5 ms·

It's not "becoming" a major risk. It already is a major risk: * As long-term office leases expire, more tenants are giving notice of non-renewal, because they

by cs702 3y ago

It's not "becoming" a major risk. It already is a major risk: * As long-term office leases expire, more tenants are giving notice of non-renewal, because they don't need as much space anymore. * Many office buildings cannot fulfill their monthly debt service obligations if tenant collections drop below ~80% leased, give or take, at the old $/sqft. * Many regional banks are loaded up with loans to office buildings likely to default in the near term. * Downtown restaurants, pharmacies, shops, and other retail operations have lost a lot of foot traffic. Many are on the verge of shutting down. * City governments depend significantly on downtown economic activity for tax collections. Local governments are likely to see a big hole in their finances. All of this has been on economists' radar for well over a year: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4124698 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4124698

908B64B197 3y ago
Time to retrofit into housing! Those who built smarter buildings that are easier to convert will come out on top. Those who didn't... maybe they should have put their money in VC instead of rental properties!
x86x87 3y ago
This is going to sound rough, but who gives a fuck? How is it my obligation to pay money and waste my time sitting in traffic to prop up commercial real estate? Or banks? Local governments... Oh, poor local governments! The future is now and the pandemic showed that it's feasible to do a lot of the work remotely. Companies that jump on it will thrive, the ones that do not will slowly sink.
- cs702 3y ago
  If society doesn't find a way to work through these issues before they turn into a crisis, we're bound to see (a) a wave of building bankruptcies, (b) a wave of small-business failures, (c) a wave of regional bank failures, (d) a wave of regional tax-collection holes, (e) significant stock and debt market losses for pensions, endowments, 401(k) plans, individuals, etc., and (f) higher local taxes for everyone, including you.
  - adversaryIdiot 3y ago
    We need to stop propping up the economy and let the natural cycles take hold.
    - hestefisk 3y ago
      “Natural”? There’s hardly anything natural about markets let alone the economy unless you believe in god’s hand, of course.
      - mech987987 3y ago
        Is there really anything substantive in arguing over the terminology? I'm fairly certain you understand the intention behind his statement. Markets ebb and flow in accordance with forces of supply and demand, and the government pumping liquidity into a market falls naturally into the same metaphorical linguistic space as "cash flows". Money is as liquid as water. If the motive behind the argument is suspicion that characterizing capitalism as natural is painting it in too positive of a light, then I'd figure that capitalism is as Hobbesian as the jungle.
      - TurkishPoptart 3y ago
        It's natural that customer habits change, and that they move around. Brick and mortar businesses need to move to reach their target audience (i.e. to the suburbs, or to non-downtown locations).
    - cs702 3y ago
      When you say "let the natural cycles take hold," do you mean in the way Western governments used to before the Great Depression, say during the 19th and early 20th centuries? Do you realize how horrific the panics of 1818-19, 1825, 1837, 1847, 1857, 1866, 1869, 1873, 1884, 1893, 1896, 1907, 1914 were, in both the US and Europe? And after all those horrific panics, the old systems led to the Great Depression, 1929-1939. Is that what you mean? To the extent economists today recommend propping things up, it's only because they believe the alternatives are much worse. Judging by the historical record, I'd say they're right to focus on minimizing damage, akin to doctors with their Hippocratic oath.
- TurkishPoptart 3y ago
  Exactly. All those ailing businesses must simply relocate to reach their customer base (which obviously sucks, but that's how market economies are supposed to work). Downtown Seattle, for example, has become a shit-hole (open-air drug market, closed businesses, drugged-out vagrants, lack of law enforcement) but that's not _because_ of empty offices; it's just another pull factor for remote work wherever possible. Why risk getting assaulted on a bus or pay for parking?
algem 3y ago
converting these buildings to homes would solve a lot these issues. Local business can’t survive from locals? What about the inverse of the increased economic activity in the community these workers live in instead of commute to? There has to be solutions that work for everyone besides forcing everyone back to office.
- Tanjreeve 3y ago
  The same people wailing about their commercial real estate investments going south will probably start wailing about their residential investments going south if a glut of residential property was released onto the market from relaxed zoning. The only solution according to the MSM is going to amount to communism for property investors.
- tonyedgecombe 3y ago
  We've been doing that in the UK and it hasn't gone well. Office buildings make poor homes. Better to tear them down and build something more suitable.
sdwr 3y ago
What are the solutions? - vacant buildings suck, but there's no urgent cost to ignoring them for 5-10 years - multi-use "free-for-all" buildings like those big apartment blocks in Hongkong. Doesn't mesh w/ western sensibility. - convert to apartments. Works in theory, but city centre would have to remap target customer from <office worker> to <resident>.
winrid 3y ago
Time for HubHaus Extreme?

by cs702 3y ago

908B64B197 3y ago

Time to retrofit into housing! Those who built smarter buildings that are easier to convert will come out on top. Those who didn't... maybe they should have put their money in VC instead of rental properties!

x86x87 3y ago

This is going to sound rough, but who gives a fuck? How is it my obligation to pay money and waste my time sitting in traffic to prop up commercial real estate? Or banks? Local governments... Oh, poor local governments! The future is now and the pandemic showed that it's feasible to do a lot of the work remotely. Companies that jump on it will thrive, the ones that do not will slowly sink.

cs702 3y ago
If society doesn't find a way to work through these issues before they turn into a crisis, we're bound to see (a) a wave of building bankruptcies, (b) a wave of small-business failures, (c) a wave of regional bank failures, (d) a wave of regional tax-collection holes, (e) significant stock and debt market losses for pensions, endowments, 401(k) plans, individuals, etc., and (f) higher local taxes for everyone, including you.
- adversaryIdiot 3y ago
  We need to stop propping up the economy and let the natural cycles take hold.
  - hestefisk 3y ago
    “Natural”? There’s hardly anything natural about markets let alone the economy unless you believe in god’s hand, of course.
    - mech987987 3y ago
      Is there really anything substantive in arguing over the terminology? I'm fairly certain you understand the intention behind his statement. Markets ebb and flow in accordance with forces of supply and demand, and the government pumping liquidity into a market falls naturally into the same metaphorical linguistic space as "cash flows". Money is as liquid as water. If the motive behind the argument is suspicion that characterizing capitalism as natural is painting it in too positive of a light, then I'd figure that capitalism is as Hobbesian as the jungle.
    - TurkishPoptart 3y ago
      It's natural that customer habits change, and that they move around. Brick and mortar businesses need to move to reach their target audience (i.e. to the suburbs, or to non-downtown locations).
  - cs702 3y ago
    When you say "let the natural cycles take hold," do you mean in the way Western governments used to before the Great Depression, say during the 19th and early 20th centuries? Do you realize how horrific the panics of 1818-19, 1825, 1837, 1847, 1857, 1866, 1869, 1873, 1884, 1893, 1896, 1907, 1914 were, in both the US and Europe? And after all those horrific panics, the old systems led to the Great Depression, 1929-1939. Is that what you mean? To the extent economists today recommend propping things up, it's only because they believe the alternatives are much worse. Judging by the historical record, I'd say they're right to focus on minimizing damage, akin to doctors with their Hippocratic oath.
TurkishPoptart 3y ago
Exactly. All those ailing businesses must simply relocate to reach their customer base (which obviously sucks, but that's how market economies are supposed to work). Downtown Seattle, for example, has become a shit-hole (open-air drug market, closed businesses, drugged-out vagrants, lack of law enforcement) but that's not _because_ of empty offices; it's just another pull factor for remote work wherever possible. Why risk getting assaulted on a bus or pay for parking?

algem 3y ago

converting these buildings to homes would solve a lot these issues. Local business can’t survive from locals? What about the inverse of the increased economic activity in the community these workers live in instead of commute to? There has to be solutions that work for everyone besides forcing everyone back to office.

Tanjreeve 3y ago
The same people wailing about their commercial real estate investments going south will probably start wailing about their residential investments going south if a glut of residential property was released onto the market from relaxed zoning. The only solution according to the MSM is going to amount to communism for property investors.
tonyedgecombe 3y ago
We've been doing that in the UK and it hasn't gone well. Office buildings make poor homes. Better to tear them down and build something more suitable.

sdwr 3y ago

What are the solutions? - vacant buildings suck, but there's no urgent cost to ignoring them for 5-10 years - multi-use "free-for-all" buildings like those big apartment blocks in Hongkong. Doesn't mesh w/ western sensibility. - convert to apartments. Works in theory, but city centre would have to remap target customer from <office worker> to <resident>.

winrid 3y ago

Time for HubHaus Extreme?