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Landlords are trying not to rent to startups in San Francisco

42floors.com

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

#81

Post by recursive »

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…

Most startups fail pretty quickly. It seems reasonable to me.

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

#82

Post by mbillie1 »

Domenic_S wrote: post #80
mbillie1 wrote: post #68

Earlier quoted context omitted.

All fair points, but remote work also has increased massively ( http://fortune.com/2015/02/12/lessons-learned-from-3-compani... ). It is interesting to consider that well-paid remote workers, free to live where they choose, may also be choosing to live in these bigger cities. I'm fully remote and I live in a city, albeit a relative small one (SLC), when I could easily pay a ~$300/mo mortgage for a small rural house i…

> ~$300/mo mortgage for a small rural house in the middle of nowhere How's the internet access out there?

Slow but available. There's a lot of empty land if you aren't picky about where you live...

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

#83

Post by swehner »

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.

Like Oakland. Can get to SF by BART if needed.

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

#84

Post by Old_Thrashbarg »

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.

Landlords deliver value by managing and providing a physical space to work in, but when the landlords have lobbies and use their political power to artificially restrict the supply of space and jack up the prices to no end, then it is evil.

The landlords are therefore parasitizing the economy.

Although this article is about commercial space, residential space is just as outrageously priced. I think there should be three things that should never be allowed to be artificially restricted just for the greed of a few: food, water and housing.

Here's a good Economist article on this: http://www.economist.com/news/briefing/21647622-land-centre-...

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

#85

Post by danieltillett »

Has anyone done the analysis at which point the higher rents and labor costs outweigh the benefits of access to low cost capital? At some point it makes no sense to start a new business in the SF area even when taking into account access to investors.

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

#86

Post by danharaj »

lkrubner wrote: post #38
ChuckMcM wrote: post #10

Earlier quoted context omitted.

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…

As James Surowiecki makes clear in his book "The Wisdom Of Crowds", the wisdom is only apparent in situations where the people are not able to talk to each other. But real estate agents are able to talk to each other. In Surowiecki's telling, if you get a room full of people to write down a guess about how many jelly beans are in a jar, the average of all the guesses will be surprisingly accurate. But if the people a…

That's a delightful observation. Is the book worth reading?

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

#87

Post by ExploitsforFun »

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…

I have talked to people who are in property management companies who are worried about (possible) rising interest rates are going to do to their profitability. It may not be a concern in SV but elsewhere very much so.

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

#88

Post by Johnny555 »

briandear wrote: post #74
meatysnapper wrote: post #13

Earlier quoted context omitted.

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.

I never understood why investors need to be 'close.' I also don't understand why most startups need an office. Basecamp is entirely remote with an office just for show. They only use it a few times a year. Unless you build hardware, an office is unnecessary. A dumb waste of money, especially early in a startup's life. I do some side work for a major international medical lab and their entire Dev team is remote -- and…

We've tried and found that remote engineers are less effective, they miss out a lot from group whiteboard discussions, overhearing office chatter "Hey bill, service XX crashed again because of YY (and Mike overhears and says "Oh yeah, I saw YY in service ZZ too and fixed it"), and just general team cohesiveness. In theory we could hire more people for less salary if we had a remote workforce, but we're still a small company (less than 100 people) and it's a lot harder to manage a 100 person geographically spread out engineering team than a 50 person local team). Paying the San Francisco premium for salaries (and rent and everything else) is less than the cost to build and manage a distributed team. As we grow, that will likely change as we'll be able to have specialized teams and open satellite offices, but for now hiring in the Bay Area makes the most sense.

We could likely build an accomplished team in any major metropolitan area, but since our investors and board members are here (as are the other companies they invest in and manage), it makes sense to have the company here. (not entirely our choice, when someone invests millions of dollars into a company, they want to be close to it)

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

#89

Post by pinaceae »

Domenic_S wrote: post #79
Obi_Juan_Kenobi wrote: post #58

Earlier quoted context omitted.

East Bay is great. Oakland is starting to look like a decent city. Doesn't mean there aren't real disadvantages, but it's something most people/startups should at least consider.

the East Bay is way bigger than Oakland/Berkeley. Walnut Creek, Pleasant Hill, the Lamorinda area, Danville, Pleasanton -- all very nice, safe towns with good bart access. No startups there though.

sure there are, a lot focuses on enterprise though. the peoplesoft legacy lives on in various forms over here.

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

#90

Post by pinaceae »

Domenic_S wrote: post #79
Obi_Juan_Kenobi wrote: post #58

Earlier quoted context omitted.

East Bay is great. Oakland is starting to look like a decent city. Doesn't mean there aren't real disadvantages, but it's something most people/startups should at least consider.

the East Bay is way bigger than Oakland/Berkeley. Walnut Creek, Pleasant Hill, the Lamorinda area, Danville, Pleasanton -- all very nice, safe towns with good bart access. No startups there though.

sure there are, a lot focuses on enterprise though. the peoplesoft legacy lives on in various forms over here.
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