4 ms·

For those cheering on the demise of office landlords, please keep in mind the astonishing number of public and private pension plans invested in these assets. T

by voisin 3y ago

For those cheering on the demise of office landlords, please keep in mind the astonishing number of public and private pension plans invested in these assets. The impact will not be limited to just the landlords and will be nothing short of catastrophic to downtowns (which we’ve just spent the last 30 years trying to rejuvenate after being hollowed out by white flight to the suburbs), the character of our cities, our municipal budgets, and our economy.

iancmceachern 3y ago
I think the solution is for those funds to divest in those investments, not for society to change course in order to keep a certain investment vehicle.
lproven 3y ago
It is an excellent idea to step back and look at the bigger picture. I put it to you that while you have taken one step back, you will get a clearer view if you take 10 paces back. We are in the midst of catastrophic accelerating climate change. We are heading for a world that is 3-4º C warmer by the end of the 21st century, when children born today are getting to old age. That means the certain collapse of the West Antarctic Ice Sheet and worldwide sea level rise of 5-6 metres in those kids' lifetimes. Now look at how much of these expensive cities and their expensive offices are build under 5-6m of current high tide level. All those buildings will be lost to the sea before they are paid off. All those investors will lose their money. All cities and city districts wholly located within 5-6m of mean sea level will disappear completely. Just considering sea level rise, whole nation states will disappear. Whole economic sectors will collapse. But it's not just about sea level rise. With 3-4º of warming, much of the tropics becomes uninhabitable. Most glaciers disappear; currently fertile countries lose their year-round water supply. The Himalays are called the world's 3rd pole. 5 or 6 major rivers originating in the glaciers of the Himalayas provide about one third of all humanity with their fresh water. All those countries become desert, even if only seasonal desert. All agriculture fails. If you view the world in terms of money -- not a good strong robust worldview at all, but a common one -- then there are far far bigger financial threats looming than empty offices and bankrupt financial institutions that invested in them.
- voisin 3y ago
  I don’t disagree with you at all, which is why I believe dense, vibrant cities are the future rather than endless suburban sprawl so that people can have their 1/4 acre with backyard and everyone has their own in-home office. I view WFH as a setback to the climate argument rather than a benefit. We should be tackling commutes by building denser cities with mass transit, not by having everyone with more space in the burbs. Another point: it takes a lot more to heat and cool thousands of individual houses to human comfort rather than setting those thermostats back throughout the day and only managing the HVAC for densely packed offices.
  - lproven 3y ago
    Yes and no. :-) I lived in such a city until January, in a dense medium-rise apartment block, with 3 forms of public transport available to me within walking distance. It had no heating system of any form, heated by hot water from the mains supply, provided by waste heat from a power station 40km away. I worked from home from it from early 2020 for 3 years. I'd prefer, for that purpose, that it were considerably larger and had a dedicated office space, or even a co-working space in every building or something like that. I have never, even driven a car to work routinely in my life. I got my driver's licence at 37 and have not owned a car as a licence holder. But TBH I personally did prefer going into an office. Almost everyone I know prefers not to, though. So, you're right, but the two designs are not mutually exclusive, which you seem to be implying.
  - jupp0r 3y ago
    The problem is that people do not want to live in densely packed high rise buildings with noisy neighbors, lots of crime and no nature for their kids to play in when the alternative is a nice little house in the suburbs or in a small rural town. HVAC is a completely solved problem by just putting solar on roofs, especially for single family homes.
- friend_and_foe 3y ago
  We were having a nice conversation about the viability of office space as an investment in a world of broadband internet and remote work on information related fields, but thank you for shoehorning your pet issue into it where it doesn't fit. In the sage words of the Dude, "what the fuck has anything got to do with Vietnam!"
nradov 3y ago
This is exactly why we need to eliminate all defined benefit pension plans and switch workers to defined contribution plans such as 401(k). Traditional pension plans are just too risky because the managers often make bad decisions. Defined contribution plans invested in low-cost target date mutual funds are much safer.
- voisin 3y ago
  Defined Contribution plans have been the trend in the private sector for three decades now and generally are seen as less attractive to pensioners who now hold all the risk for retirement. Do you have evidence that only DB plans have office real estate exposure?
  - nradov 3y ago
    Most target date mutual funds have some REIT exposure but it's limited and overall they are more broadly diversified than most managed pension funds. The risk with target date funds is very low, and if one worker makes a bad 401(k) investment selection it doesn't impact other workers. So defined contribution plans are more resilient overall and less likely to suffer catastrophic failures.
friend_and_foe 3y ago
If that's how the cookie crumbles... What we are seeing is that with the proliferation of broadband internet, information workers don't need close proximity to one another. Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself. I personally don't want to forcibly stagnate development to protect what amounts to unrealized losses becoming realized. The numbers are big, and so the impact is big, but fundamentally all this is is nonviable business models failing. If your pension relies on office buildings being full, if your city based it's investment plan on information workers requiring proximity to something physical, it was not viable, and there's nothing anyone can do to change that. I won't be forced into a life I don't want to save a city budget or someone's pension plan. Am I cheering? Sure, a little, but mostly I'm just looking at the situation pragmatically and realistically and seeing what's in front of me. If your retirement necessitates me paying thousands in rent to overlook deadlocked traffic, commuting for an hour or corporations paying for floor space as what amounts to a frivolous amenity, you backed the wrong horse and will take a financial hit, whether I cheer or not won't change that fact one iota.
- kuhaku22 3y ago
  > Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself. There are still plenty of physical-only things that cities exist for, and other benefits besides working. And when people talk about how much they love cities, office buildings are not the first thing that come to mind.
  - friend_and_foe 3y ago
    And all those benefits cease to exist if people don't have to be there all day just to pay their bills. You don't go to the city to eat deep dish pizza, you go there to work and get paid, the deep dish pizza is just there so you can enjoy your life while you're there and spend some of that money you made. The choice people appear to be making is that they'd rather pay for their own home office and cook their own deep dish pizza. Cities aren't entirely nonviable, just nonviable in their current iteration from the current paradigm. Their main attraction is that you have to go there to make good money. If cities are to survive into the future, they have to change from that to being attractive to live in regardless of your source of income. The only viable jobs in a city are ones that require workers to be present for practical reasons, such as dockworkers and service workers, and cities have evolved into service economies that cater to information workers, which is nonviable in an age of global connectivity. To survive, housing has to be the largest market for real estate development. Cities have to be made more walkable alongside this transition. Most cities cannot afford to make such a transition because their tax bases would dry up and they'd go insolvent. Those that can, some of them won't make the hard choices before it is too late. I expect at some point some cities will do it and survive, albeit very changed and different.

by voisin 3y ago

iancmceachern 3y ago

I think the solution is for those funds to divest in those investments, not for society to change course in order to keep a certain investment vehicle.

lproven 3y ago

It is an excellent idea to step back and look at the bigger picture. I put it to you that while you have taken one step back, you will get a clearer view if you take 10 paces back. We are in the midst of catastrophic accelerating climate change. We are heading for a world that is 3-4º C warmer by the end of the 21st century, when children born today are getting to old age. That means the certain collapse of the West Antarctic Ice Sheet and worldwide sea level rise of 5-6 metres in those kids' lifetimes. Now look at how much of these expensive cities and their expensive offices are build under 5-6m of current high tide level. All those buildings will be lost to the sea before they are paid off. All those investors will lose their money. All cities and city districts wholly located within 5-6m of mean sea level will disappear completely. Just considering sea level rise, whole nation states will disappear. Whole economic sectors will collapse. But it's not just about sea level rise. With 3-4º of warming, much of the tropics becomes uninhabitable. Most glaciers disappear; currently fertile countries lose their year-round water supply. The Himalays are called the world's 3rd pole. 5 or 6 major rivers originating in the glaciers of the Himalayas provide about one third of all humanity with their fresh water. All those countries become desert, even if only seasonal desert. All agriculture fails. If you view the world in terms of money -- not a good strong robust worldview at all, but a common one -- then there are far far bigger financial threats looming than empty offices and bankrupt financial institutions that invested in them.

voisin 3y ago
I don’t disagree with you at all, which is why I believe dense, vibrant cities are the future rather than endless suburban sprawl so that people can have their 1/4 acre with backyard and everyone has their own in-home office. I view WFH as a setback to the climate argument rather than a benefit. We should be tackling commutes by building denser cities with mass transit, not by having everyone with more space in the burbs. Another point: it takes a lot more to heat and cool thousands of individual houses to human comfort rather than setting those thermostats back throughout the day and only managing the HVAC for densely packed offices.
- lproven 3y ago
  Yes and no. :-) I lived in such a city until January, in a dense medium-rise apartment block, with 3 forms of public transport available to me within walking distance. It had no heating system of any form, heated by hot water from the mains supply, provided by waste heat from a power station 40km away. I worked from home from it from early 2020 for 3 years. I'd prefer, for that purpose, that it were considerably larger and had a dedicated office space, or even a co-working space in every building or something like that. I have never, even driven a car to work routinely in my life. I got my driver's licence at 37 and have not owned a car as a licence holder. But TBH I personally did prefer going into an office. Almost everyone I know prefers not to, though. So, you're right, but the two designs are not mutually exclusive, which you seem to be implying.
- jupp0r 3y ago
  The problem is that people do not want to live in densely packed high rise buildings with noisy neighbors, lots of crime and no nature for their kids to play in when the alternative is a nice little house in the suburbs or in a small rural town. HVAC is a completely solved problem by just putting solar on roofs, especially for single family homes.
friend_and_foe 3y ago
We were having a nice conversation about the viability of office space as an investment in a world of broadband internet and remote work on information related fields, but thank you for shoehorning your pet issue into it where it doesn't fit. In the sage words of the Dude, "what the fuck has anything got to do with Vietnam!"

nradov 3y ago

This is exactly why we need to eliminate all defined benefit pension plans and switch workers to defined contribution plans such as 401(k). Traditional pension plans are just too risky because the managers often make bad decisions. Defined contribution plans invested in low-cost target date mutual funds are much safer.

voisin 3y ago
Defined Contribution plans have been the trend in the private sector for three decades now and generally are seen as less attractive to pensioners who now hold all the risk for retirement. Do you have evidence that only DB plans have office real estate exposure?
- nradov 3y ago
  Most target date mutual funds have some REIT exposure but it's limited and overall they are more broadly diversified than most managed pension funds. The risk with target date funds is very low, and if one worker makes a bad 401(k) investment selection it doesn't impact other workers. So defined contribution plans are more resilient overall and less likely to suffer catastrophic failures.

friend_and_foe 3y ago

If that's how the cookie crumbles... What we are seeing is that with the proliferation of broadband internet, information workers don't need close proximity to one another. Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself. I personally don't want to forcibly stagnate development to protect what amounts to unrealized losses becoming realized. The numbers are big, and so the impact is big, but fundamentally all this is is nonviable business models failing. If your pension relies on office buildings being full, if your city based it's investment plan on information workers requiring proximity to something physical, it was not viable, and there's nothing anyone can do to change that. I won't be forced into a life I don't want to save a city budget or someone's pension plan. Am I cheering? Sure, a little, but mostly I'm just looking at the situation pragmatically and realistically and seeing what's in front of me. If your retirement necessitates me paying thousands in rent to overlook deadlocked traffic, commuting for an hour or corporations paying for floor space as what amounts to a frivolous amenity, you backed the wrong horse and will take a financial hit, whether I cheer or not won't change that fact one iota.

kuhaku22 3y ago
> Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself. There are still plenty of physical-only things that cities exist for, and other benefits besides working. And when people talk about how much they love cities, office buildings are not the first thing that come to mind.
- friend_and_foe 3y ago
  And all those benefits cease to exist if people don't have to be there all day just to pay their bills. You don't go to the city to eat deep dish pizza, you go there to work and get paid, the deep dish pizza is just there so you can enjoy your life while you're there and spend some of that money you made. The choice people appear to be making is that they'd rather pay for their own home office and cook their own deep dish pizza. Cities aren't entirely nonviable, just nonviable in their current iteration from the current paradigm. Their main attraction is that you have to go there to make good money. If cities are to survive into the future, they have to change from that to being attractive to live in regardless of your source of income. The only viable jobs in a city are ones that require workers to be present for practical reasons, such as dockworkers and service workers, and cities have evolved into service economies that cater to information workers, which is nonviable in an age of global connectivity. To survive, housing has to be the largest market for real estate development. Cities have to be made more walkable alongside this transition. Most cities cannot afford to make such a transition because their tax bases would dry up and they'd go insolvent. Those that can, some of them won't make the hard choices before it is too late. I expect at some point some cities will do it and survive, albeit very changed and different.