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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

#161

Post by jupp0r »

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 don't get your point. If there's no demand for office space anymore, who will have offices in these buildings? If nobody has offices in them (or if rent is not enough to maintain the buildings), what will happen to them?

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

#162

Post by jupp0r »

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.

You could also have mixed use of buildings, putting residential on the outside and commercial on the inside.

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

#163

Post by [deleted] »

closeparen wrote: post #150
api wrote: post #65

Earlier quoted context omitted.

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.

[deleted]

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

#164

Post by HeyLaughingBoy »

vel0city wrote: post #93
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 d…

> You want the machines producing as much as they can to balance out their costs

And you may have a single operator who's responsible for keeping multiple machines going. Loading raw material, attending to alarms, etc.

To add to what you said, there's a concept known as "lights-out manufacturing" wherein the machines are continuously reloaded by robots/automation with raw materials (and if needed there's other automation to offload completed parts) so they can continue making parts even after everyone's gone home for the day.

An idle machine isn't making money.

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

#165

Post by danaris »

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.

That seems like an extraordinary claim that requires extraordinary evidence.

It seems intuitive to me that just because mid-rises are likely to be built using the cheapest materials that satisfy building codes doesn't mean it's impossible to build them with better sound isolation and other amenities that improve living there.

So can you provide some reason why mid-rises must be that way, as opposed to the Almighty Market just failing, as it usually does, to provide anything other than the cheapest least-common-denominator solution?

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

#166

Post by lamontcg »

This is probably the tip of the iceberg of the bad businesses/investments that have been propped up by zero percent interest rates for the past decade.

When the tide recedes and all those investments pop, that should cause a major recession in the US and rest of the world.

A positive feedback loop will also exist, though, where due to the recession and belt-tightening, companies will defect on RTO plans and seek to get out of leases and office spaces, further intensifying the commercial real estate crash.

The Fed has definitely slammed on the brakes and will continue to do so until they create a recession and push unemployment significantly higher. We're still in a situation where nothing fundamental has changed about the US economy and if rates were dropped then inflation would surge again. And the only way that keeping rates higher doesn't break the US economy is if you believe that a decade of ZIRP didn't lead to a lot of bad investments that are funded by kick-the-can-down-the-road cheap money refinancing.

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

#167

Post by friend_and_foe »

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…

If that's how the cookie crumbles...

What we are seeing is that with the proliferation of broadband internet, information workers don't need close proximity to one another. Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself.

I personally don't want to forcibly stagnate development to protect what amounts to unrealized losses becoming realized. The numbers are big, and so the impact is big, but fundamentally all this is is nonviable business models failing. If your pension relies on office buildings being full, if your city based it's investment plan on information workers requiring proximity to something physical, it was not viable, and there's nothing anyone can do to change that. I won't be forced into a life I don't want to save a city budget or someone's pension plan. Am I cheering? Sure, a little, but mostly I'm just looking at the situation pragmatically and realistically and seeing what's in front of me. If your retirement necessitates me paying thousands in rent to overlook deadlocked traffic, commuting for an hour or corporations paying for floor space as what amounts to a frivolous amenity, you backed the wrong horse and will take a financial hit, whether I cheer or not won't change that fact one iota.

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

#168

Post by kuhaku22 »

friend_and_foe wrote: post #167
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…

If that's how the cookie crumbles... What we are seeing is that with the proliferation of broadband internet, information workers don't need close proximity to one another. Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself. I…

> Cities are now largely obsolete, unfortunately. They're a choice whereas before they were a necessity, and arguments about how much someone loves the diversity of a city to the contrary, the emptiness of these office buildings speaks for itself.

There are still plenty of physical-only things that cities exist for, and other benefits besides working. And when people talk about how much they love cities, office buildings are not the first thing that come to mind.

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

#169

Post by friend_and_foe »

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…

We were having a nice conversation about the viability of office space as an investment in a world of broadband internet and remote work on information related fields, but thank you for shoehorning your pet issue into it where it doesn't fit. In the sage words of the Dude, "what the fuck has anything got to do with Vietnam!"

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

#170

Post by warning26 »

BirAdam wrote: post #138
warning26 wrote: post #63

Earlier quoted context omitted.

> Why not keep things decentralized and utilize the technologies we've built to manage the communications and interactions? (...) I do acknowledge that humans are social animals and there are benefits to face to face interactions, but these come at enormous costs. This sounds like a horrible vision for the future -- everyone completely separated, all interactions via video chat? All in the name of making sure we neve…

Nah. The thought is that you gain back the commute time and you can meet up with friends, family, and attend cultural events. You needn't confine all of your human interaction to the workplace.

I would love to know the percentage of time people WFH spend doing these things. I'd estimate it's close to zero.
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