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Office real estate crash will be so sharp, values unlikely to recover by 2040

fortune.com

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Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#61

Post by joenot443 »

hotpotamus wrote: post #55
2OEH8eoCRo0 wrote: post #53

Earlier quoted context omitted.

I don't want more low income housing and fewer F-35s though- in fact I want the exact opposite. Low income housing comes with associated costs to the city and the people who inhabit them pay essentially no taxes so everyone else's taxes need to go up.

I never really thought about the tradeoffs, but given that the F-35 is mostly used to destroy low income housing of government undesirables, I suppose there is some tension there.

What conflict are you thinking of exactly when you reference F-35s being "mostly used to destroy low income housing of government undesirables"? I have no doubt the US military using fighter jets to mow down their own civilians would be well reported, so I'm sure there are lots of sources for the incident you're referencing.

Please be as specific as possible, I'd be surprised if you'd be ignorant enough to make such an accusatory comment if you didn't have an example ready to go.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#62

Post by joenot443 »

spokeonawheel wrote: post #40
joenot443 wrote: post #33

Earlier quoted context omitted.

Imagine the layout of a large office building. Some of them have the same footprint as an entire city block. The "empty cores" make up the majority of the interior of the building itself, it can't all be repurposed as storage areas. I feel like the notion "the govt should turn empty offices into housing!!" comes up on places like reddit _all_ the time, it takes very little explanation to show why it's not that simple…

ignoring code for a minute, for the most vulnerable, having a roof over their head is a serious challenge, and only getting worse as more and more people get kicked out onto the streets. Additionally, I am suggesting that this would be a government social service. USA is a deplorable example of how to view and treat homeless.

Which developed country whose population experiences similar rates of homelessness to the US do you think the US should be modeling their policy off of? The UK or NZ I guess?

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#63

Post by hotpotamus »

joenot443 wrote: post #61
hotpotamus wrote: post #55

Earlier quoted context omitted.

I never really thought about the tradeoffs, but given that the F-35 is mostly used to destroy low income housing of government undesirables, I suppose there is some tension there.

What conflict are you thinking of exactly when you reference F-35s being "mostly used to destroy low income housing of government undesirables"? I have no doubt the US military using fighter jets to mow down their own civilians would be well reported, so I'm sure there are lots of sources for the incident you're referencing. Please be as specific as possible, I'd be surprised if you'd be ignorant enough to make such…

Where did I say anything about "their own civilians"?

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#64

Post by alvern »

If you look on loopnet, the cost of office versus warehouse per sq ft is staggering. It's a large visual indicator of a bubble.

I've been looking for 1500-3000 sq ft for a light manufacturing space for around two years. In my area warehouse $/sqft is $5-7 a year. Office space is $13 for old and dated layouts. I have no use for that dotcom era conference room. I need 10 ft dock doors, tall ceilings, and reliable 3 phase power.

Buying land outside my metro area and building new is becoming the only option for me until this crash actually happens. Sprawling out of the metro would only bite me down the line because the labor market is even tighter in rural areas.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#65

Post by emsign »

Fine by me, turn them into homes if possible. Or would that lead to yet another devaluation now on the residential housing market as well? Do we need another bailout soon or what?

It seems to me that one big reason why companies want their employees to return from home office so badly is to secure their investments in real estate. The benefits of having leaner office spaces are in conflict with the investment made into these office spaces.

That's one issue with parking your capital into speculative assets, it ties down your freedom of action tremendously.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#66

Post by adingus »

2OEH8eoCRo0 wrote: post #53
spokeonawheel wrote: post #6

crazy idea: us govt scoops up all the office real estate at the crash and converts to low income housing for free. Solve two crisis at once, the obviously coming real estate crisis and the homeless crisis. All for the cost of a handful of F35s If only politicians had an iota of strategy.

I don't want more low income housing and fewer F-35s though- in fact I want the exact opposite. Low income housing comes with associated costs to the city and the people who inhabit them pay essentially no taxes so everyone else's taxes need to go up.

I'm from a state with a long history of manufacturing and aerospace. The people who make F-35s are paid at least 75k without any qualifications and can take home much more than that if they choose to work OT. Definitely no need for low income housing for that crowd.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#67

Post by heywhatupboys »

baremetal wrote: post #36
heywhatupboys wrote: post #23

Earlier quoted context omitted.

meh, we have much more stable financial institutions in 2023 than 2008.

Are you joking or serious? We have had multiple bank failures this year. And so many banks are holding large amounts of commercial real estate and also long term bonds they can't mark to market without suffering monster losses.

> We have had multiple bank failures this year.

that is the whole point. We had a top-10 bank fail, and you know what? our financial institutions did not cascade into failure.

There WILL always be failures, ups and downs, the question is how it is mitigated.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#68

Post by heywhatupboys »

gremlinsinc wrote: post #32
heywhatupboys wrote: post #23

Earlier quoted context omitted.

meh, we have much more stable financial institutions in 2023 than 2008.

lol was that sarcasm? how many banks just failed including the bank most sv startups used and 16th largest? I think we'll adapt and hopefully build housing where offices used to be.

> how many banks just failed including the bank most sv startups used and 16th largest?

that is the whole point. We had a top-10 bank fail, and you know what? our financial institutions did not cascade into failure.

There WILL always be failures, ups and downs, the question is how it is mitigated.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#69

Post by kryogen1c »

bell-cot wrote: post #12
xbmcuser wrote: post #5

Current market prices for a lot of commercial real estate seems to be a ponzi scheme especially in the US. It is not in the interest of any of the players to decrease prices only the renters. Local government need higher prices as without the high property prices their property tax receipt will tank making them unable to meet their budgets. Banks need higher prices as they are highly leveraged and will be on the hook…

Ponzi scheme? Yes. Lots of major players who really don't want the Ponzi pyramid to collapse? Yes. But, long-term, no Ponzi pyramid can avoid collapse. Black money is not infinite, and can get skittish when the music starts fading. A central bank printing money can prop the pyramid up...for a while. But that only makes the collapse bigger, and takes more of the central bank's economy down with it when it finally does…

>> Current market prices for a lot of commercial real estate seems to be a ponzi scheme

> Ponzi scheme? Yes.

How in the world are these the top comment and top reply? Commercial real estate isn't a ponzi scheme. Like, at all. In any way, shape, or form.

There are disparate actors making separate, uncoordinated decisions. There are single transactions being made delivering real value. There's no long term holdings falsely being promised under the guise of stealing short term value by adding more customers.

The commercial real estate market changed. Money is going to be lost. There are bad contracts on the books. Correlated markets are going to suffer. Leveraged losses are going to exponentiate. None of this has anything to do with a ponzi scheme.

Re: Office real estate crash will be so sharp, values unlikely to recover by 2040

#70

Post by drdec »

Spooky23 wrote: post #35
eganist wrote: post #15

Earlier quoted context omitted.

Code requirements for housing are far more strict. One of the reasons you don't regularly see office building conversions is because homes require things like windows for each bedroom or at least one bathroom per home. While the bathrooms can be fixed with effort, windows mean a lot of office spaces would have empty cores as only the square footage near the outer edge of the building would be used. (This isn't my are…

The real issue is plumbing. You need more plumbing in residential real estate. Many buildings are difficult to retrofit because they use a type of compressed concrete floor that cannot be safely drilled. Cheaper to demo.

Right, you demo the existing building and rebuild one that will satisfy the window per bedroom requirement efficiently. I'm sure people reading HN can imagine a multitude of solutions.

We just need to reach the tipping point where the demo/rebuild cost is lower than the expected gain.

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