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

bloomberg.com

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

#71

Post by renewiltord »

refulgentis wrote: post #34
candiddevmike wrote: post #27

Earlier quoted context omitted.

If startups couldn't make payroll, what do you think would happen here?

Does asking this advance the discussion, or is it a passive-aggressive way to continue signalling you believe “seized the bank and sold it, keeping deposits whole” means “SoftBank bailout”?

If you really think about it, it was a bailout of the American people. And that's why it was good and an example of socialist praxis.

After all, startups take venture capital money from the rich and spend it primarily on t-shirts and catering - which primarily comes from small businesses who hire local unskilled labour.

Marx would be proud of the FDIC for their work.

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

#72

Post by mikestew »

skizm wrote: post #37
SV_BubbleTime wrote: post #23

Earlier quoted context omitted.

> actually a good thing Those words in that word rarely give me confidence in an idea.

Same vibes as when someone describes anything as "perfectly good". It always sets off alarm bells.

It's simply an attempt to establish the baseline to the speaker's liking. For instance, someone who doesn't like skydiving: "why would you jump out of a perfectly good airplane?"

Let's start with the fact that there are no "perfectly good" airplanes, then we can debate the wisdom of free falling from 3Km.

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

#73

Post by klyrs »

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…

> "Just turn it to housing" isn't an easy answer.

Well, rent/sqft is dropping rapidly, like it or not. The housing crisis felt across north america has never had easy answers. But we're seeing a possibility for incentives to come into alignment with increasing the supply of housing. Even if that means tearing down buildings -- because if you don't, you get squatters.

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

#74

Post by mlyle »

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…

Older-but-otherwise viable office stock, though, is a decent candidate to turn into housing. In a perfect world:

* Lots of companies still using office space migrate to new office towers.

* Older office towers get turned into housing.

Will that get us there? I'm not sure. Of course, banks will still not be so happy, because a lot of this newer stock that would have rented at premium commercial rates is going to have to go a fair bit cheaper.

(The other thing is-- if some of the older office stock gets turned into housing, the demand for commercial should go up, too, because it's easier for your work force to live close to work... but unfortunately, all of these corrections are on a timescale of 5+ years).

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

#75

Post by triceratops »

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 ?

I don't understand this "SVB bailout" meme. If a company manufacturing lifesaving medication goes under and the government takes over its factories to keep manufacturing the medicine and prevent shortages, did all the patients get "bailed out"? Should they have known better than to buy their medication from only one manufacturer?

Comments like this distract from real bailouts and moral hazards.

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

#76

Post by ajmurmann »

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…

I worked in a suburban office park before the pandemic. My commute to the office park wasn't substantially shorter than when I commuted to a downtown office and the office park was a lot more depressing. When I worked downtown, my coworkers would regularly explore new restaurants during lunch, have 1-on-1s over ice cream etc. The other benefit was that downtown had better public transit. Getting from one random place in the suburbs to another via public transit is a much harder problem to solve than getting people to a central area.

I wish we could solve zoning and permitting and just build our cities up.

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

#77

Post by freedude »

wnolens wrote: post #31
rcme wrote: post #22

Earlier quoted context omitted.

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.

Right, and so lower collateral for other loans. This is apparently rampant in NYC. It's wild that incentives exist to make vacancy profitable. But there's a LOT of vacant storefronts and apparently vacant apartments (though it's hard to get this data..)

With a tighter money policy coming from the FED in an attempt to control inflation, the availability of commercial building loans is negligible. The market will self correct. Hopefully it won't take a bunch of people with it.

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

#78

Post by mlyle »

api wrote: post #65
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…

Seems to me that we've speed run the story of why suburban sprawl exist in the first place. A car is a machine to provide negotiating leverage in real estate markets. Dense urban centers, while awesome in many ways, easily lend themselves to the development of grassroots real estate cartels made up of property owners who block new construction to profit from real estate appreciation. As this occurs people are forced…

Japan also has a radically different property ownership structure which has myriad effects.

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

#79

Post by gorjusborg »

rcme wrote: post #24
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.

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.

> I would say the banking sector as a whole was bailed out

I disagree with that characterization.

The FDIC refunds depositors using money (assessments) they collect from member banks. So in essence, unless the government does something special to inject funds directly into the FDIC, the remaining FDIC member banks would likely see their assessment rates go up to cover the costs of these bank failures.

From https://www.fdic.gov/news/speeches/2023/spmar2723.pdf:

> "any losses to the FDIC’s Deposit Insurance Fund (DIF) as a result of uninsured deposit insurance coverage will be repaid by a special assessment on banks as required by law."

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

#80

Post by mooxie »

dbg31415 wrote: post #52

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.

Pre-pandemic I started commuting by train and even though it was nearly the same time spent, my attitude and outlook was worlds better than when I was driving in heavy traffic every day.

There are multiple workable solutions, and unfortunately most US cities aren't heavily invested in any of them. My city has very limited rail lines and it was only happenstance that my work was close enough to a stop for it to be a reasonable way to get to the office. Literal millions of other people in the metro area don't have that option.

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