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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

#91

Post by giantrobot »

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…

The other major issue is that commercial space has much different plumbing requirements than residential. Commercial plumbing is mostly centralized with low flow pipes for sprinkler systems. That's not sufficient for residential space and it would take significant construction to add in that plumbing.

Some commercial space will have similar issues with air conditioning and power.

I'm often amazed when Big Brains trot out the "turn offices into residential!" without for a second wondering where people will shit.

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

#92

Post by freedude »

SoftTalker wrote: post #64
adverbly wrote: post #55

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.

People who are invested in these things are motivated to prop up the prices for as long as they can, until they can't and the bottom drops out. It's not a normal supply/demand curve because the demand is not just lower, in a lot of cases it's gone and not coming back at any price.

Exactly! In these cases it becomes apparent the market isn't free but manipulated in some way (Socialism, tariffs, tax benefits, regulatory measures).

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

#93

Post by vel0city »

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…

The machines are expensive. You want the machines producing as much as they can to balance out their costs. Workers don't like working 24/7, so they'll stop working after a few hours (this is good!).

If each worker has their own machine, that means the machine probably ceases to be producing when the worker is done. Coupled with potentially longer startup processes (many machines are way easier to keep running than do a cold start) it means these machines sit idle for most of their existence. This is sub-optimal.

If you centralize the machines, then you can trade off workers and keep the machines running. You then also potentially don't have to worry about startup processes eating into productive time as often. This is than a major efficiency boost.

On top of that, many times several different jobs might be related to the operation of that machine. You might need someone who specializes on cleaning the machines, you might have people specializing on the inspection on the machines, you might have people specializing on the day to day operations of the machines. Having that specialization can be a net benefit overall.

Think about repair turn-around times. So you've got a CNC operator way off in the middle of nowhere, super distributed. He knows the basics on how to use the machine, but maybe not a lot more. Then it throws a fault, and he doesn't know how to repair it or doesn't have the equipment and parts. Now he's going to call up the head office, who is going to dispatch a repair person from somewhere (maybe close? maybe far?) to come out to some far away remote location to repair it. Meanwhile, for larger operations they might have some techs on-site who can do repairs within just a few minutes and get the machine functional sooner. You can co-locate a smaller cache of spare parts for a larger pool of machines, because multiple failures is probably pretty rare. All that downtime avoided turns into productivity gains as the machine gets to functional levels faster and the CNC tech gets back to work faster.

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

#94

Post by kibwen »

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…

I highly encourage people to read that NYT link, the diagrams are excellent. That said, the article also shows how you address the problem of no natural light: you punch a hole through the center of the building (and in New York City's case, this permits the developer to "move" that lost floorspace into newly-built units on top of the building). Far from a trivial solution, but also far from impossible.

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

#96

Post by hd4 »

The time bomb began ticking around the time people started getting broadband connections and work-from-home/video-calling became viable (so around 2007). The surprising thing is the cultural shift took 15 years to play out, and needed an actual global pandemic to really push it through even then, and even then there is a massive effort to put the genie back in the bottle. Turns out office buildings are just another form of technology that has been superseded by something that just works better, deal with it banks.

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

#97

Post by vkou »

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 problem with suburban office parks is that commuting to them is worse than downtown when you live in the wrong suburb - one on the other side of town from them.

Downtown is a central location that is equally bad to car-commute to for everyone. Suburbs make for okay car-commutes for some people, and utter hell for everyone else.

You can fix downtown commutes by building out good transit networks, but there's no real way to solve the suburb-to-suburb commute problem.

----

And no, 'Just move from your suburb to the one that has the office park' doesn't work. Moving costs 6% of realtor fees on + a mountain of effort and stress and other money. All for a job that might lay you off/that you'll leave next year.

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

#98

Post by nradov »

kibwen wrote: post #94
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…

I highly encourage people to read that NYT link, the diagrams are excellent. That said, the article also shows how you address the problem of no natural light: you punch a hole through the center of the building (and in New York City's case, this permits the developer to "move" that lost floorspace into newly-built units on top of the building). Far from a trivial solution, but also far from impossible.

That "solution" is literally impossible for most office buildings where the core is structural and contains most of the building machinery. For those it's cheaper to demolish and rebuild.

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

#99

Post by kibwen »

ajmurmann wrote: post #76
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…

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

Lest people think that building up necessarily means skyscrapers, it doesn't. You can build a six-story building without any of the extreme engineering or exotic materials that skyscrapers require. Paris, Barcelona, and Amsterdam all manage high levels of density where the average resident will be living in a building of approximately six stories or less.

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

#100

Post by bobthepanda »

fragmede wrote: post #47
bobthepanda wrote: post #36

Earlier quoted context omitted.

To put this in perspective, retail has been in free-fall for decades in the United States, yet as of 2018 the US had something like 23 sq ft of retail per capita when countries like Japan, UK, Germany, France etc. average around 4. It takes eons to clear out nonperforming real estate inventory. Just ask the Rust Belt.

But what is the retail sq ft per capita in urban cores? In the vast endless car-required suburbia that is American, that big box stores dominate, and pull up the average isn't surprising. The easiest way to visualize an acre is a Best Buy, after all. But how about if you only look at stores in Manhattan? What's the per capita SQ ft there?

According to what I can find on the Internet, there is 55M retail square feet in Manhattan for its 1.6M residents, so about 34 square feet per person.

Keep in mind that this figure doesn’t account for tourists, commuters, etc; but also keep in mind that over the last decade several large million+ square foot malls have opened in Manhattan itself (Hudson Yards, the Moniyhan station hall, the future Penn Station renovations, the Fulton transit center, the World Trade Center Oculus, etc.) The Hudson Yards one just lost its anchor tenant.

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