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Work from home and the office real estate apocalypse

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Re: Work from home and the office real estate apocalypse

#141

Post by midasuni »

Gigachad wrote: post #59
raldi wrote: post #18

Earlier quoted context omitted.

But it wasn't destroyed; it was transferred: WFH-comfortable residential properties went up in value.

Did they? Can we see that the entire value of these properties moved? Sounds like an impossible thing to measure. Considering most people already had space to work from home so they didn't move value anywhere. There is also the problem where the property which is most profitable for local governments has been the hardest hit. When you look at the maps that have been produced on this you can see some serious issues co…

Du no about the US, but covid caused England and Wales prices to increase in rural areas far faster than urban areas

https://www.theguardian.com/society/2021/jun/20/rural-house-...

Re: Work from home and the office real estate apocalypse

#142

Post by Mountain_Skies »

alkonaut wrote: post #139

Does anyone work for a company that has reduced its office space but not headcount due to wfh? Most seem to still be working remotely from too large offices while companies are figuring out what to do.

My employer started shifting to a work from home model about five years ago. They were shedding office space as quickly as they were able to get out of leases. I think that slowed down with covid because before the pandemic they were able to easily find other companies eager to take over leases. On the rare occasion I go into a company facility, it's notable how dead they are, with plenty of excess space. This was true even before covid. I know they were planning on putting up some of the company owned facilities up for sale back in 2019 but I think that's been put on hold now that they market has dropped.

Re: Work from home and the office real estate apocalypse

#143

Post by danuker »

raldi wrote: post #18
cortesoft wrote: post #8

Earlier quoted context omitted.

Whether value was 'destroyed' or not depends on how you look at it. $500 billion dollars worth of assets were lost by the owners of the real estate; that value is gone, and it didn't go to someone else. It just vanished. The value didn't disappear because it transferred to someone else, it went away because the asset itself become less desirable and valuable to other people. You can imagine it being like if a farmer…

But it wasn't destroyed; it was transferred: WFH-comfortable residential properties went up in value.

But there are many more of those.

Maybe total value still decreased, because people no longer pay such a large premium for the limited city center space.

As such, total money paid on rent is less.

Re: Work from home and the office real estate apocalypse

#144

Post by nonrandomstring »

vba616 wrote: post #39
cortesoft wrote: post #8

Earlier quoted context omitted.

Whether value was 'destroyed' or not depends on how you look at it. $500 billion dollars worth of assets were lost by the owners of the real estate; that value is gone, and it didn't go to someone else. It just vanished. The value didn't disappear because it transferred to someone else, it went away because the asset itself become less desirable and valuable to other people. You can imagine it being like if a farmer…

>You can imagine it being like if a farmer had a bunch of grain stored in a silo and it somehow went bad. It's fundamentally different, practically the opposite. Paper losses are like a farmer realizing that the grain in his silo is bad. Knowing this when you were oblivious before is a good thing, whereas the grain going bad is obviously not. Once you start regarding bad news as a loss, very bad stuff happens. In som…

> Once you start regarding bad news as a loss, very bad stuff happens.

I like this. It's insightful, and stated in a plain way.

And equally we can say, once we start regarding good news as a gain, very bad stuff happens.

The idea of "confidence" rather than measurable, tangible facts as an economic basis has been the road to many bad things. In some ways confidence and pessimism can be seen as the ability to ignore reality. We've been inventing ways to delude ourselves in western economies for decades. For example, film and record companies counting copyright infringement as if it were an actual loss, or Twitter over-counting its users as a kind of corporate egotism.

What might really help our societies on multiple levels is a return to fact-based economics, instead of what is essentially information warfare directed at pulling off ever more audacious confidence tricks.

Re: Work from home and the office real estate apocalypse

#145

Post by kolp »

wmeredith wrote: post #2

From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.

One way of looking at the "destruction" of the value of the property is based on Net Present Value of future rent payments. Let's take one hypothetical building, its owner and its tenant.

The market value of this building (not its construction cost) is the Net Present Value of future rent payments to be made by a tenant to the owner. There is a scheduled, anticipated transfer of value from tenant to owner based upon the agreed market rental value of the building.

When the agreed market rental rate declines, the amount of value to be transferred from tenant to owner declines and consequently, the present value of those future payments is lower. This is the basis for journalists or commentators to say that value has been destroyed. But, the value hasn't been "destroyed"; it has been transferred to the tenant in the form of the net present value of his rent reduction.

Re: Work from home and the office real estate apocalypse

#146

Post by ahartmetz »

wmeredith wrote: post #2

From the abstract, “We revalue the stock of New York City commercial office buildings taking into account pandemic-induced cash flow and discount rate effects. We find a 32% decline in office values in 2020 and 28% in the longer-run, the latter representing a $500 billion value destruction.” Is that value “destroyed”? Is it not unlocked to flow elsewhere? I’m genuinely curious about the dynamics of this.

Perhaps one could say that the value was adjusted downwards. It wasn't an actual thing that was destroyed - rather, a dynamic equilibrium has changed. "Value was destroyed" has all the wrong connotations - it sounds like something somebody had a moral right to was maliciously, well, destroyed.

Re: Work from home and the office real estate apocalypse

#147

Post by babyshake »

betwixthewires wrote: post #107
ehnto wrote: post #92

Earlier quoted context omitted.

I am not entirely convinced WFH will stay the norm either. Certainly more normal, but I think the HN crowd might be uniquely positioned to exploit the situation. Your average office worker doesn't usually have the agency to push back on office policies at the best of times, and you already see plenty of pull back into the office. The other part of the equation is the more common hybrid arrangement. If you still have…

Covid is basically over and it is still like this. It will probably stay more like this than it will revert. Global paradigm shifts don't usually revert. The less number of days workers go into the office, the less companies can justify renting the space and paying for the supplies. I think companies will begin to either go 100% remote except for on location workers that have to be there such as data center people, a…

I wonder sometimes if the future of office work is something like a Star Trek Holodeck. Most people won't have one at home and will commute to a local remote work office used by people working for various employers.

Re: Work from home and the office real estate apocalypse

#148

Post by ehnto »

betwixthewires wrote: post #107
ehnto wrote: post #92

Earlier quoted context omitted.

I am not entirely convinced WFH will stay the norm either. Certainly more normal, but I think the HN crowd might be uniquely positioned to exploit the situation. Your average office worker doesn't usually have the agency to push back on office policies at the best of times, and you already see plenty of pull back into the office. The other part of the equation is the more common hybrid arrangement. If you still have…

Covid is basically over and it is still like this. It will probably stay more like this than it will revert. Global paradigm shifts don't usually revert. The less number of days workers go into the office, the less companies can justify renting the space and paying for the supplies. I think companies will begin to either go 100% remote except for on location workers that have to be there such as data center people, a…

I don't know where you live but covid is not over here.

Re: Work from home and the office real estate apocalypse

#149

Post by occamrazor »

tarsinge wrote: post #138
asimpleusecase wrote: post #85

This has an impact not just in rents for office buildings but the entire ecosystem of support businesses that sell to workers who come into city centre to work. One example. Small organic food shop, that sold mostly to office workers and has seen a 70% drop in foot traffic. The same thing hits bars, cafes, restaurants, theatres and other venues. Those very things that make living near or in a city interesting for man…

These vibrant ecosystems flourished where people spent most of their day. It could be a huge win if they finally migrate to residential neighborhoods, where people will now be more present.

Residential neighborhoods don’t have the same peak density. In central business districts every street has shops, in residential ones it wouldn’t be sustainable.

Re: Work from home and the office real estate apocalypse

#150

Post by raldi »

danuker wrote: post #143
raldi wrote: post #18

Earlier quoted context omitted.

But it wasn't destroyed; it was transferred: WFH-comfortable residential properties went up in value.

But there are many more of those. Maybe total value still decreased, because people no longer pay such a large premium for the limited city center space. As such, total money paid on rent is less.

Total money spent on card catalogs went down since 1980. Does that mean value was destroyed?
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