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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

#51

Post by BirAdam »

I have felt since I was a teen in the 90s that the world would be better served if offices, schools, and factories didn't exist. I thought that this centralization just increased the costs for everyone. Why not keep things decentralized and utilize the technologies we've built to manage the communications and interactions? If there's a CNC machine with one primary operator, why can he have that and the material gets shipped to him and he then ships the next stage product to someone else? With 3D printers this is even crazier right? For technologists, the only job that I can see requiring physical proximity is hardware repair and other helpdesk style roles.

I do acknowledge that humans are social animals and there are benefits to face to face interactions, but these come at enormous costs. These costs aren't merely financial as so many people emphasize, but material. The material cost of cities on our planet is quite high. The amount of concrete, metal, glass, and other materials is quite large. With decentralization we would have an increased use of roads for logistical concerns, and we'd have an increased sprawl issue, but there'd be so much less traffic overall I think we'd have a net win on air quality. The next issue to tackle would be expressly limiting sprawl, and I have no idea how that'd be done.

EDIT: Comments have been that this would decrease production. this is entirely accurate. Most items today aren't made to last and we have become accustomed to hyperconsumption of low quality stuff. No doubt. Scale has alternatively raised the standard of living the poorest among us by insane amounts. There is severe good and severe bad that have accompanied this remarkable economic boom of the last 100 years. The thought that I really have regarding this is that Amazon has made it possible to distribute insane amounts of stuff to a distributed buying public and there must be a way to manufacture in the same way. I am not a logistics person, and I could be entirely wrong (I probably am), but it's a dream and not a proposal.

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

#52

Post by dbg31415 »

Simple fix! Build more housing near city centers.

Design communities where people can walk to work, walk to the neighborhood grocery store, walk to the park...

It's all the driving we hate. I'd gladly work in an office again if I could walk there.

I will fight tooth and nail against having to commute ever again.

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

#53

Post by iancmceachern »

voisin wrote: post #35

For those cheering on the demise of office landlords, please keep in mind the astonishing number of public and private pension plans invested in these assets. The impact will not be limited to just the landlords and will be nothing short of catastrophic to downtowns (which we’ve just spent the last 30 years trying to rejuvenate after being hollowed out by white flight to the suburbs), the character of our cities, our…

I think the solution is for those funds to divest in those investments, not for society to change course in order to keep a certain investment vehicle.

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

#54

Post by marcosdumay »

pradn wrote: post #38
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…

It's quite hard to turn modern office builds into housing. Recently-built offices have huge floors, so natural light can't penetrate into the interior. Those spaces are fine as meeting rooms, but won't suffice for living in.[1] It's possible to make apartments with no natural light, but most people don't want to live in those. If they're low in rent, maybe they'd be attractive enough. But then your rent/sqft number g…

> But then your rent/sqft number goes down

Yeah, that's the issue.

I'm sure there's plenty of demand for commercial space on a lower rent. Commercial space is much more than offices, but those things are priced so that only high-margin artificially high-density knowledge work can afford them.

Our modern cities are clearly not economically viable (proof of that is that people can't afford to live in them), so yeah, something will break sooner or later.

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

#55

Post by adverbly »

Does anyone have any recommended background reading on how bubbles and "time bombs" work? Why don't these things behave according to normal price supply demand curves where the price would slowly come back down to earth over time. I've seen this repeat time and time again across certain assets, and always being curious about the underlying mechanisms.

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

#56

Post by jiveturkey42 »

BirAdam wrote: post #51

I have felt since I was a teen in the 90s that the world would be better served if offices, schools, and factories didn't exist. I thought that this centralization just increased the costs for everyone. Why not keep things decentralized and utilize the technologies we've built to manage the communications and interactions? If there's a CNC machine with one primary operator, why can he have that and the material gets…

This was called Cottage Industry and it was the norm before the industrial revolution

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

#57

Post by pradn »

toomuchtodo wrote: post #41
pradn wrote: post #38

Earlier quoted context omitted.

It's quite hard to turn modern office builds into housing. Recently-built offices have huge floors, so natural light can't penetrate into the interior. Those spaces are fine as meeting rooms, but won't suffice for living in.[1] It's possible to make apartments with no natural light, but most people don't want to live in those. If they're low in rent, maybe they'd be attractive enough. But then your rent/sqft number g…

But this is good. It means no new office buildings need to be built. The existing ownership and debt will simply be juggled and fought over, numbers on a spreadsheet. The buildings will still exist and be available for office needs at reduced costs (after debt takes a haircut). New urban construction can now focus solely on residential needs, and with housing unit shortages, this natural reallocation of construction…

I'm with you - there'll be a long term re-allocation. It might take decades, though. It's a larger scale version of the problem of empty storefronts. Store owners would keep buildings empty than reify the financial cost of reducing rents. There's large numbers of empty stores on Broadway in NYC, of all places - perhaps the most famous street in the country!

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

#58

Post by bluSCALE4 »

BirAdam wrote: post #51

I have felt since I was a teen in the 90s that the world would be better served if offices, schools, and factories didn't exist. I thought that this centralization just increased the costs for everyone. Why not keep things decentralized and utilize the technologies we've built to manage the communications and interactions? If there's a CNC machine with one primary operator, why can he have that and the material gets…

You lost me at shipping CNC machines. I can't wrap my head around that factory job being remote. Personally, I feel these jobs need to go away. Machines need to take them over and we need a new, subsidized generation to figure out what to do next. Global economies need to be a thing of the past.

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

#59

Post by ahupp »

rcme wrote: post #28
throwway120385 wrote: post #13

Earlier quoted context omitted.

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.

The FDIC insurance fund is paid by banks, so ultimately depositors were "bailed out" by the broader banking industry.

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

#60

Post by spacemadness »

BirAdam wrote: post #51

I have felt since I was a teen in the 90s that the world would be better served if offices, schools, and factories didn't exist. I thought that this centralization just increased the costs for everyone. Why not keep things decentralized and utilize the technologies we've built to manage the communications and interactions? If there's a CNC machine with one primary operator, why can he have that and the material gets…

How is shipping something around during every stage of production for a modern product a good idea? That seems insanely inefficient.
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