Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

San Francisco braces for commercial real estate crash

sfstandard.com

Post reply on HN
Print view View original

51–60 of 622 posts

Re: San Francisco braces for commercial real estate crash

#51

Post by niffydroid »

bragr wrote: post #2

Give the corresponding housing crisis in the Bay Area, one wonders if the solution is to "simply" start converting office space to living space until the corresponding demand for office space recovers from a combination of increased demand and decreased supply. Now I'm sure there are all kinds of challenges to doing that, engineering, zoning, other practicalities, but it seems overall reasonable to me, though perhaps…

Where I live in the UK, they've converted multiple office blocks to student accommodation. They are also tearing down block of flats due to other structure issues. Generally it's easier to build housing on green field rather than brown sites due to contamination etc. Once you convert the office to housing, when you need office space you'll have to build it somewhere

Re: San Francisco braces for commercial real estate crash

#52

Post by ErikVandeWater »

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.

> We live in a democracy. The underlying problem of government is voters.

Pretty sure dictatorships have the same problem with improper zoning.

Re: San Francisco braces for commercial real estate crash

#53

Post by sharklazer »

ptmcc wrote: post #32
ethbr0 wrote: post #19

Earlier quoted context omitted.

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?

Even bigger, most of the buildings are highly leveraged. There literally is no incentive unless the mortgages can be restructured, as the ultimate prices will be forwarded to the renter.

Everyone’s underwater a there isn’t a good solution without massive price decrease (crash) or commercial space demand re-invigorates.

Re: San Francisco braces for commercial real estate crash

#54

Post by cjbgkagh »

onlyrealcuzzo wrote: post #14
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.

I'd argue that a "crash" isn't really a "crash" if it comes after a 50% increase in 2 years. Anything short of a 20% correction is simply a reversion. If prices shot up 100% in 1 year, and then were down 3% in two months - no one would be talking about a crash.

I generally have the same rule of thumb; not a crash until down 50% from peak. But housing is leveraged. It’s not like stock where few people have margin accounts, a 20% reversion sends most people who bought recently underwater. Plus the size of the real estate market is much bigger than the stock market. The flow-on reverse wealth effect will feel like a stock crash to many people.

Re: San Francisco braces for commercial real estate crash

#55

Post by jeffbee »

FartyMcFarter wrote: post #35
jeffbee wrote: post #12

Earlier quoted context omitted.

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?

There is a large difference between a preference and a mandate. The city of San Francisco requires this development pattern. It is not known whether the owners prefer it or not. The existence of pre-down-zoning apartment buildings in this area of town suggests that the preference is not universal.

Re: San Francisco braces for commercial real estate crash

#56

Post by paxys »

In a way I'm glad that a large chunk of San Francisco's population is getting exactly what they have wanted for years – to get rid of big tech takeover of the city. Maybe they will actually fare better with a significantly reduced number of tech workers and jobs, or maybe they won't. At least we'll know for certain now, and can stop all the whining.

Re: San Francisco braces for commercial real estate crash

#57

Post by JumpCrisscross »

sharklazer wrote: post #53
ptmcc wrote: post #32

Earlier quoted context omitted.

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?

Even bigger, most of the buildings are highly leveraged. There literally is no incentive unless the mortgages can be restructured, as the ultimate prices will be forwarded to the renter. Everyone’s underwater a there isn’t a good solution without massive price decrease (crash) or commercial space demand re-invigorates.

> most of the buildings are highly leveraged. There literally is no incentive unless the mortgages can be restructured, as the ultimate prices will be forwarded to the renter.

This is what recessions are useful for. Underwater mortgages still need to be serviced. There might be a deal in providing assistance to the lender in exchange for financing conversion.

Re: San Francisco braces for commercial real estate crash

#58

Post by GekkePrutser »

121789 wrote: post #10
bragr wrote: post #2

Give the corresponding housing crisis in the Bay Area, one wonders if the solution is to "simply" start converting office space to living space until the corresponding demand for office space recovers from a combination of increased demand and decreased supply. Now I'm sure there are all kinds of challenges to doing that, engineering, zoning, other practicalities, but it seems overall reasonable to me, though perhaps…

From my understanding, it’s just like a legacy code base. It is just easier/cheaper to start from scratch than converting the entire thing a piece at a time.

Cost isn't the only thing. Tearing down and rebuilding is probably much slower than conversion.

Re: San Francisco braces for commercial real estate crash

#60

Post by notch656a »

s0rce wrote: post #29
ethbr0 wrote: post #19

Earlier quoted context omitted.

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.

As long as its safe to occupy for permanent living it should get permitted, not sure how its much different than a hostel/rooming house-like arrangement. You don't need a kitchen and bathroom in your unit to live.

Safety will always be a top argument to constrain and block off new housing. Look at current building codes. Sure all those things make us safer -- if you ignore the homeless left on the streets and the people who no longer have money left over for good food, education, and healthcare after paying the high price it costs to build an up-to-code house in America.

You can restrict housing practically as tight as you want by raising permitting requirements, safety assessments, and safety factors and other safety features until it's practically impossible for anyone but the rich to build.

There are people out there that would be safer in a run-down tinder-box shack than an up to code and zoned house. Not because the house is safer, but because it allows them to have an affordable roof over their head and round out their finances for other things that bring them wellbeing. Building and zoning codes fail to account for this.

Post reply on HN