Work from home and the office real estate apocalypse • Hacker News Board

Re: Work from home and the office real estate apocalypse

#111

Post by betwixthewires » Sun, Jun 05, 2022, 6:50 AM UTC

WastingMyTime89 wrote: post #100

betwixthewires wrote: post #98

This is just the beginning of a wider shift that will destabilize domestic economies worldwide, particularly in well developed nations, if the trend continues. It's not just urban office buildings. It starts there, then it leads to deurbanization, increased populations in less urban areas, a more flat population distribution. Why live in a city unless your job requires it? All the other perks of a city only really ap…

> Why live in a city unless your job requires it? Huge variety of shops in walkable proximity, great public transport network, vibrant cultural life, plenty of opportunities to socialise. Why would you want to live outside of a city?

I do live outside of a city, and I do it for the lack of traffic, less crime, lower cost of living, being surrounded by the natural outdoors, and less stressful culture.

But you missed my point. All those perks of living in a city are great, if you need to be there to earn what you earn. without that, the high cost of living simply isn't justified. Even if people want to be there, they'll make financial and economic decisions. And once those people start leaving, all those shops and bars and bodegas and what not that cater to them will go belly up. Then their owners and employees will leave. There goes your vibrant cultural life and opportunities to socialize.

The flip side is that you'll find more of those things in less densely populated areas as this shakes out, and cost of living will rise as well outside of cities, but not by nearly as much, because the diaspora will be spread out.

Re: Work from home and the office real estate apocalypse

#112

Post by yakak » Sun, Jun 05, 2022, 6:52 AM UTC

betwixthewires wrote: post #99

yakak wrote: post #89

Earlier quoted context omitted.

I know a few areas that were gentrified in earlier times and ended up with things more suited for residents of a certain class than commuters. I also know of other downtown locations that became terrible to live in because a grocery store was uneconomical use of space. I'd generally say that if they can fill it to a good density it can have a good local market compared to suburbs with poor density.

But how do you fill it to a good density when the cost to live there is higher and there's no need to live there to earn a living anymore?

People I knew in the conversion of industrial areas to unaffordable lofts did not have commuter jobs, maybe photographers, who combined their studio and home, etc, until they were priced out by trust fund children, possibly in disguise as boutique owners and entrepreneurs, then there are retirees looking for a certain feel and walkable community, etc.

At each stage the surrounding retail and gastronomy changed towards something that could support higher floor cost.

Re: Work from home and the office real estate apocalypse

#113

Post by mushbino » Sun, Jun 05, 2022, 6:52 AM UTC

betwixthewires wrote: post #99

yakak wrote: post #89

Earlier quoted context omitted.

I know a few areas that were gentrified in earlier times and ended up with things more suited for residents of a certain class than commuters. I also know of other downtown locations that became terrible to live in because a grocery store was uneconomical use of space. I'd generally say that if they can fill it to a good density it can have a good local market compared to suburbs with poor density.

But how do you fill it to a good density when the cost to live there is higher and there's no need to live there to earn a living anymore?

People, culture, and amenities attract people. Maybe lowering prices would help too. Artists, galleries, restaurants, theaters are all attracted by dense areas with prices that are attractive. Cities can also step up to help with incentives instead of completely leaving it up to the free market to sort out.

Re: Work from home and the office real estate apocalypse

#114

Post by WastingMyTime89 » Sun, Jun 05, 2022, 6:57 AM UTC

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.

I think the whole thing becomes more clear when you remember that price is an indication of how desirable things are relative to other things rather than an indicator of intrinsic value.

If you have an asset which used to be desirable but is no more, its market value is indeed just destroyed and not transferred. It doesn’t necessarily impact the price of other goods.

Re: Work from home and the office real estate apocalypse

#115

Post by saiya-jin » Sun, Jun 05, 2022, 6:58 AM UTC

asimpleusecase wrote: post #85

This has an impact not just in rents for office buildings but the entire ecosystem of support businesses that sell to workers who come into city centre to work. One example. Small organic food shop, that sold mostly to office workers and has seen a 70% drop in foot traffic. The same thing hits bars, cafes, restaurants, theatres and other venues. Those very things that make living near or in a city interesting for man…

Must be some US thing with its more mobile and dynamic population, but I dont see any real change pre-covid vs post-covid in the city centre we live in (Geneva, Switzerland) or any other bigger cities we saw in past half year.

Few moved out, few moved in, maybe rents adjusted a bit but I didnt check that. Same shops, bars restaurants opened, same entertainment going on.

Re: Work from home and the office real estate apocalypse

#116

Post by mushbino » Sun, Jun 05, 2022, 6:58 AM UTC

seydor wrote: post #97

cortesoft wrote: post #8

Earlier quoted context omitted.

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…

The value was transferred to the companies who no longer pay that rent, no?

And the workers who don't have to spend all of that time commuting. There's a lot of value in that time. It seems like a lot of value was added elsewhere, just not for commercial office real estate companies, but that's the nature of real estate in the US.

Re: Work from home and the office real estate apocalypse

#117

Post by kkfx » Sun, Jun 05, 2022, 7:06 AM UTC

My cynic and caustic view: office buildings will became social houses for new poor witch will happen to be far more than today, wealthy from large cities migrate toward new places around some new or existing services and all such buildings have actually to be built, along a bit of needed infra.

So real estate simply refocus from large and expensive buildings to smaller single houses, not much less expensive for their buyer while in raw materials terms they cost FAR less, who really loose are those who actually live in large cities, can't buy a new home in a good place, all who have jobs around offices (like restaurants, bar, ... and all shops in the shopping center areas nearby large offices areas).

Of course, those who came first might fall because it's an uncharted territory, those who came second normally prosper benefiting from those who came first, who came third and beyond... Sorry, you are too late...

Re: Work from home and the office real estate apocalypse

#118

Post by asiachick » Sun, Jun 05, 2022, 7:06 AM UTC

My uninformed solution is, at least in SF, they should re-zone all of the financial district and union square. If the first floors were cafes and shops and the upper floors where apartments and the top floors restaurants, patios, lounges, they'd revitalize that part of town. It's dead at the moment.

Re: Work from home and the office real estate apocalypse

#119

Post by puszczyk » Sun, Jun 05, 2022, 7:08 AM UTC

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…

I don’t know if like the spoiled grain analogy.

If my stock portfolio was worth $1000 yesterday and is only $800 we don’t say the $200 was destroyed. I have the same number of stock. It may go down further, but it can also go up to say $1100 tomorrow. Is this a new being value created, or only capricious market pricing things differently?

Until I sell, there is no real gain or loss. And for the farmer, if the grain goes bad it’s not temporarily, it will never recover. This might have been a better analogy if the underlying real estate was destroyed (uninsured and fire, etc).

Re: Work from home and the office real estate apocalypse

#120

Post by WastingMyTime89 » Sun, Jun 05, 2022, 7:10 AM UTC

betwixthewires wrote: post #111

WastingMyTime89 wrote: post #100

Earlier quoted context omitted.

> Why live in a city unless your job requires it? Huge variety of shops in walkable proximity, great public transport network, vibrant cultural life, plenty of opportunities to socialise. Why would you want to live outside of a city?

I do live outside of a city, and I do it for the lack of traffic, less crime, lower cost of living, being surrounded by the natural outdoors, and less stressful culture. But you missed my point. All those perks of living in a city are great, if you need to be there to earn what you earn. without that, the high cost of living simply isn't justified. Even if people want to be there, they'll make financial and economic…

> But you missed my point. All those perks of living in a city are great, if you need to be there to earn what you earn. without that, the high cost of living simply isn't justified.

I am not missing anything. I just deeply disagree.

City life is enjoyable in and of itself. I don’t live there because I have to for my work. I live there because I find it inherently better than living somewhere else.

If I was living in a normal city and not the capital of my country, it would not even be more expensive than living in the countryside. It would probably actually be cheaper. Gas is expensive here and our cities are built like proper cities.

I think you are projecting your value on the situation and conclude that cities are doomed. Personally I think we are just going to witness a shift away from cities where life is expensive towards cheaper cities.