizes the true reason for radical innovation in early days of Google was putting truly intelligent people together in a closed space. Is there an example of a fully remote company doing generationally transformative innovation in the past few years? And no, VPN and git companies don’t count IMO. My take is for “regular” tech work remote is perfectly fine but if you’re trying to do something magical it’s not.
    - nradov 3y ago
      Perhaps, but those sort of case studies don't really establish causality and tend to reflect confirmation biases from the authors and interview subjects rather than providing really rigorous evidence. There were plenty of other startups which also put truly intelligent people together in a closed space yet still failed to deliver radical innovation. Was the office space really the key factor in Google's success or just an irrelevant detail?
    - hurrrr 3y ago
      Remote work became mainstream only 3 years ago. It's early for this kind of considerations. Let's see in 5 years how many remote first unicorn there are going to be.

zxcvbn4038 3y ago

Everybody is hoping they can cash out at pre-pandemic prices before it all comes crashing down. The real estate valuations are mostly wishful thinking at this point. Only question is how long the bluff plays out.

randomifcpfan 3y ago

Under US accounting rules, it is much better for a landlord to leave a property unrented at a higher price than to rent it at a lower price. If the property is unrented, the landlord can use the proposed rental price in calculating the value of the property. If the landlord accepted the lower rent, they would have to use that lower price in calculating the value of the property. That could cause all sorts of problems with any loans that the landlord has on the property that are secured by the value of the property.

deleted 3y ago
[deleted]
deleted 3y ago
[deleted]
nradov 3y ago
Which specific "US accounting rules" are you referring to? I'm not aware of anything in GAAP to justify your claim. There may be covenants in certain mortgage agreements related to lease rates and occupancy levels, but those are terms negotiated individually with lenders rather than being dictated by accounting rules.
- RestlessMind 3y ago
  I think GP meant mortgage terms (or covenants). Accepting a lower rate will trigger all sorts of cascading effects. This article covers some aspects: https://www.horizoncreok.com/post/why-is-it-better-to-leave-a-commercial-property-vacant-rather-than-reduce-the-rent https://www.horizoncreok.com/post/why-is-it-better-to-leave-...
BurningFrog 3y ago
That may well be true, but the downside of not renting the property out is that you get zero income. That has to be more important in the long run at least?
- lamontcg 3y ago