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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

#141

Post by importantbrian »

hn_throwaway_99 wrote: post #19

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…

I'm surprised there haven't been any Georgist responses. I think the biggest reason this happens is that in dense urban areas most of these landlords are really speculating on land value. You'd like to have tenants but most of the profits you're going to derive from owning the property are from appreciation of the land value. It's not always worth it to sign commercial tenants to a long term lease and take on the costs of those tenants vs just holding the vacant building until you're ready to sell. I think the best method to fix these issues is to tax the value of land at close to 100%. This forces the landlords to put the land to productive use or sell it to someone else who will.

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

#142

Post by ghaff »

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.

I'd need to be convinced the punch a hole is actually a good solution. I've stayed in lower-floor hotel rooms on a light well and they weren't great. (Of course, a lot of Manhattan hotel rooms aren't great from a natural light perspective--but I'd almost certainly have higher standards for something I was going to live in full-time.)

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

#144

Post by voisin »

lproven wrote: post #67
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…

It is an excellent idea to step back and look at the bigger picture. I put it to you that while you have taken one step back, you will get a clearer view if you take 10 paces back. We are in the midst of catastrophic accelerating climate change. We are heading for a world that is 3-4º C warmer by the end of the 21st century, when children born today are getting to old age. That means the certain collapse of the West…

I don’t disagree with you at all, which is why I believe dense, vibrant cities are the future rather than endless suburban sprawl so that people can have their 1/4 acre with backyard and everyone has their own in-home office. I view WFH as a setback to the climate argument rather than a benefit.

We should be tackling commutes by building denser cities with mass transit, not by having everyone with more space in the burbs.

Another point: it takes a lot more to heat and cool thousands of individual houses to human comfort rather than setting those thermostats back throughout the day and only managing the HVAC for densely packed offices.

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

#145

Post by closeparen »

kibwen wrote: post #99
ajmurmann wrote: post #76

Earlier quoted context omitted.

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 sto…

Yes and these buildings are awful to live in. Paper mache boxes with no sound isolation. If you are going to live in an apartment in the US, it's very important to live in a tower, even on a low floor, and not a mid-rise, because extreme engineering and exotic materials (relative to US construction norms) are necessary to make multifamily living tolerable.

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

#146

Post by voisin »

nradov wrote: post #127
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…

This is exactly why we need to eliminate all defined benefit pension plans and switch workers to defined contribution plans such as 401(k). Traditional pension plans are just too risky because the managers often make bad decisions. Defined contribution plans invested in low-cost target date mutual funds are much safer.

Defined Contribution plans have been the trend in the private sector for three decades now and generally are seen as less attractive to pensioners who now hold all the risk for retirement. Do you have evidence that only DB plans have office real estate exposure?

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

#147

Post by ghaff »

telotortium wrote: post #118
tehjoker wrote: post #107

Earlier quoted context omitted.

I don't get why people don't like skyscrapers. They're cool. I am from NYC, so maybe I'm used to it. My understanding is the major reason they aren't build as much outside of Manhattan is because the bedrock in Manhattan supports heavy structures.

That might have been true in the early 1900s when skyscrapers were new, but they can build skyscrapers on any kind of soil these days.

A good chunk of the tallest buildings in Boston are built on late 19th century landfill (Back Bay). Admittedly not an earthquake-prone area but still.

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

#148

Post by bugglebeetle »

mywittyname wrote: post #132
mlyle wrote: post #82

Earlier quoted context omitted.

We had a longstanding regime and precedent for how bank defaults would be handled. Anyone with treasury experience knows about insurance limits and accordant risks. Then the venture capital industry and startups decided to ignore these risks and put massive amounts in one bank. Then they were made whole at 100 cents on the dollar, when it probably would have ended up at 85 cents on the dollar on the amount over $250k…

Counter-point: SVB's funds were in treasury bonds. Their losses were entirely paper losses caused by the Fed's decision to aggressively raise interest rates. The government caused this, so it's not unreasonable to expect that the government pay for the damaged caused. This was a completely predictable outcome of aggressive rate hikes - banks buy a whole lot of t-bonds. T-Bonds can lose money on paper. If someone buys…

That’s entirely absurd. This is essentially saying there should be a special, perpetual class of government-backed securities with a guaranteed return in excess of all other market performance or conditions. If this was true, everyone would just invest in the special government stocks where you get 10% ROI forever and almost nothing in anything else. At that point, you’d have insane inflation or be better off with a state-run command economy.

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

#149

Post by kibwen »

closeparen wrote: post #145
kibwen wrote: post #99

Earlier quoted context omitted.

> 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 sto…

Yes and these buildings are awful to live in. Paper mache boxes with no sound isolation. If you are going to live in an apartment in the US, it's very important to live in a tower, even on a low floor, and not a mid-rise, because extreme engineering and exotic materials (relative to US construction norms) are necessary to make multifamily living tolerable.

The exotic materials and construction required for a skyscraper are due to a need for massive strength:weight ratios, and are a separate consideration from sound insulation. A desire to use less material overall (and therefore need to support less weight) will naturally drive a skyscraper to have as little of this material as it can get away with, which means poor sound insulation is the default. Naturally, low buildings will also skimp on sound insulation because nothing's cheaper than nothing, but this is why you need regulation and building codes that take sound insulation into account.

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

#150

Post by closeparen »

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…

Sprawl is also a technology for balancing public order and civil rights.

I don’t think there’s any way to square the circle of cities being nice places for middle class families to live while also having a right to camp on the sidewalk and urinate on the train.

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