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San Francisco braces for commercial real estate crash

sfstandard.com

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Re: San Francisco braces for commercial real estate crash

#361

Post by balderdash »

JumpCrisscross wrote: post #137
darth_avocado wrote: post #127

The city officials are asleep at the wheel. Blame it on remote work and pandemic as much as you want, but the reality is that the city was in decline even before that. It is too expensive to live in the city. It is too expensive to commute to the city. It is too expensive to feed yourself in the city. Crime is rampant. Drug use and filth is everywhere. Most importantly city has been hostile to tech and business owner…

> city officials are asleep at the wheel Eh, San Francisco's voters have been drinking crazy water for some time. New developments blocked by renters. Stringent building codes and environmental reviews defended by those who think they're being compassionate to the poor. Scolding tech companies for hiring in the city and then panicking when they stop hiring in the city. This obviously isn't all of them. But it's not l…

I wish I could find it, but I recall some research indicating that elected officials are very good at giving voters the stuff they want (even if it’s internally inconsistent) e.g. voters want more spending on education, healthcare and don’t want cuts anywhere else + plus want less deficit spending/balanced budget = impossible, but as the politician understood that they’d rewarded for increasing spending in your important areas, and can live with you blaming for the deficit spending because hey, what you wanted wasn’t possible…

Re: San Francisco braces for commercial real estate crash

#362

Post by gumby »

NYC is already starting to see office-to-residential (apartments) conversions, even down near Wall Street. Sad that this article doesn't even consider that (I searched for "residen" and found only a single match, for "president".

If SF has a surplus of office space and a shortage of housing stock, well the buildings are already built.

I don't see why you couldn't do both: Saleforce tower could have some residential floors and office floors.

Re: San Francisco braces for commercial real estate crash

#363

Post by intrasight »

onlyrealcuzzo wrote: post #350
intrasight wrote: post #332

Earlier quoted context omitted.

My understanding is that that is the rule in most states. Is where I live. I don't know about CA.

States and counties are starting to move away from this. Michigan essentially has a prop 13 that limits property tax increases to below what the average inflation rate is (far below average home price appreciation). Counties like Allegheny in Pennsylvania (Pittsburgh) simply just haven't reassessed properties since 2012 - which is actually even more regressive than Prop 13 in CA and the equivalent in Michigan. I imag…

In Allegheny myself (perhaps you saw that). You are right that having such a law doesn't mean that it will be enforced. That's what the courts are for.

https://www.publicsource.org/allegheny-county-property-tax-a...

Re: San Francisco braces for commercial real estate crash

#364

Post by acchow »

baggy_trough wrote: post #22

You would have to be stark raving mad to open a business in San Francisco. Not only is the downtown filthy and unsafe, but the government, when it can stir itself from its torpid incompetence, is absolutely malevolent towards businesses.

> Not only is the downtown filthy and unsafe

That's why tons of companies have moved out of the old downtown and created a new downtown in the east cut. It's clean and organized.

Re: San Francisco braces for commercial real estate crash

#365

Post by cjbgkagh »

nikanj wrote: post #302
cjbgkagh wrote: post #54

Earlier quoted context omitted.

I generally have the same rule of thumb; not a crash until down 50% from peak. But housing is leveraged. It’s not like stock where few people have margin accounts, a 20% reversion sends most people who bought recently underwater. Plus the size of the real estate market is much bigger than the stock market. The flow-on reverse wealth effect will feel like a stock crash to many people.

A 20% reversion is back to early 2021 prices..

Given the long history of ever increasing housing prices people have become accustomed to treating asset price inflation on property as income. Why work a 9-5 when your house can make your money (and your banks money) go to work for you. A lot of that money is spent - it's very difficult to un-spend it for a downturn. Plus a chunk of the recent nominal price inflation is due to general inflation and regressing to the same price 2 years ago is a loss in absolute real terms. Plus going forward people who could assume a $100K yearly increase in wealth from a property have lost that $100K in 'income' and must make up the shortfall from elsewhere. It's a huge marginal difference. Then there is the erosion of the tax base; governments make a percentage of the capital gains on nominal inflation as kind of a wealth tax. During a deflationary period this money disappears and can take a very long time to come back. The shortfall again must be made up for by further taxing the taxpayers or by borrowing with the expectation that the same taxpayers will pay it off later. These are the same taxpayers who lost their $100K in 'income' so they're not exactly flush with money.

Re: San Francisco braces for commercial real estate crash

#366

Post by nemothekid »

thegjp210 wrote: post #181
throwayyy479087 wrote: post #141

Earlier quoted context omitted.

NYC is doing great, as are quality-of-life focused cities like KC, Miami and Columbus. Maybe calling every critic in your town names and letting QoL go to absolute crap is the real driver of movement.

By what metrics is NYC doing "great"? The amount of crime and visible urban decay/blight seems just as pronounced (in Lower Manhattan) as it does in San Francisco

>The amount of crime and visible urban decay/blight seems just as pronounced (in Lower Manhattan) as it does in San Francisco

The crime/urban blight angle is a red-herring; It implies that there was anytime in the last 30 years that New York/San Francisco was anywhere nearly comparable to a city like Tokyo.

Manhattan is already seeing a net influx in people moving back into the city.[1]

[1] https://www.sfchronicle.com/sf/article/sf-covid-recovery-nyc...

Re: San Francisco braces for commercial real estate crash

#367

Post by JamesBarney »

jfghi wrote: post #201
pixl97 wrote: post #166

Earlier quoted context omitted.

Yea, people love blaming (elected) city officials but NIMBYism and "Housing is an investment that should only go up in price" will eventually kill any market.

I agree that nimbyism is harmful, however I also think that the organizations owning large portfolios of properties can generally find a way to maintain scarcity levels in the presence of additional construction.

How? If you own 10% of the rental units in San Francisco, how do you enforce scarcity except by trying to prevent construction?

Re: San Francisco braces for commercial real estate crash

#368

Post by ceejayoz »

buscoquadnary wrote: post #326
ceejayoz wrote: post #240

Earlier quoted context omitted.

This theory falls down when you look at murders. They're down with all the others on that link, and they're highly unlikely to go unreported.

Looking at that link murders are down from 34 to 33, not exactly stunning success. Especially if a murder is ruled something else.

Not sure which link you're looking at; the link I see shows murders going from a peak of 100 in 2007 to 40 in 2019.

Re: San Francisco braces for commercial real estate crash

#369

Post by HeyLaughingBoy »

ethbr0 wrote: post #19
ptmcc wrote: post #8

Earlier quoted context omitted.

Most offices have physical layouts that make conversion to residential difficult to impossible. Big things like lots of interior square footage without windows and plumbing only to a few central locations. And while some or even most of this is fixable, major renovations are a ton of cost and effort to convert them to something that will still be expensive and weird, if even possible to meet the legal requirements of…

Maybe SF should relax the legal requirements of residential space, then? If they choose not to build sufficient housing... they can at least choose to use what they have. A windowless room with a community bathroom doesn't sound appealing, but at a certain price point it's better than nothing.

> A windowless room with a community bathroom doesn't sound appealing,

It also likely doesn't meet Fire code, which is there for a pretty good reason.

Re: San Francisco braces for commercial real estate crash

#370

Post by JumpCrisscross »

bombcar wrote: post #334
JumpCrisscross wrote: post #222

Earlier quoted context omitted.

> For how long? Infinitely. Wages go up in nominal terms, too. What matters is the real housing price hovering around zero. (Slightly above, localized, is also fine if balanced by migration.)

Real "house price" for a given house should actually go down over time, because it gets older and worn down and just not quite as good as the new hotness.

> Real "house price" for a given house should actually go down over time, because it gets older

House, as in structure, yes. Home, as in structure + land, probably not. Real wages are higher today than they were in the 80s [1]. One would expect some of that to filter into land value.

[1] https://fred.stlouisfed.org/series/LES1252881600Q

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