What if we convert "abandoned" offices into hydroponic (or similar) production? Would cities allow this?
More importantly, would it make money?
Office real estate crash will be so sharp, values unlikely to recover by 2040
101–110 of 241 posts
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#102Earlier quoted context omitted.
Ponzi scheme? Yes. Lots of major players who really don't want the Ponzi pyramid to collapse? Yes. But, long-term, no Ponzi pyramid can avoid collapse. Black money is not infinite, and can get skittish when the music starts fading. A central bank printing money can prop the pyramid up...for a while. But that only makes the collapse bigger, and takes more of the central bank's economy down with it when it finally does…
Tell that to Seattle and Amazon. I have little doubt that Amazon's back to work is about real estate and tax revenue for the city.
I doubt it: Amazon isn’t on good terms with Seattle’s city government. They wouldn’t mandate RTO if it wasn’t in their self interest, Amazon isn’t one for needless charity.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#103Current market prices for a lot of commercial real estate seems to be a ponzi scheme especially in the US. It is not in the interest of any of the players to decrease prices only the renters. Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. Banks need higher prices as they are highly leveraged and will be on the hook…
> Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. California is the only state facing this due to Prop 13. Most jurisdictions are able to adjust real estate tax rates in response to the drop in valuations and many did so when property values dropped in the Great Recession.
A lot of jurisdictions work on a budget: they need X dollars from property taxes, and use your assessed value to determine the rate they need to get X dollars. So if a recession hits, your property taxes don’t go down even if your home falls in value (your rate simply goes up). In a housing boom, your property value goes up, but so does everyone else’s, since X is fixed your rate goes down.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#104Current market prices for a lot of commercial real estate seems to be a ponzi scheme especially in the US. It is not in the interest of any of the players to decrease prices only the renters. Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. Banks need higher prices as they are highly leveraged and will be on the hook…
How is it a ponzi scheme? There is actual real estate being bought, sold and rented. What has happened is that demand for office space has dropped dramatically. The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential. Then these properties will more likely find tenants.
The transaction volume is near zero. So price discovery can’t happen. Similar to how during the the last crisis there was almost no market for cdo and all sorts of other shit paper so holders could pretend the asset was worth more dispite not being able to sell it.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#105This is why changing zoning laws is so important. These buildings and their underlying values can be saved by 'going condo' or conversion to smaller unit spaces for the purpose of housing so many who are struggling with massive increases to rent. Most rent does not increase because of increased asset expenses, it increases because of increased owner expenses and that quickly becomes a slippery slope in the face of ad…
knockdown and rebuild for new purposes, ie better quality cities would be better, because you'd get the opportunity to fix stoads, and generate jobs from the rebuild.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#106Earlier quoted context omitted.
This is not really how a lot of this works. Zoning is basically irrelevant - the problem is that the cost of converting an outmoded commercial building to residential is usually within the same order of magnitude as knocking it down and putting up something built for purpose. I would bet real money that there aren’t more than a handful of municipal governments that would die on the hill of maintaining existing zoning…
Yes, I'm making a reference to the time when these massive residential building projects began as a juxtaposition for today. The costs of just becoming a renter today are similar to what it took to own a home previously. Zoning is not irrelevant it is the absolute cause of these areas essentially becoming Special Economic Zones which are now, in historic fashion, about to flounder and fade unless the powers that be c…
LA really isn’t a desert. It is definitely near a desert, but the city itself isn’t very desert like. LA’s water use is a lot smaller than the farms around LA, so converting farms to residential use would actually save a lot of water.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#107Earlier quoted context omitted.
> How is it a ponzi scheme? Because it’s credit built on credit. It’s not an intentional Ponzi scheme (maybe). > The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential. It’ll be prohibitively expensive for most properties to convert them to residential. They might as well be demolished for their land value.
That still doesn’t make it a Ponzi scheme . Don’t just throw the word around.
Ponzi scheme is when the price collapses for something that I don't like, and the more that I don't like it the Ponzi-er it is
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#108Current market prices for a lot of commercial real estate seems to be a ponzi scheme especially in the US. It is not in the interest of any of the players to decrease prices only the renters. Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. Banks need higher prices as they are highly leveraged and will be on the hook…
> Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. California is the only state facing this due to Prop 13. Most jurisdictions are able to adjust real estate tax rates in response to the drop in valuations and many did so when property values dropped in the Great Recession.
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Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#109This is why changing zoning laws is so important. These buildings and their underlying values can be saved by 'going condo' or conversion to smaller unit spaces for the purpose of housing so many who are struggling with massive increases to rent. Most rent does not increase because of increased asset expenses, it increases because of increased owner expenses and that quickly becomes a slippery slope in the face of ad…
This is not really how a lot of this works. Zoning is basically irrelevant - the problem is that the cost of converting an outmoded commercial building to residential is usually within the same order of magnitude as knocking it down and putting up something built for purpose. I would bet real money that there aren’t more than a handful of municipal governments that would die on the hill of maintaining existing zoning…
the problem is that the cost of converting an outmoded commercial building to residential is usually within the same order of magnitude as knocking it down and putting up something built for purpose.
If you look at the urban core of many cities, they are full of old commercial buildings converted to lofts/residentia. The old bank district in LA was empty and in disrepair for decades, then a huge conversion boom in the 2000's. Soho in NYC. Many buildings south of Market in SF.
The question is why can't we accelerate the process so the buildings don't sit unused for decades before it becomes worth conversion. <- though maybe that is the crux, the prices need to decline enough to make it worth it.
Re: Office real estate crash will be so sharp, values unlikely to recover by 2040
#110crazy idea: us govt scoops up all the office real estate at the crash and converts to low income housing for free. Solve two crisis at once, the obviously coming real estate crisis and the homeless crisis. All for the cost of a handful of F35s If only politicians had an iota of strategy.
I don't want more low income housing and fewer F-35s though- in fact I want the exact opposite. Low income housing comes with associated costs to the city and the people who inhabit them pay essentially no taxes so everyone else's taxes need to go up.
Unless we go with a very cheap option (kill all the houseless), housing them is actually a net positive for the city. Being houseless as a lot of negatives that cost us directly or indirectly. Think police enforcement, garbage cleanup, emergency rooms, even lost productivity.