Landlords are trying not to rent to startups in San Francisco • Hacker News Board

Re: Landlords are trying not to rent to startups in San Francisco

#21

Post by buro9 » Thu, Jul 30, 2015, 9:43 PM UTC

astazangasta wrote: post #14

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

Eventually we might consider that rent is just outright theft, we're not actually paying for value, landlords are parasites who suck surplus value from the economy, etc.

> we're not actually paying for value

The value you are receiving is location.

If you do not care for location, then rent office space in Tennessee where you can pay less than 1/4 of SF prices.

Re: Landlords are trying not to rent to startups in San Francisco

#22

Post by mattzito » Thu, Jul 30, 2015, 9:44 PM UTC

meatysnapper wrote: post #13

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

I think the advantage of a massive skilled labor pool and investors within walking distance is a nearly insurmountable advantage. For a small company, I'd say the time/cost of hiring a few good engineers is way more than a few months rent. You'll certainly pay a respectable headhunter quite a bit.

It's a lot more complicated than that - there's a massive skilled labor pool, but at any given time, a huge percentage of them are gainfully employed and not currently looking.

Many of the really amazing labor pool members are recognized as being amazing and are compensated and rewarded in such a way that it will be difficult to draw them away.

Then those that are looking are being courted by every other company.

The converse can be true - it can be much easier to get very high quality talent somewhere that there is not a massive labor pool. You'll attract the people who don't want to live in SF or NYC, or want a certain lifestyle, or to be close to where they went to college, etc. etc.

I'm not saying that starting a company not in SF is inherently better, but that "insurmountable advantage" is also one of the biggest disadvantages about SF. Your mileage may vary.

Re: Landlords are trying not to rent to startups in San Francisco

#23

Post by untog » Thu, Jul 30, 2015, 9:44 PM UTC

meatysnapper wrote: post #13

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

I think the advantage of a massive skilled labor pool and investors within walking distance is a nearly insurmountable advantage. For a small company, I'd say the time/cost of hiring a few good engineers is way more than a few months rent. You'll certainly pay a respectable headhunter quite a bit.

It both helps and hurts - just yesterday Yelp admitted that the "Unicorn bubble" was hurting their profits:

http://recode.net/2015/07/29/yelp-admits-the-unicorn-bubble-...

For some reason it has only occurred to them now that hiring for offices in cities other than San Francisco might help them get talented developers.

Re: Landlords are trying not to rent to startups in San Francisco

#24

Post by jmonegro » Thu, Jul 30, 2015, 9:45 PM UTC

rdl wrote: post #2

Obvious arbitrage possibility is obvious, and being exploited by new companies (WeWork for $10b valuation) themselves -- if you're better at evaluating startups than big dumb landlords, you can profit here. And there isn't a shortage of capital to play this game.

WeWork might not be in the best position if most of their clients are venture-backed startups and they all go away within a few years.

Re: Landlords are trying not to rent to startups in San Francisco

#25

Post by stephengillie » Thu, Jul 30, 2015, 9:46 PM UTC

s73v3r wrote: post #15

Remote work and starting the company elsewhere are pretty easy solutions to this problem.

If all of your employees are remote, what do you show your investors, partners, board members, and creditors when they want a tour of your facility? How do you show them that you've got smart people working on hard problems? For some (bad?) startups, this is an even more valuable function of engineers than engineering.

Re: Landlords are trying not to rent to startups in San Francisco

#26

Post by RogerL » Thu, Jul 30, 2015, 9:48 PM UTC

astazangasta wrote: post #14

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

Eventually we might consider that rent is just outright theft, we're not actually paying for value, landlords are parasites who suck surplus value from the economy, etc.

Fine, run your startup in the middle of the street. There's no value in the office, correct?

Re: Landlords are trying not to rent to startups in San Francisco

#27

Post by nostrademons » Thu, Jul 30, 2015, 9:48 PM UTC

ChuckMcM wrote: post #10

fredkbloggs wrote: post #3

This is a great analysis and the argument makes perfect sense in every respect. The only thing I find dubious is the idea that the bust is 2-4 years out. I think if you polled most SF commercial landlords, they would tell you that they expect most of their startup tenants to start having difficulty paying the rent in no more than 18 months. It would be interesting to see some actual data on this. After all, there's n…

Agreed, many landlords seem to feel like the trouble is a mere few months away, although often any attempt at getting them to discuss how they arrived at that conclusion gets something like "I just know it." So one wonders about the whole "wisdom of the crowds" or "herd" in this case, and whether or not they can sense something that isn't showing up in other indicators. I've been looking but other than the extensivel…

A lot of this may come from the belief that the economy is only being propped up by the easy money policies of the Fed, and that the Fed is going to start tightening rapidly in the fall. There's a sense that once the tightening starts, everyone will run for the exits at once, and we'll have another 2008 situation but worse.

Re: Landlords are trying not to rent to startups in San Francisco

#28

Post by LandoCalrissian » Thu, Jul 30, 2015, 9:49 PM UTC

astazangasta wrote: post #14

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

Eventually we might consider that rent is just outright theft, we're not actually paying for value, landlords are parasites who suck surplus value from the economy, etc.

Then don't rent an office? I really don't know what you think the alternative would be. I assume the value comes from not having to work by a flaming barrel down by the river.

Re: Landlords are trying not to rent to startups in San Francisco

#29

Post by arielweisberg » Thu, Jul 30, 2015, 9:50 PM UTC

astazangasta wrote: post #14

mooreds wrote: post #7

Or, consider starting a company outside of San Francisco. Not just outside of SoMA, actually outside of San Francisco. (I know, I know, blasphemy.) Eventually the price of real estate and labor will be so high that the relative disadvantages of other locations will not matter.

Eventually we might consider that rent is just outright theft, we're not actually paying for value, landlords are parasites who suck surplus value from the economy, etc.

Yes and no? They take on risk as well right?

They only get to be parasitic when the real estate market is dysfunctional and supply is constrained, possibly artificially. In some sense they are acting as gatekeepers to a limited resource and providing liquidity by setting prices high enough that only those with need are willing to pay.

Re: Landlords are trying not to rent to startups in San Francisco

#30

Post by mooreds » Thu, Jul 30, 2015, 9:52 PM UTC

nosuchthing wrote: post #20

Why is it just assumed economic downfalls and recessions should happen every 7-10 years? Self fulfilling prophecy? Bugs in the system?

Experience. History.

Here's a graph from 2013 from Calculated Risk (an economics blog) that shows recessions in blue shading.

http://2.bp.blogspot.com/-cF1c7HUBzQg/UV7FqoIP9BI/AAAAAAAAZt...