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As downtown Seattle offices empty, city facing years of 'zombie' towers

seattletimes.com

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Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#91

Post by Schiendelman »

jmyeet wrote: post #83
Schiendelman wrote: post #67

Seattle here, and a real estate nerd. This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like…

I'm not sure the bank has that much to do with it. Commercial real estate valuation is based entirely on its ability to produce income. Lower the rent, lower the value. And that's a problem because most commercial leases are long (5-20+ years) so you're locking in an asset writedown for a long period of time. So it can be better to leave it vacant and pretend the value hasn't changed. You can still run into problems…

Yes, that's exactly the lag I'm talking about. The banks won't allow the buildings to lease for less than they need to make per sqft to pay back their loans. They'd rather foreclose, apparently. There's some reporting around this recently, I'm not in a position to look it up today but it should be easy to find!

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#92

Post by Schiendelman »

hyperrail wrote: post #77
Schiendelman wrote: post #67

Seattle here, and a real estate nerd. This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like…

> This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special? > We just saw another building turn over, US Bank Center. The new owner bought it at a p…

Why is Seattle impacted worse? Because so much of our office space was tech companies that decided they didn't need as much office space and can do their work remotely.

Look up the old owner and you'll realize why it doesn't really matter that they're taking a massive loss, and why I don't really care. I left it out because it's already a long comment and that's not really relevant.

They could have written an article about how foreclosures on office buildings take a long time and that sublet offerings in Seattle are turning over at a healthy rate. And the owner of a company in media absolutely influences that coverage, why do you think everybody's worried about CBS, or for a long time Fox News?

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#93

Post by Schiendelman »

lokar wrote: post #76
Schiendelman wrote: post #67

Seattle here, and a real estate nerd. This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like…

And you have to wonder, what kind of boom in innovation could lots of reasonably priced office space support? What gov policy cold push landlords and banks to accept reality? Vacancy tax? Change to bank regulations?

The timeframe of regulatory changes here is not worth any investment. The turnover will continue to happen, it's too complicated to try to change, and you'd probably create nasty unexpected side effects.

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#94

Post by GroksBarnacles »

piker wrote: post #63
GroksBarnacles wrote: post #47

Earlier quoted context omitted.

Are you saying we need to be in the office and not remote to do interesting things? Or are you misunderstanding the context and talking about employment or something?

Yes. I think remote works for a lot of people, but at a societal level we need real-time in person collaboration among a large swath of society to accomplish interesting tasks. I say that as someone who works entirely from home and really enjoys it.

I'll only disagree that it's not large swaths. I've never met my coworkers in person and we're doing immensely interesting things, anecdotally. And we're moving so much faster than my last in-person workplace. But my perspective isn't just based on that.

Or maybe "large swaths" is too imprecise to quibble over. Certainly some industries are better in person, but who can say how many? I think my precise point is that I don't think the industries that have gone remote are worse for it and don't need to to back, and many more can afford to go remote.

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#95

Post by Schiendelman »

nighthawk454 wrote: post #80
Schiendelman wrote: post #67

Seattle here, and a real estate nerd. This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like…

This tracks with what I’ve heard around as well. What changed in the financial instruments? My understanding is a lot of the loans have gone PIK or otherwise essentially aren’t serviceable at current prices. Do you think that’s resolvable somehow or just lagging implosion?

Nothing changed in financial instruments - we just don't usually have a lot of office tenants decide to walk away like we have with the advent of remote work. The loans will work themselves out. We've seen a couple of buildings trade for way less than pre-Covid numbers, and we'll see more.

In another 10 years downtown Seattle will be aligned with the rest of the market again.

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#96

Post by asveikau »

Schiendelman wrote: post #58
asveikau wrote: post #35

Earlier quoted context omitted.

The neighborhoods they built that stuff in (mostly South Lake Union and Denny Triangle) used to be so sleepy in 2010 and earlier. It was a big transformation.

Earlier than that, they were actively dangerous. I spent a lot of my childhood in Belltown, and it was not a safe place in the late 80s and early 90s. SLU and Denny Triangle are amazing now. Those are some of the few places with restaurants open into the evenings. Amazon, like them or not, does a great job prioritizing local businesses in the retail spaces in their buildings. They can't all survive, but they've had a…

I haven't lived in Seattle since 2011. I remember Belltown having one or two blocks that felt a little spotty or like you wanted your guard up, but the rest of it was thoroughly gentrified by the time I left, and it was a common choice to live for new college grads from the suburbs arriving to work in tech. I have to assume the process has continued.

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#97

Post by Schiendelman »

tired-turtle wrote: post #79
Schiendelman wrote: post #49

Earlier quoted context omitted.

Seattle here. The problem isn't that there's too little "planning" or "zoning". Where that's relevant, there's too much. The city has used those tools over and over to slow growth and tack on requirements for businesses. I'm not aligned with the new mayor's business-hostile policies. But as far as making the city better for walking, things are going very well. We've been narrowing crossing distances, improving sidewa…

> And the number of people in tent encampments has dropped dramatically, it's become rare and short lived in most of the city. Do you have any data to support this claim?

Lots. https://harrell.seattle.gov/2024/12/03/one-seattle-homelessn...

From over 700 tents in 22 to under 200 by the end of 24.

Removals, regardless of how you feel about whether this is good policy, are continuing unabated when reported: https://www.kuow.org/stories/is-seattle-sweeping-more-homele...

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#98

Post by xnx »

Schiendelman wrote: post #67

Seattle here, and a real estate nerd. This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. The Seattle Times has always been a conservative rag, and their editorial board hates the new mayor, so they hit the "Seattle is dying" story as often as possible. They've got a long history of this whenever there's leadership they don't like…

Is there any more to this story than "extend and pretend" that's been going on for 6 years?

Re: As downtown Seattle offices empty, city facing years of 'zombie' towers

#100

Post by BryantD »

Schiendelman wrote: post #92
hyperrail wrote: post #77

Earlier quoted context omitted.

> This is almost entirely an artifact of the financial instruments used to pay for these buildings, regardless of any Seattle policy changes. Why would this be different in Seattle than in other cities? Many downtown office towers are bought or built using a lot of debt throughout the U.S. What do you think makes Seattle special? > We just saw another building turn over, US Bank Center. The new owner bought it at a p…

Why is Seattle impacted worse? Because so much of our office space was tech companies that decided they didn't need as much office space and can do their work remotely. Look up the old owner and you'll realize why it doesn't really matter that they're taking a massive loss, and why I don't really care. I left it out because it's already a long comment and that's not really relevant. They could have written an article…

Think it's significant that Zillow's one of the few significant tech companies to maintain full remote working? They don't leave an Amazon-sized hole in downtown, but they had quite a few floors.
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