7 ms·
Small biz owners scale back their office space or go remote altogether
- 627467 3y agoMakes sense. Why lock-in into ATH prices if you can just wait it out until the market corrects itself by crashing
- senordevnyc 3y ago[dead]
- gottorf 3y agoI believe commercial real estate is a ticking time bomb in the financial system. So many small and regional banks have so much loans tied away in CRE, the future of which is completely uncertain.
- TuringNYC 3y ago[flagged]
- hn_throwaway_99 3y agoYou are correct, and 60 minutes did a good detailed overview of this recently: https://www.cbsnews.com/video/60minutes-2024-01-14/ https://www.cbsnews.com/video/60minutes-2024-01-14/ They highlight how the rolling nature of long-term commercial leases means that banks can kind of kick this can down the road, but only so much, and high interest rates makes this incredibly difficult. With this one it really does feel like we've jumped out of the airplane without a parachute and a lot of us are just going "Hey, nice breeze". I'm not the most optimistic sort, so I'd love to hear any thoughts on how this doesn't end in complete catastrophe. It just seems like something policy makers and market participants don't want to talk about too loudly because they're worried about spooking the market.
- Tao3300 3y agoIt's not some big secret. If the market was going to spook it would have spooked.
- 7thaccount 3y agoNot necessarily true I don't think. It's possible they will freak out over the upcoming years. There's a lot riding on commercial real estate. It isn't easy to convert to living space either.
- baq 3y agoMarket is too busy buying NVDA and selling puts. Everybody knows about CRE but it isn't a problem for this quarter. Besides, if it ever becomes a problem, the FED will drop a dedicated CRE credit line over the next couple weekends. (If it doesn't, though...)
- graemep 3y agoThe market can be blind for a long time. Bad mortgage lending was pretty obvious in the early 2000s. The dotcom boom and many other booms were obvious overvaluation. Greater fool and FOMO are powerful, especially if your incentives are short term.
- candiddevmike 3y agoI think the market assumes that since everyone is exposed, no one is exposed (there will be bailouts).
- toomuchtodo 3y agoFDIC bailouts or failure managements of smaller non GSIB banks who are overexposed. Haven't dived into which banks are most at risk, potential investment opportunity if their equity is publicly traded (not investing advice). https://www.fitchratings.com/research/banks/us-regional-small-banks-cre-exposure-could-pressure-ratings-24-05-2023 https://www.fitchratings.com/research/banks/us-regional-smal... https://www.fsb.org/2023/11/2023-list-of-global-systemically-important-banks-g-sibs/ https://www.fsb.org/2023/11/2023-list-of-global-systemically... Related: https://www.bloomberg.com/news/articles/2024-01-30/billionaire-sternlicht-sees-1-trillion-loss-in-office-values https://www.bloomberg.com/news/articles/2024-01-30/billionai... | https://archive.today/isGFU https://archive.today/isGFU ("Billionaire Barry Sternlicht sees more than $1 trillion of losses for office real estate, calling the properties “one asset class that never recovered” from the pandemic.")
- majormajor 3y agoIt won't necessarily be cheap or free to convert, but I think it's a slow long-term haircut more than a time bomb. Land is still at very high levels of demand in most urban and suburban cities, people will find non-commercial uses for places that never get used as office again.
- potatolicious 3y agoOne thing I keep wondering about is retail as a use for this office space. If you visit most parts of Asia you'll find that the North American focus on having retail only on the ground floor is a self-imposed and arbitrary limitation. In other parts of the world there's nothing at all strange about having a restaurant on the 8th floor of a building, or a clothing store, or a hair salon, etc etc. Personally I find that retail businesses in Asia are far more interesting as a result - retail rents are comparatively cheap, encouraging an explosion of interesting niche retail businesses (a vinyl store selling only 70s vinyl? Sure!) that still pencil out financially. Retail in US urban cores on the other hand has been stagnant, with only major chains being able to afford the skyrocketing rents. This feels like an opportunity? Imagine the kinds of interesting businesses that can be created if we took off the totally arbitrary cap on retail space.
- kevinmchugh 3y agoI've never been to Asia but have heard about the mixed-use high-rises and am hopeful we'll get them. In Chicago our central business district has a decent variety of retail beyond just the chains: a small jewelers' row, a comic book shop, a record store, some independent menswear and shoe shops, and yes, all at ground level. Some buildings have a barber or gym somewhere in them, and that's pretty nice. I once heard an anecdote of two friends planning to meet up in the bar in a specific building in Tokyo and having to text to realize there were two bars, how cool is that? It seems like there's a bunch of businesses that could help make an office building more enticing - specialty coffee shop, bar, barber/salon/nail salon, dry cleaning drop-off/pickup (this one I've seen). And then the one that might really make a big difference: daycare. I'm not a parent so I assume there's a good answer why these buildings don't have daycares (commuting with the kid maybe is too difficult?)
- ericmcer 3y agoTons of unused commercial real estate coupled with tons of people who cant afford housing... I wouldn't be mad if govt used my tax dollars to incentivize conversion of giant downtown office complexes into mixed use buildings.
- ghaff 3y agoWe'll have to see. I do see people thinking about lease renewals that would once have been automatic. It's not that people don't meet in person but you don't necessarily need fully-provisioned office space in an expensive location to do that.
- barbazoo 3y agoThis might be an opportunity for smaller, more local co-working spaces.
- ghaff 3y agoNot sure why. I need a meeting space in a city I want a familiar website to go to.
- barbazoo 3y agoYou're right, I'm thinking of a different persona. I'm thinking less about travellers and more about locals working from home wanting to hang out with and work alongside other local workers. Maybe a business needs a permanent number of desks but not enough to warrant renting an office. I don't know anything specific it's just my gut feeling and how I'd want it to play out.
- ghaff 3y agoFair enough. Don't really have an opinion on local colo absent a company office.
- andyish 3y agoExactly. I see companies downsizing to offices with more meeting and collaboration spaces
- sbdaman 3y agoNever thought I'd see CP24 on HN
- frfl 3y agoThere are a few posts that link to cp24. But definitely rare. https://hn.algolia.com/?q=cp24.com https://hn.algolia.com/?q=cp24.com I was lazy to find a original source of this, I'm assuming CP24 did nothing but repost this news article from some other news org (AP most likely).
- _air 3y agohttp://archive.today/baKGL http://archive.today/baKGL
- deleted 3y ago[deleted]
- ilamont 3y agoDid this at the end of last year, after my landlord said he was raising the rent 12% because his costs were higher. He owns the building outright and services like cleaning are paid by tenants. When he saw I started moving furniture out he came back to me and said we could discuss the rent. I gave my 30 day notice and was gone by New Years Eve.
- thelastparadise 3y agoHis nominal costs are higher. Taxes, insurance, repairs, maintenance all have gone way up. Plus costs due to crime/vandalism. And there's a chance you voted for the policies that led to this outcome.
- punkybr3wster 3y agoI like how you conveniently left out greed. But I’m sure that’s someone else’s fault too.
- thelastparadise 3y agoIt's greedy to try and maintain a constant, razor thin profit margin?
- quickslowdown 3y agoNo, but the ways landlords go about trying to maintain that margin are. This isn't hard to understand, are you a landlord or something?
- punkybr3wster 3y agoYou have zero notion to what the current profit the landlord is making or if it’s anywhere close to “razor thin”. Yet you pontificated on all the things the increase could be and took the time to get in a jab by asserting it is most likely the op’s fault because they “voted for those policies” yet you conveniently left out the easiest of them all - greed. It’s not beyond the pale for a landlord, especially a private one, to arbitrarily raise prices just because they can. But, oh no, it must be taxes and crime and everything else under the sun but couldn’t possibly be simple greed. Must be those razor thin profit margins jumping out to scare that most honorable capitalists like the boogeyman under the bed.
- etchalon 3y agoWe're taking a haircut on our space. We just don't need the same amount of space now that 50% of our staff are primarily remote. We're keeping 75% of the square footage, but the "overflow" just isn't necessary anymore.
- andyish 3y agoYeah, I've seen that trend a lot. Execs don't want to fully commit and lose half of their office space so they reduce it down a little bit. I imagine they'll reduce it again if it's the same for the duration of the tenancy.
- andyish 3y agoThese are offices for 10 to 20 people (1200 to 2000 sq/ft) if your company isn't flush with cash an office is becoming a luxury rather than a necessity. Especially in a major city where a small office can be 100k a year. The trend is going to continue over the coming years, especially with bigger offices that are paying millions each year.
- fishpen0 3y agoEven in really big companies that focus around retail or healthcare, it is really practical to shut down offices. Our medical care facilities are no longer being built out with offices in the backrooms for IT/Finance/Etc... staff. We can rent smaller spaces or do more with existing spaces by converting it into more medical facility space and run all the business and software operations via WFH. We operate in 20 states and are racing with competitors to who does this the fastest to cut costs and charge less to providers for a competitive edge
- sirspacey 3y agoThat’s fascinating. I’d be really curious to learn how they are evolving the back office with that shift. Over the pandemic that’s when I saw the biggest change in tech stack/process in healthcare.
- adaboese 3y agoI am a bit advocate of remote work, but I actually think for _small teams_ offices make sense. I would thoroughly enjoy working in 4-8 people small office. It is when you get into high double digits and beyond when it becomes unbearable drain.
- zem 3y agodepends on how close those people live to the office, i think. my productivity definitely went up during the pandemic when i didn't have to face a daily commute.
- adaboese 3y agocommute sucks regardless of the team size, no denying. I am only referring to whether work in the office can be rewarding or not
- dirtybirdnj 3y agoWait you guys got offices?
- imroot 3y agoI rent at a WeWork style building, and have been at this coworking space since 2018. My rent has consistently been around $700/month. This year, they got a new sales person, a new community manager, and finally started fixing things like the broken coffee machine (which was only broken because the previous community manager didn't want to clean it/stock it), removing expired products from the vending machine, and finally changing out the water filters on the drinking fountains...and the tried to raise my rent to $1400/month, with "No room for negotiation." Interestingly enough, the minute I started moving things out of my office, we could negotiate a smaller amount of money for rent, but, I'd rather take that $700 and just get an extra bedroom in my apartment: things can be closer and I can do more. When I moved in to this building, there was a waiting list of people to get in -- now, it's close to 85% vacant...with more and more folks leaving every day.
- pixl97 3y agoCommercial property prices are disconnected from reality.
- AstroJetson 3y agoI'm associated with a non-profit that does robotics. We are trying to find space to grow the program. A local mall that has lots of dead storefronts is close by. We tried to talk to them about a lower lease rate and they were not interested in talking. I asked isn't it better to get some money coming in and they said that they were able to write the space of against taxable income in the rest of the space. REIT's are weird.
- netman21 3y agoWe have always been 100% remote. I have people who live in India, Pakistan, Nigeria, NC, IL, and CA. It's the only way to go.
- jackvalentine 3y agoMy wife runs a small business and I've been seriously considering buying a 1br apartment nearby to serve as our 'home office'. Mortgage would be ~1200 a month and there are plenty of them 5 minutes bike from our house to choose from. Getting our place + 1 bedroom in the same area would cost way more because a lack of 3+ bedroom builds here.
- Log_out_ 3y agoThe problem seems to be rent cascades. One shop owner quits his lease, the mall landlord redistributes the expected income/costs to the other renters, who then become more likely to quit.