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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

#231

Post by russellendicott »

cortesoft wrote: post #8
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.

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…

My theory is that companies are keeping the same office space but saving a ton of money on snacks.

The workers think they're getting a good deal but they really traded gas money for snack money. /s

Re: Work from home and the office real estate apocalypse

#233

Post by [deleted] »

Gigachad wrote: post #61
swader999 wrote: post #33

Earlier quoted context omitted.

Yeah imagine replumbing for residential. I guess you could gut it to the shell. Almost starting over at that point.

It would make more sense to just wait it out until the building is needed again. Refitting offices is nightmarishly difficult and the result is sub standard compared to a new build.

[deleted]

Re: Work from home and the office real estate apocalypse

#234

Post by fnordpiglet »

ojbyrne wrote: post #88
fnordpiglet wrote: post #62

Redevelop the office space as residential space. Our cities are flush with office space but are squeezed for housing. Sounds like a win / win.

Definitely but first there will be a lot of lose/lose. Commercial real estate first has to collapse, taking people’s savings with it. Redeveloping is not a very fast process, especially since the prime places for the development are in highly regulated cities. In 20 years-ish you’ll be proved correct.

I know. We as humans prefer steady states because we can reason about them. But transitory periods are chaotic and unpredictable, and inherently painful for humans in many ways. I’m not trying to diminish the profound pain a structural remake of how we live and work will be, but I also think given the economics of maintaining a large real estate footprint vs offloading occupancy expenses to employees makes it inevitable. I think prescient commercial real estate holders will move ahead of the curve and being repurposing now. Note that most regulated cities allow for mixed use development fairly readily and in fact have been encouraging it. Hopefully there will be more forward thinking and preparation - but history indicates we don’t do that well.

Re: Work from home and the office real estate apocalypse

#235

Post by fnordpiglet »

betwixthewires wrote: post #123
88840-8855 wrote: post #102

Earlier quoted context omitted.

I disagree. Living in a city is way better than living on the countryside. - access to a large airport to go on regular holidays easily - better health care coverage, more doctors, more specialists - cultural access - more diversity and more colorful services and products - better public transportation

I have access to a small airport that's an hour flight to a large one. The logistics of going somewhere for leisure are only marginally more difficult for me, and even easier since I don't have to navigate a small city within a city with a million people in it and traffic to get there and all that. And for the most part I have plenty of leisure around me, I don't have to fly anywhere to see wide open spaces for examp…

Small cities can’t support a critical mass of “niche” services such as exotic foods, night clubs of special appeal, cultural centers like major museums, and a lot of really neat coffee shops etc. I’m in your camp preferring rural life at some level but after living in SF, NYC, and Seattle I can’t imagine not being able to walk to a great coffee shop, grab some bingsu, and visit the Computer History Museum. There’s a density of people that allows you to find a wide social network that’s into the weird things you are. Etc. I think an awful lot of city dwellers live in them because they prefer the lifestyle regardless of cost.

Rather than collapsing I think cities will thrive. There’s a huge economic pressure on residential property and a downswing on office property and the office property is in some of the best real estate in the city. Developers aren’t stupid, they’ll convert to mixed use and reduce office densities to keep their per unit margins up, and rent/sell condos and retail space for the residential community. This will actually draw more people to the cities because there are a lot of city dwellers that have been pushed out to suburbs due to lack of residential supply.

Re: Work from home and the office real estate apocalypse

#236

Post by fnordpiglet »

hizxy wrote: post #173

Does anyone really know the impact on productivity? I work for a remote-first company (never had an office) and things move so slow.

My mega corp did a lot of research using our pervasive spyware and came to the conclusion that remote work improved productivity by approximately 15%. I think generally velocity though is driven more by decision making processes and culture more than where chairs are being warmed.

Re: Work from home and the office real estate apocalypse

#237

Post by paintman252 »

Broken_Hippo wrote: post #172
ehnto wrote: post #148

Earlier quoted context omitted.

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

Not here, either: Folks are still getting it and folks are still dying from it. We simply don't have as many restrictions right now - though we are getting those again. Yesterday, some places in California are mandating masks again and I still have to prove I'm Covid-free to visit family in the US, and it doesn't matter than I'm a citizen.

>Not here, either: Folks are still getting it and folks are still dying from it.

If that's how you measure it, then covid will NEVER be over (People are still dying from flu every year)

Pandemic is over. COVID19 is never leaving us.

Re: Work from home and the office real estate apocalypse

#238

Post by throwawaymaths »

russellendicott wrote: post #230
908B64B197 wrote: post #213

Earlier quoted context omitted.

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

> Time to retrofit some of these office buildings into apartment complexes. But why would people want to live where they don't want to work?

Because it's cheap and maybe the demographic that uses the "downtown" changes. Iirc The former Goldman? JP Morgan? hq in Manhattan ( moved to Newark?) Is now an apartment mostly occupied by 20-somethings that want to live in Manhattan

Re: Work from home and the office real estate apocalypse

#239

Post by pg_1234 »

techdragon wrote: post #226
dougmwne wrote: post #175

Earlier quoted context omitted.

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…

The big issue is how few cities reach sufficient residential density with enough occupancy over a wide enough area to begin creating that vibrant community. A few overpriced apartments towers near the CBD won’t get you there. I’d say the city I live in Perth, Western Australia has completely failed to cross that threshold and the current real estate environment is basically actively pushing back to prevent the urban…

We may find we get the density and vibrancy, with all accompanying shops and services, but centered where we live rather than where we work.

I think it's part of the general swing back to a healthier work-life balance, and really ... that would be fantastic!

Re: Work from home and the office real estate apocalypse

#240

Post by dmpetrov »

spangry wrote: post #199
dmpetrov wrote: post #79

I'd like to see a research of WFH impact to people's spendings. Many households have to pay extra for more space to have a home office while companies pay less :)

It's just anecdotal, but I found myself unintentionally saving money like crazy when I was WFH during lockdown due to not selling out every day for fuel, parking and buying lunch. But then again I'm someone who always pays the 'disorganisation tax'. I'm sure people with more optimised spending (e.g. catching the bus, bringing their lunch in from home etc.) didn't see as much of an effect.

Well... I need to rent a property with +1 bedroom to WFH. It is a substantial family spending.
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