The world’s empty office buildings have become a debt time bomb
21–30 of 206 posts
Re: The world’s empty office buildings have become a debt time bomb
#22I 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…
I think the reason they preferred the vacancies is that the value of the property is related to the rent price, so if they lowered the rent they’d have to lower the book value of the asset as well.
Re: The world’s empty office buildings have become a debt time bomb
#23In 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…
> actually a good thing
Those words in that word rarely give me confidence in an idea.
Re: The world’s empty office buildings have become a debt time bomb
#24I 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.
The depositors were bailed out. Also, I would say the banking sector as a whole was bailed out. Providing unlimited insurance is to SVB’s depositors allowed other banks to remain solvent, as did the Fed’s new lending programs.
Re: The world’s empty office buildings have become a debt time bomb
#25I 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…
I think the reason they preferred the vacancies is that the value of the property is related to the rent price, so if they lowered the rent they’d have to lower the book value of the asset as well.
And compensate creditors.
Re: The world’s empty office buildings have become a debt time bomb
#26Earlier quoted context omitted.
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 depositor…
Their assets were worth less than they owed depositors. An auction would have caused a 30 percent or so loss to many millionaires.
Re: The world’s empty office buildings have become a debt time bomb
#27Earlier quoted context omitted.
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
If startups couldn't make payroll, what do you think would happen here?
Re: The world’s empty office buildings have become a debt time bomb
#28Earlier quoted context omitted.
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 depositor…
SVB’s bailout is estimated to have cost the FDIC 20B. The Fed also set up new lending programs to support the banks, which was essentially free* money.
Re: The world’s empty office buildings have become a debt time bomb
#29I 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 ?
They will be bailed out guaranteed. Can kicking is the only solution.
> Can kicking is the only solution.
Oh come on, we can do far more than can kicking. There is always war, revolution, and decades of economic hardship!
Re: The world’s empty office buildings have become a debt time bomb
#30I 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…
I think the reason they preferred the vacancies is that the value of the property is related to the rent price, so if they lowered the rent they’d have to lower the book value of the asset as well.
Sounds like a regulatory failure; an unoccupied building shouldn't be able to retain book value.