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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

#181

Post by freedude »

solumunus wrote: post #130
freedude wrote: post #83

Earlier quoted context omitted.

Who were the depositors? SVB's depositors were primarily businesses with more than $250,000 in an account. Over 90% of depositors(google for exact percenatge) had more than 250,000 in the account. So who was the bailout for? Not the average guy on the street...

That’s simplistic thinking. The majority of those businesses would not have been able to pay staff and there would have been many redundant “average guys on the street”.

Perhaps, but perhaps the simplistic thinking is that the bailout changes anything. Are businesses which are trying to meet payroll now running a buffer in multiple banks? Are they securing the future of their employees by making sure they can meet payroll in an emergency? Probably not and as a result they didn't learn anything from the experience.

The truth is, this is the tip of the iceberg. Don't be sailing on the Titanic since you have been warned.

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

#182

Post by mywittyname »

bugglebeetle wrote: post #148
mywittyname wrote: post #132

Earlier quoted context omitted.

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…

It's not absurd at all when you consider that T-Bonds are the foundation of our banking system. Plus, there's no fundamental reason we price bonds the way we do.

The risk of this exact scenario playing out across the banking sector is likely the reason why the Fed took so long to raise rates (and the drastic, reversal of course when they tried in 2018).

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

#183

Post by jareklupinski »

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…

why is everyone dreaming of turning offices into 2 bedroom 2 bathroom family units? most of these buildings are in very dense, tourist heavy areas, usually with booming nightlives and social scenes

it's become a dirty word, but turning these buildings into SROs / low-cost rental units might bring back the artists and musicians that have been sorely missed from these areas, while providing people who don't have a credit history or first month + last month + security deposit a place to stay in a place that charges by the night instead of by the month

much easier to turn an office into a coliving space with communal bathrooms, dorm style accomodations, and large cafeteria kitchens anyway

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

#184

Post by freedude »

yazaddaruvala wrote: post #114
freedude wrote: post #83

Earlier quoted context omitted.

Who were the depositors? SVB's depositors were primarily businesses with more than $250,000 in an account. Over 90% of depositors(google for exact percenatge) had more than 250,000 in the account. So who was the bailout for? Not the average guy on the street...

The depositors were payroll accounts. > So who was the bailout for? Not the average guy on the street... The "bailout" (badly named) was for the average people working at these companies. Their families that wouldn't have gotten a paycheck. The grocery stores they couldn't have bought from. Payroll accounts should be 100% FDIC insured the same why it works in many other countries.

"Payroll accounts should be 100% FDIC insured the same why it works in many other countries."

Perhaps, but they are not so it is a bailout.

"The "bailout" (badly named) was for the average people working at these companies."

That jumps to a conclusion and fails to recognize the business owes a debt required to be paid by law to the employee for the work they have performed in the previous weeks.

I don't want to see banks fail like any of you folks, but the reality is responsibility lies somewhere and that somewhere isn't in more FDIC insurance. Business management is just as culpable as the banking staff in maximizing profit and maintaining proper liquidity and insuring working capital is secure.

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

#185

Post by nunuvit »

closeparen wrote: post #177
nunuvit wrote: post #156

Earlier quoted context omitted.

Yeah, but they make shorter buildings out of steel and masonry, too. Next time you're apartment hunting, you can call ahead and ask whether the building is lumber construction, if you're not sure.

I’m pretty familiar with the “luxury apartment” offerings in the Bay Area and they’re pretty much all steel towers or wood 5-over-1s. I’m told 5 stories is the standard because that’s what you can make out of wood; an extra story or three isn’t worth it with the shift to more expensive materials. Some of the steel towers have their cheaper apartments in wood podiums; have to be careful. I live in a 10-story condo. 9…

Ok, so it seems like they're hard (or impossible) to find in your area, but that's not true everywhere.

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

#186

Post by yazaddaruvala »

freedude wrote: post #184
yazaddaruvala wrote: post #114

Earlier quoted context omitted.

The depositors were payroll accounts. > So who was the bailout for? Not the average guy on the street... The "bailout" (badly named) was for the average people working at these companies. Their families that wouldn't have gotten a paycheck. The grocery stores they couldn't have bought from. Payroll accounts should be 100% FDIC insured the same why it works in many other countries.

"Payroll accounts should be 100% FDIC insured the same why it works in many other countries." Perhaps, but they are not so it is a bailout. "The "bailout" (badly named) was for the average people working at these companies." That jumps to a conclusion and fails to recognize the business owes a debt required to be paid by law to the employee for the work they have performed in the previous weeks. I don't want to see b…

> but the reality is responsibility lies somewhere and that somewhere isn't in more FDIC insurance.

Yes, and this is why $20 BB from SVB investors, hit $0. The bank management and investors were did have to live up to that responsibility.

Should they have to do more? Yes. There should be compensation clawbacks from the C-suite over the last 5 years or something. Lets see where this goes.

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

#187

Post by mlyle »

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…

> The government caused this, so it's not unreasonable to expect that the government pay for the damaged caused.

No. You don't just get to get the government to subsidize all your duration risk. You need to properly run a bank. You can buy shorter duration bonds in order to mitigate the risk from interest rate changes.

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

#188

Post by mlyle »

mywittyname wrote: post #182
bugglebeetle wrote: post #148

Earlier quoted context omitted.

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…

It's not absurd at all when you consider that T-Bonds are the foundation of our banking system. Plus, there's no fundamental reason we price bonds the way we do. The risk of this exact scenario playing out across the banking sector is likely the reason why the Fed took so long to raise rates (and the drastic, reversal of course when they tried in 2018).

> Plus, there's no fundamental reason we price bonds the way we do.

Discounted cash flow analysis / net present value is the one thing that we have in finance that's really a fundamental/intrinsic thing.

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

#189

Post by tzs »

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…

> People want to live close to work

I think for most it is the other way around. They want to work close to where they live.

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

#190

Post by lproven »

voisin wrote: post #144
lproven wrote: post #67

Earlier quoted context omitted.

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 b…

Yes and no. :-)

I lived in such a city until January, in a dense medium-rise apartment block, with 3 forms of public transport available to me within walking distance. It had no heating system of any form, heated by hot water from the mains supply, provided by waste heat from a power station 40km away.

I worked from home from it from early 2020 for 3 years.

I'd prefer, for that purpose, that it were considerably larger and had a dedicated office space, or even a co-working space in every building or something like that.

I have never, even driven a car to work routinely in my life. I got my driver's licence at 37 and have not owned a car as a licence holder.

But TBH I personally did prefer going into an office. Almost everyone I know prefers not to, though.

So, you're right, but the two designs are not mutually exclusive, which you seem to be implying.

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