Work from home and the office real estate apocalypse • Hacker News Board

Re: Work from home and the office real estate apocalypse

#211

Post by ghaff » Sun, Jun 05, 2022, 2:12 PM UTC

sokoloff wrote: post #202

blagie wrote: post #184

Earlier quoted context omitted.

Much of the world proves this assumption false. See, e.g.: - Residential districts in China and many former Soviet countries. Big concrete blocks, with the bottom floor lined with small stores. They're absolutely delightful places to live. - Urban residential districts in the US aren't quite in this style, but a city like Cambridge will have small shops within walking distances of virtually all housing. The critical…

> a city like Cambridge will have small shops within walking distances of virtually all housing I lived in Cambridgeport near Central Square in Cambridge, MA. There was indeed a small convenience store/variety shop almost within sight of my apartment. In six years, I bought something from them only once that I can recall. I used to walk quite literally past them to Whole Foods to save money. (When Whole Foods is kill…

For grocery shopping in Cambridge, I'd be some combination of Whole Foods, Trader Joe's, and H-Mart. Yes, there are a few specialty markets and bakeries but those are almost certainly occasional things. CVS pharmacy. Maybe a hardware store if I need something routine and small. And restaurants of course. But besides buying consumables, mostly food and mostly at bigger chains, I'm not sure what all the small stores I'd be going into would be.

Re: Work from home and the office real estate apocalypse

#212

Post by MichaelZuo » Sun, Jun 05, 2022, 2:15 PM UTC

kibwen wrote: post #209

MichaelZuo wrote: post #200

Earlier quoted context omitted.

Right but the vast majority of folks won’t pay more to live in a similarly sized apartment as a house in suburbia to experience that. They will spend less money on a nice house in suburbia unless they had no other choice. If the big apartment were a fraction of the price of the house in suburbia, maybe. But it costs way too much to build tall buildings for that to ever be feasible. Asian and European cities work beca…

This has it the wrong way around. The price of infrastructure means that dense places cost less to upkeep than sparse places. The reason that cities cost more than the suburbs is 1) that there's more demand for cities, and 2) in the US, taxes paid by city-dwellers subsidize the expensive suburban infrastructure.

No, all in construction costs for a typical 40 story high rise divided by number of saleable square feet equate to much higher cost per square feet than the average suburban housing development. I’ve seen very credible figures that indicates it’s at least a 2x multiple even for a barebones apartment building with no amenities at all

And that’s before the expensive taxes, permits, etc., that cities charge on top for downtown or high rise construction, which as you say partially subsidizes suburbia. So in reality it’s more around triple the cost per square foot in a North American city.

The only reason apartments bigger than a shoebox are affordable at all is because land acquisition costs when divided by hundreds of units is obviously far lower than for even the narrowest cookie cutter tract.

Re: Work from home and the office real estate apocalypse

#213

Post by 908B64B197 » Sun, Jun 05, 2022, 2:18 PM UTC

dougmwne wrote: post #175

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…

I have always found that office-heavy areas of a city were pretty lame in comparison to denser residential. It does not seem like a big loss to me. Office centers tend to have some sandwich/salad lunch places that close at 4pm, some stuffy overly corporate happy hour bars, some dry cleaning places, some convenience stores and fast food spots. Dense residential area tend to have the full range of services, more intere…

Time to retrofit some of these office buildings into apartment complexes.

Re: Work from home and the office real estate apocalypse

#214

Post by koshnaranek » Sun, Jun 05, 2022, 2:20 PM UTC

jmtulloss wrote: post #9

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.

They are exaggerating it by not including the increases in value elsewhere, but there is "value" destroyed. The flow to other places is not as high as what was lost. I think this is due to the perceived value of proximity not keeping up with technology. The "real" value of proximity fell as technology improved, and that was exposed during the pandemic. It's more of a correction than outright destruction, but it's not…

If we look at the most extreme case where everybody had an office or at least a desk and then everybody moves to homeoffice 100% then it massively decreases then demand for property in general. Everybody already has a home. Even if more people buy bigger homes then or rent a personal office, lots of former office space will be converted for other uses.

Re: Work from home and the office real estate apocalypse

#215

Post by JoeAltmaier » Sun, Jun 05, 2022, 2:23 PM UTC

ghaff wrote: post #211

sokoloff wrote: post #202

Earlier quoted context omitted.

> a city like Cambridge will have small shops within walking distances of virtually all housing I lived in Cambridgeport near Central Square in Cambridge, MA. There was indeed a small convenience store/variety shop almost within sight of my apartment. In six years, I bought something from them only once that I can recall. I used to walk quite literally past them to Whole Foods to save money. (When Whole Foods is kill…

For grocery shopping in Cambridge, I'd be some combination of Whole Foods, Trader Joe's, and H-Mart. Yes, there are a few specialty markets and bakeries but those are almost certainly occasional things. CVS pharmacy. Maybe a hardware store if I need something routine and small. And restaurants of course. But besides buying consumables, mostly food and mostly at bigger chains, I'm not sure what all the small stores I'…

I remember when shopping meant visiting the butcher, bakery, fruit market, dairy. Then supermarkets were invented.

But everything that is old is new again. Now we shop at three different supermarkets! To get the best prices or quality or specialty item or whatever.

Maybe they'll invent a super-duper-market or something like that next, and we'll go back to a one-stop experience.

Re: Work from home and the office real estate apocalypse

#216

Post by homoiconic » Sun, Jun 05, 2022, 2:26 PM UTC

nopenopenopeno wrote: post #15

chii wrote: post #13

Earlier quoted context omitted.

there's more to it though. Real estate doesn't "expire" like grain. It can be repurposed, but it would require some capital investment. As an analogy, the grains could be fermented and turned into spirits. And as an addendum, the value lost in the commercial real estate could be potentially considered as transferred - let's say a business either gets a cheaper rent, or stops renting offices (after this is why these c…

If NYC office space in a high rise, it cannot just be repurposed for something else.

From 2009 to 2015 I lived in exactly that. It was a high-rise former bank headquarters converted to residential. The conversion was done in the wake of the collapsing commercial real estate market after 9/11. Repurposing buildings is quite common in New York, and I expect to see more conversions like this in the future.

Re: Work from home and the office real estate apocalypse

#217

Post by raldi » Sun, Jun 05, 2022, 2:32 PM UTC

morelisp wrote: post #190

raldi wrote: post #150

Earlier quoted context omitted.

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

In a weird coincidence, I have been trying find a card catalogs or two for home storage for a couple months. These are often incredibly well-made solid wood furniture, and yet most libraries worldwide have just been scrapping them. (Their size and weight makes them extremely difficult to ship - buyers/sellers aren't well aligned.) So, in short, yes. We also got new value, but tons is being unnecessarily destroyed.

Imagine someone were to invent a miracle power source that could be produced easily and cheaply by anyone and allowed all vehicles to be powered for free, completely obliterating the fossil fuel industry. In this situation, would you say value was created or destroyed?

Re: Work from home and the office real estate apocalypse

#218

Post by tellsor » Sun, Jun 05, 2022, 2:35 PM UTC

ehnto wrote: post #92

IAmGraydon wrote: post #23

I’m a believer in reversion to the mean, and I think that’s what we will see with the office market and work from home. The technology to work from home existed before the pandemic. Why didn’t it take off before the pandemic if it works so well? We didn’t suddenly discover a new technology here. The use of that technology was precipitated by a transient force, and when that force is removed completely, things will re…

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…

IMO the hybrid arrangement is because office leases tend to be long term commitments. Since it is already a sunk cost in a sense the hybrid model has value right now.

I just can't see that the hybrid model is the long term equilibrium. The office either has a competitive advantage or it is a liability that can be trimmed in cost cutting measures. Long term, firms will either push the edge of the competitive advantage of the office back to everyone going to the office full time or cut the cost completely. Maybe it even depends on the department within the firm or across firms but the hybrid model is just nonsense to me. A cascade of punting a decision down the road so leadership doesn't have to really decide right now while we are all stuck in these pre-2020 commercial leases anyway.

Re: Work from home and the office real estate apocalypse

#219

Post by zxcvbn4038 » Sun, Jun 05, 2022, 3:03 PM UTC

At some point that office space will get converted to housing and things will balance out again. Don’t feel too bad for those small organic food shops because there are not that many of them, most of the office workers were eating Subway or McDonald’s - if they could afford it. You get a lot better options when your working remotely. I know where all the farmers markets are now. My grill has never had so much action.

Re: Work from home and the office real estate apocalypse

#220

Post by kibwen » Sun, Jun 05, 2022, 3:07 PM UTC

MichaelZuo wrote: post #212

kibwen wrote: post #209

Earlier quoted context omitted.

This has it the wrong way around. The price of infrastructure means that dense places cost less to upkeep than sparse places. The reason that cities cost more than the suburbs is 1) that there's more demand for cities, and 2) in the US, taxes paid by city-dwellers subsidize the expensive suburban infrastructure.

No, all in construction costs for a typical 40 story high rise divided by number of saleable square feet equate to much higher cost per square feet than the average suburban housing development. I’ve seen very credible figures that indicates it’s at least a 2x multiple even for a barebones apartment building with no amenities at all And that’s before the expensive taxes, permits, etc., that cities charge on top for d…

A 40-story high rise isn't the density we're referring to here, in a discussion of European-style urban living. Obviously one can astronomically inflate the price of any building by stretching it preposterously upwards, thereby requiring exotic materials and building techniques to support its own weight and the increasing winds and seismic concerns. But "dense urban living" doesn't mean "skyscrapers", it can mean four-to-six-story mixed-use buildings, which are both short enough to build without difficulty or undue expense and dense enough to realize efficient infrastructure costs. To be sure, skyscrapers are a dead end that we should be building less of.