Posted on 01/08/2024 5:20:15 AM PST by davikkm
Office building prices in the United States have experienced a substantial downturn, witnessing a significant 40% drop from their peak over the past two years. The past year alone has seen a massive 30% decline, leaving one in five office buildings vacant across the nation. The gravity of the situation is exacerbated by the substantial debt burdens carried by most of these empty office spaces.
(Excerpt) Read more at citizenwatchreport.com ...
convert them to “migrant” shelters. suck on the government tit. problem solved.
This and POLITICS is the real reason a lot of companies are trying to force employees back to the office against the wishes of most workers. Local politicians are really scared seeing the collapse of commercial real estate, tax revenue and eventually a big hit to residential real estate in their cities if hundreds of thousands of White collar workers cannot be forced to waste their time and money commuting in to office buildings 5 days a week. So those politicians are applying as much heat to corporate bosses as they can to force employees back in.
Its still failing. People just don’t want it.
I generally oppose government “solutions” and spending.
But I think the country has an over-abundance of corporate real estate and a critical shortage of affordable residential real estate. Perhaps if government got out of the way we might be able to return to the days when young people could afford to house themselves.
I have lived in several beautiful lofts and even prefer it.
Office buildings often made great candidates for conversion into condos.
It’s only going to get worse. Commercial space is considered “occupied” if it is under lease and the lease payments are being made — even if the space hasn’t been used since 2020. As these leases expire, the flood of vacant commercial space on the market will become a tsunami.
And then I wonder what LA. will look like in say, fifty years.?
I do think there is a lot of potential there.
People have pointed out to me that the economics doesn’t work — but this seems like an area where federal subsidies might actually make sense.
People have also pointed out to me that while real estate designed for residential use usually maximizes window space, existing corporate real estate often has a lot of “interior” space with no access to natural light at all.
But, for me, the bottomline is that we need cheap housing solutions. And that corporate real estate is just sitting there.
My 22 year old (and liberal) daughter is always coming up with a “the government oughta” scenario. I try to explain to her that is why states like in the NE or left coast have such high taxes because they are always coming up with another “the government oughta” plan that “wouldn’t cost that much”.
Next up, real estate bail outs
Absolutely true. The government is good at making problems, not so good at implementing real solutions. But de-regulation and less government can go a long way to helping the marketplace invent solutions that work.
To quote Jeremy irons in margin call: this is it.
Yep. There will be significant conversion costs no doubt. They’ll have to gut those buildings, completely re-do the plumbing etc. Apartments/Condos will need to be long and narrow to maximize space with limited access to windows.
That said conversion will still be much cheaper than building entire buildings from scratch and what else are they gonna use that space for? They’re never going to get workers to show up at the office at anything like the rates they used to pre 2020.
Thanks Leftie control freaks! You did one good thing. You showed everyone it was perfectly possible to run lots of corporations with nearly everyone working remotely - and thus out from under your control.
At least until the government decides it needs the money more than the residents; then there will be a story about how it's the renter's responsibility to pay more tax.
Why should companies which are already suffering under a sluggish economy pay inflated rent for expensive office space they can replace with a much, much cheaper virtual office with shared receptionist and shared conference facility?
The business model of a city has been failing for a century.
People who point that out obviously don't have experience in this kind of conversion.
Sometimes the economics work great. It depends on the structure, its location, the interest rate environment, the developer, and the RE market.
NYC is full of various kinds of buildings that have been converted into apartments. This kind of conversion has been around forever and works beautifully when conditions are right.
As an aside, I recently saw a grain silo that had been converted into a MIL apartment. It was beautifully done and the MIL was ecstatic with the results (and when your MIL is happy, you're happy;-)). .
It is also the BANKS that made these commercial real estate loans. Typically they are interest only with a balloon payment at the end. If the interest rate goes up and the occupancy rate is down the math just does not work. It means the BANK ends up owning a 50 story office building in NYC, San Fran, Cleveland, Chicago, etc.
“You showed everyone it was perfectly possible to run lots of corporations with nearly everyone working remotely”
In India
In Vietnam
Yes. Since I work in banking I can tell you its mostly local and regional banks which made these loans. Commercial Real Estate was considered to be the gold standard in terms of reliable returns even if they weren’t the highest rates of return. Everything has been upended obviously. Several local and regional banks are going to end up insolvent when the scale of the losses is revealed as long term corporate leases run out on many of these buildings.
That’s unfortunate. I wish it were Chase and BofA and Citi, etc taking it in the shorts instead of the small and medium sized banks but..........
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