San Francisco braces for commercial real estate crash • Hacker News Board

Re: San Francisco braces for commercial real estate crash

#31

Post by onlyrealcuzzo » Tue, Sep 06, 2022, 5:53 PM UTC

ryanSrich wrote: post #18

ryandrake wrote: post #6

Residential crash is potentially already upon us, at least in the outskirts (East Bay for me). We've had our house on the market for over a month now, and nobody else in the neighborhood is selling either. Big changes from only 3 months ago, when sellers were closing in days.

Turns out prices have to go down when the fed doubles rates. By my math, a 30% correction is needed to make up the difference in terms of monthly affordability - meaning a $500k house at 6% is the same as a $750k house at 3%.

Yeah, but a lot of people are willing to bet that rates won't stay high for long.

If the average person is buying a house to hold for 7 years - and you're expecting only 2 years to be at elevated rates before you can refinance at 3% or less - then you'll settle for a lot less than a 30% correction.

Does your 30% figure doesn't include property tax - or mortgage interest deduction? If you include those - I'd imagine you're looking at a <20% correction.

Re: San Francisco braces for commercial real estate crash

#32

Post by ptmcc » Tue, Sep 06, 2022, 5:53 PM UTC

ethbr0 wrote: post #19

ptmcc wrote: post #8

Earlier quoted context omitted.

Most offices have physical layouts that make conversion to residential difficult to impossible. Big things like lots of interior square footage without windows and plumbing only to a few central locations. And while some or even most of this is fixable, major renovations are a ton of cost and effort to convert them to something that will still be expensive and weird, if even possible to meet the legal requirements of…

Maybe SF should relax the legal requirements of residential space, then? If they choose not to build sufficient housing... they can at least choose to use what they have. A windowless room with a community bathroom doesn't sound appealing, but at a certain price point it's better than nothing.

But that is also key to the problem: the cost to convert these buildings is already prohibitively expensive, and converting them into dormitories cannot possibly recoup the cost.

It's like how sometimes it just doesn't make sense to refactor code because it is fundamentally designed for a different purpose. Sure you can grind it out but will it be any better or cheaper than starting fresh?

Re: San Francisco braces for commercial real estate crash

#33

Post by hn_version_0023 » Tue, Sep 06, 2022, 5:54 PM UTC

yodon wrote: post #21

hollywood_court wrote: post #5

Earlier quoted context omitted.

Those commercial spaces make it incredibly easy to build them however you like. The access to plumbing and electrical would make it simple to convert them into small dwellings.

Modern office buildings only have plumbing available in the center of the building. The flooring is designed to function as a highly efficient membrane. If you start punching holes in the flooring to place plumbing and toilets away from the central core you weaken the floor membrane to the point where it loses the required structural integrity. If you try to build raised flooring to provide space for the plumbing the…

Every place I've ever lived had plumbing in the walls. Now, it also had it in the floors, so your point is well taken. But I seriously doubt that a central plumbing stack is a serious holdup on plumbing out an entire floor.

Then again, I don't have any real experience, so I'm very much being optimistic here without actual hands-on knowledge. I could be very wrong, and would love to hear why!

Re: San Francisco braces for commercial real estate crash

#34

Post by sidvit » Tue, Sep 06, 2022, 5:54 PM UTC

How's this compare in other cities? Just annecdotally speaking, I feel like I know a lot more people who used to live and work in San Francisco who don't anymore post pandemic, as opposed to friends of mine who left and came back to Austin/New York/Seattle

Re: San Francisco braces for commercial real estate crash

#35

Post by FartyMcFarter » Tue, Sep 06, 2022, 5:55 PM UTC

jeffbee wrote: post #12

coding123 wrote: post #9

Earlier quoted context omitted.

People in SF have backyards? I can see NIMBY as a concern in the rest of the bay area, but SF, it's already stacked housing.

Nope. On an area-weighted basis most of SF is wasted on detached single-family homes. https://www.google.com/maps/@37.7470676,-122.4914956,314m/da...

Why "wasted" ? Does everyone need to live with the least amount of space possible?

Re: San Francisco braces for commercial real estate crash

#36

Post by unethical_ban » Tue, Sep 06, 2022, 5:55 PM UTC

hollywood_court wrote: post #13

newaccount2021 wrote: post #3

Not just SF I see For Lease signs on commercial real estate at all price points everywhere I go. WFH has been a paradigm shift and commercial real estate hasn't caught up to the reality yet. Companies that embrace WFH will have access to an entire nations' worth of talent and will end up with a competitive advantage. Requiring RTO means employees must be within thirty miles or so of campus, and lots of talent won't g…

I’m not near a big tech center, but I know of exactly 3 businesses in my town that no longer exist because they would not allow their employees to work remotely. Two of them were owned by former clients of mine. They allowed themselves to fail because they wanted to make their employees’ lives more difficult. It was that simple. There was no need for either business to have a brick and mortar location at all. No need…

We as an industry are still sailing through the air thinking things are fine with WFH, but in reality the engines have stalled and we're gliding.

What I mean by that is that the industry has all the benefits of in-person work, having social connections, having gotten jobs through networking, and of knowing the ins and outs of a domain from pre-covid standards.

As time goes on, I think the working population will have more trouble networking for jobs, have less enjoyment from their work, less interaction with other human beings, and fewer people will be able to "break in" from college or from non-IT roles into technology. We are insulating ourselves from spontaneous interactions, and that's a bad thing for evolution.

TLDR - Not all RTO is about cruelty.

Re: San Francisco braces for commercial real estate crash

#37

Post by tcmart14 » Tue, Sep 06, 2022, 5:56 PM UTC

onlyrealcuzzo wrote: post #20

guywithahat wrote: post #17

Earlier quoted context omitted.

The underlying issue is government preventing development of both houses and office space. If you were to build more housing in any capacity that would risk lowering housing values and people (including politicians) would lose tens or even hundreds of millions in assets. This would be incredibly unpopular and won't happen anytime soon

> The underlying issue is government preventing development of both houses and office space. We live in a democracy. The underlying problem of government is voters. Most home owners ( especially in The Bay) refuse to allow anyone to build anything because they see that as a threat to their home value.

This guy gets it. It is NIMBYism at work. Whether it is keeping those ugly affordable apartments out of my neighborhood or wanting the housing supply restricted so I can keep my home value at peak value.

Re: San Francisco braces for commercial real estate crash

#38

Post by Animats » Tue, Sep 06, 2022, 5:56 PM UTC

This could work out. Most of the emptying buildings are in low-lying fill areas. Those will need to be demolished as the glaciers melt.

Re: San Francisco braces for commercial real estate crash

#39

Post by hollywood_court » Tue, Sep 06, 2022, 5:57 PM UTC

yodon wrote: post #21

hollywood_court wrote: post #5

Earlier quoted context omitted.

Those commercial spaces make it incredibly easy to build them however you like. The access to plumbing and electrical would make it simple to convert them into small dwellings.

Modern office buildings only have plumbing available in the center of the building. The flooring is designed to function as a highly efficient membrane. If you start punching holes in the flooring to place plumbing and toilets away from the central core you weaken the floor membrane to the point where it loses the required structural integrity. If you try to build raised flooring to provide space for the plumbing the…

Perhaps we’re each familiar with different codes or perhaps they do things differently where you are?

I spent 4 years as a commercial superintendent on various projects in the Caribbean, Dubai, and the DFW.

None of those projects would have any difficulty adding plumbing wherever they wish.

Re: San Francisco braces for commercial real estate crash

#40

Post by mstipetic » Tue, Sep 06, 2022, 5:57 PM UTC

hollywood_court wrote: post #13

newaccount2021 wrote: post #3

Not just SF I see For Lease signs on commercial real estate at all price points everywhere I go. WFH has been a paradigm shift and commercial real estate hasn't caught up to the reality yet. Companies that embrace WFH will have access to an entire nations' worth of talent and will end up with a competitive advantage. Requiring RTO means employees must be within thirty miles or so of campus, and lots of talent won't g…

I’m not near a big tech center, but I know of exactly 3 businesses in my town that no longer exist because they would not allow their employees to work remotely. Two of them were owned by former clients of mine. They allowed themselves to fail because they wanted to make their employees’ lives more difficult. It was that simple. There was no need for either business to have a brick and mortar location at all. No need…

The businesses literally shut down because of that? They were that stubborn? Or they noticed it too late?