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Work from home and the office real estate apocalypse

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Re: Work from home and the office real estate apocalypse

#21

Post by prawn »

cortesoft wrote: post #11
JohnJamesRambo wrote: post #4

Earlier quoted context omitted.

Sweet ass apartments in office buildings I hope.

Will people still want to live in cities as much if you can work from home?

I think so. Some portion of the population likes the density and walkability of a city. If you take away a lot of commuting traffic, it's unlikely to get less liveable.

I co-own a small city office and we've always assumed redeveloping as three-storeys with residential above commercial would be our long-term plan. It's a short walk to dozens of restaurants/cafes/pubs, short walk to a chemist, small supermarket, florist, and so on. Two blocks from large parks and running/cycle tracks, etc.

Re: Work from home and the office real estate apocalypse

#22

Post by superfrank »

cortesoft wrote: post #11
JohnJamesRambo wrote: post #4

Earlier quoted context omitted.

Sweet ass apartments in office buildings I hope.

Will people still want to live in cities as much if you can work from home?

Of course they will. There's more reasons to live in a city than just "it's close to work".

Also, there are plenty of people who work in the city who cannot work from home because their jobs require them to physically be present.

Re: Work from home and the office real estate apocalypse

#23

Post by IAmGraydon »

I’m a believer in reversion to the mean, and I think that’s what we will see with the office market and work from home. The technology to work from home existed before the pandemic. Why didn’t it take off before the pandemic if it works so well? We didn’t suddenly discover a new technology here. The use of that technology was precipitated by a transient force, and when that force is removed completely, things will return to the previous equilibrium. It will take years for the mentality to revert, however.

That’s my take. Smart investors will acquire office properties during this time.

Re: Work from home and the office real estate apocalypse

#24

Post by bigDinosaur »

cortesoft wrote: post #11
JohnJamesRambo wrote: post #4

Earlier quoted context omitted.

Sweet ass apartments in office buildings I hope.

Will people still want to live in cities as much if you can work from home?

WFH even if I stayed exactly where I am in a city is, for me, a strict upgrade, so I imagine yes. It also gives me the freedom to move anywhere I want in an entire city without having to worry about what that'll do to my work commute.

Re: Work from home and the office real estate apocalypse

#25

Post by Taniwha »

nopenopenopeno wrote: post #15
chii wrote: post #13

Earlier quoted context omitted.

there's more to it though. Real estate doesn't "expire" like grain. It can be repurposed, but it would require some capital investment. As an analogy, the grains could be fermented and turned into spirits. And as an addendum, the value lost in the commercial real estate could be potentially considered as transferred - let's say a business either gets a cheaper rent, or stops renting offices (after this is why these c…

If NYC office space in a high rise, it cannot just be repurposed for something else.

like WFH capable apartments ....

Re: Work from home and the office real estate apocalypse

#26

Post by [deleted] »

nopenopenopeno wrote: post #15
chii wrote: post #13

Earlier quoted context omitted.

there's more to it though. Real estate doesn't "expire" like grain. It can be repurposed, but it would require some capital investment. As an analogy, the grains could be fermented and turned into spirits. And as an addendum, the value lost in the commercial real estate could be potentially considered as transferred - let's say a business either gets a cheaper rent, or stops renting offices (after this is why these c…

If NYC office space in a high rise, it cannot just be repurposed for something else.

[deleted]

Re: Work from home and the office real estate apocalypse

#27

Post by MichaelBurge »

wmeredith wrote: post #2

From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.

Real estate people tend to borrow a lot of money. Minimum 70% LTV = 3x leverage = a 33% decline wipes out all their equity.

And especially in big cities the "high-quality" real estate is usually break-even and all profit is made on appreciation, so any drop in income might mean some of them can't hold the property.

If they have to sell their properties and take a huge loss, it doesn't really affect you or me - it just means a different group of rich people will become the new landlords. But the old landlords won't like it, and it probably qualifies as news.

Re: Work from home and the office real estate apocalypse

#28

Post by ramraj07 »

cortesoft wrote: post #8
wmeredith wrote: post #2

From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.

Whether value was 'destroyed' or not depends on how you look at it. $500 billion dollars worth of assets were lost by the owners of the real estate; that value is gone, and it didn't go to someone else. It just vanished. The value didn't disappear because it transferred to someone else, it went away because the asset itself become less desirable and valuable to other people. You can imagine it being like if a farmer…

So good riddance? Do you really think someone who was able to buy real estate in Manhattan needs a handout?

Also the money didn’t disappear, it went to people smarter or luckier than them who used to own the place before. Money doesn’t disappear.

Re: Work from home and the office real estate apocalypse

#29

Post by dylan604 »

nopenopenopeno wrote: post #15
chii wrote: post #13

Earlier quoted context omitted.

there's more to it though. Real estate doesn't "expire" like grain. It can be repurposed, but it would require some capital investment. As an analogy, the grains could be fermented and turned into spirits. And as an addendum, the value lost in the commercial real estate could be potentially considered as transferred - let's say a business either gets a cheaper rent, or stops renting offices (after this is why these c…

If NYC office space in a high rise, it cannot just be repurposed for something else.

Of course it can. What makes you think that it couldn't be remodeledd into living spaces? Buildings in a town flip all the time from residential=>commercial=>residential.

Re: Work from home and the office real estate apocalypse

#30

Post by quickthrower2 »

nopenopenopeno wrote: post #15
chii wrote: post #13

Earlier quoted context omitted.

there's more to it though. Real estate doesn't "expire" like grain. It can be repurposed, but it would require some capital investment. As an analogy, the grains could be fermented and turned into spirits. And as an addendum, the value lost in the commercial real estate could be potentially considered as transferred - let's say a business either gets a cheaper rent, or stops renting offices (after this is why these c…

If NYC office space in a high rise, it cannot just be repurposed for something else.

It could be used for residential, childcare, go karts (electric … I have done this on the converted 4th floor of a car park), wework style thing, storage/warehousing, restaurant, ghost kitchens, lightweight manufacturing. Lots of potential uses. Shelter for homeless would be my favourite if it can be funded.
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