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The world’s empty office buildings have become a debt time bomb

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Re: The world’s empty office buildings have become a debt time bomb

#11

Post by lacksconfidence »

yeetcode wrote: post #10
jmclnx wrote: post #2

I could not get into the article. But if what happened with SVB is any indicator, I am sure all the large commercial property owners will get a bailout. Small ones will be on their own. As for the Cities themselves (property taxes), I think this is were issues lie. Maybe time to think about selling municipal bonds ?

But SVB didn't get bailed out though? At least not the investors. Only the depositors were given their money back.

It's indirect. Softbank gave money to startups. Startups put the money in SVB. If the startups hadn't been made whole then softbank would have seen many of it's investments fold.

Re: The world’s empty office buildings have become a debt time bomb

#13

Post by throwway120385 »

yeetcode wrote: post #10
jmclnx wrote: post #2

I could not get into the article. But if what happened with SVB is any indicator, I am sure all the large commercial property owners will get a bailout. Small ones will be on their own. As for the Cities themselves (property taxes), I think this is were issues lie. Maybe time to think about selling municipal bonds ?

But SVB didn't get bailed out though? At least not the investors. Only the depositors were given their money back.

Yes, and my understanding is that SVB's assets, which are still productive over the long term, were sold on to pay for this "bailout." So the narrative that there was a government bailout is not really true here. The real concern I've heard is that FDIC insurance paid out to a lot of depositors who had more than the statutory limit, but what's left out is that FDIC actually sold on SVB's assets to pay those depositors. It seems like they're taking an interpretation that the statutory limit only applies to banks which don't have any assets that can be traded on.

Re: The world’s empty office buildings have become a debt time bomb

#14

Post by orange_joe »

In my opinion this isn’t a consequence of the pandemic, but rather an inevitable outcome from the uneven pattern of building that vastly favored commercial real estate and prevented new housing. Even without teleworking, it was likely that jobs shifted toward suburban office parks as they had in the 80s to 2000s. People want to live close to work, and without sufficient housing in cities, commercial real estate in big cities was very likely to suffer in the long term. These foreclosures are actually a good thing as they will allow big cities to rebalance the allocation of their scarcest resource — land.

Re: The world’s empty office buildings have become a debt time bomb

#15

Post by readthenotes1 »

soared wrote: post #12

What ever happened to that SF office lease time bomb last (or this) year?

Read about the Hilton . There was another hotel that closed, and a recently an office building sold for something like 1/3 of what it was bought for before pandemic ($75m vs 240m or something like that).

The question is whether those were unusually that's or the start, and I do not have the data to know...

Re: The world’s empty office buildings have become a debt time bomb

#16

Post by rcpt »

orange_joe wrote: post #14

In my opinion this isn’t a consequence of the pandemic, but rather an inevitable outcome from the uneven pattern of building that vastly favored commercial real estate and prevented new housing. Even without teleworking, it was likely that jobs shifted toward suburban office parks as they had in the 80s to 2000s. People want to live close to work, and without sufficient housing in cities, commercial real estate in bi…

The cities have always been allowed to rebalance land allocation. This might provide a bit more push but I'm skeptical.

Re: The world’s empty office buildings have become a debt time bomb

#17

Post by refulgentis »

lacksconfidence wrote: post #11
yeetcode wrote: post #10

Earlier quoted context omitted.

But SVB didn't get bailed out though? At least not the investors. Only the depositors were given their money back.

It's indirect. Softbank gave money to startups. Startups put the money in SVB. If the startups hadn't been made whole then softbank would have seen many of it's investments fold.

That doesn't really hold water.

Its an argument that creates a bailout of whoever we want, as long as they're within 6 degrees of SVB. [^1]

A huge rhetoric win, a loss for understanding.

[^1]: https://en.wikipedia.org/wiki/Six_Degrees_of_Kevin_Bacon

Re: The world’s empty office buildings have become a debt time bomb

#18

Post by seltzered_ »

orange_joe wrote: post #14

In my opinion this isn’t a consequence of the pandemic, but rather an inevitable outcome from the uneven pattern of building that vastly favored commercial real estate and prevented new housing. Even without teleworking, it was likely that jobs shifted toward suburban office parks as they had in the 80s to 2000s. People want to live close to work, and without sufficient housing in cities, commercial real estate in bi…

Worth noting that in the mid 2000s we had urbanist evangelism via works such as 'flight of the creative class' ( https://creativeclass.com/richard_florida/books/the-flight-o... ) which was later put into question by the same author ( https://jacobin.com/2017/08/new-urban-crisis-review-richard-... )

Re: The world’s empty office buildings have become a debt time bomb

#19

Post by hn_throwaway_99 »

I remember an article not to long ago (like past 2 years or so) talking about how all these retail storefronts in Greenwich Village and SoHo in NY were closing because the rents became insane, and apparently (for a reason I don't fully understand) landlords felt it better to have spaces remain vacant than to lower rents.

I know redeveloping commercial buildings into residential is very expensive and difficult, but if/when these large commercial landlords do eventually get bailed out, I hope any assistance is conditional on converting buildings to productive uses like residential.

Re: The world’s empty office buildings have become a debt time bomb

#20

Post by badcppdev »

soared wrote: post #12

What ever happened to that SF office lease time bomb last (or this) year?

To stretch the analogy there are large bombs going off and damaging the profits of the lenders who financed various loans. These will continue.

US banks weight in at $2T. The Commercial Real Estate market weighs in at 20T although only a portion of that is office buildings in cities.

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