Posted on 12/08/2022 9:28:44 PM PST by SeekAndFind
Leading up to the Covid-19 pandemic, roughly 95% of commercial office space was occupied across the United States, according to US National Bureau of Economic Research (NBER) – a nonprofit, non-government organization. By March 2020, occupancy plummeted to 10%, and has only recovered to 47%, according to a new NBER report which claims $453 billion in office commercial real estate value has been wiped out in an "office real estate apocalypse."
Around the US, that resulted in a 17.5 percent decrease in lease revenue between January 2020, and May 2022, and not only because fewer offices were being occupied, but also because those that are being rented are going for shorter terms, lower prices per month, and a lot less floor space is needed as staff are told they can work from home for most or all the week.
Prior to the pandemic, 253 million square feet were rented per year; as of May 2022, just 59 million square feet had been rented, NBER's data indicates. "This indicates a massive drop in office demand from tenants who are actively making space decisions," NBER said. -The Register
What's more, while vacancy rates have hit a 30-year high, 61.7% of in-force commercial leases haven't come up for renewal since the pandemic - meaning that "rents may not have bottomed out yet."
What this means is that commercial real estate - a popular choice for pension fund managers and investors alike - may not be the best idea for the foreseeable future, given the continuing work-from-home options adopted by corporate America.
A common method used to invest in office real estate is commercial mortgage-backed securities (CMBS), which are managed and traded via commercial mortgage-backed indexes (CMBX) made up of pools of CMBSes.
According to NBER, more recent CMBXes tend to include a higher percentage of office collateral than earlier vintages. Those newer, office-heavy CMBXes, NBER said, are what's losing the most money. -The Register
NBER says that in 2019, commercial real estate assets topped $4.7 trillion - offices being the largest component.
Read the report below:
Words to live by! (RIP Hans Gruber)
Of course much work can be done remotely. Good for business and those who can perform such tasks and remain competitive. Talent is no longer required to be local, and now the best talent can be sought out even if they are on the other side of the planet.
There are mechanisms to ensure that they are being productive, so that's not an issue.
As far as office spaces, they can be converted and rezoned. Certainly an expensive prospect but in many cases, doable.
Imagine the instant savings for businesses that go remote. Reduced electrical, the burden of utilities and resources can be placed on the employee. The employee saves on time, gas, clothes and a dozen other benefits.
Collaborative efforts are doing quite well via apps like MS Teams and others. Plus there's no chance of the flu taking down a department for a week, and no need to push vaccines on the employed.
Sure, not every job is suitable for this, and not everyone wants it. It's ideal for those who prefer it though. I think it's worked extremely well and is here to stay.
The people behind the pseudonym ‘Tyler Durden’ are not reliable. Their original site is Zerohedge and it has been banned from FR.
I agree that many jobs can be done remotely, but I don’t assume that everyone prefers it; I have no interest in giving up a portion of my home to my employer.
In my experience those most resistant to returning to the office have the longer commutes or tolls; those most receptive to returning are those who live alone, for whom work provides a good portion of their socializing.
“Just wait for the boomers to start dying”
Don’t forget, everybody over 65 should get the vax.
Current business model no longer works, conversion to residential is too expensive and does not solve the problem. Loans go unpaid..... recipe for a very bad time for major downtowns of America.
Larry you kill me... You’ve refined your one liner skills!!!
That has been all replaced by the internet. There's a reason you see massive amazon warehouses springing up all over the place.
Not sure people figuring out you don’t have to commute to a hell hole democrat city to get the same work done is a bad thing.
So many cities exist due to inertia and are really terrible places.
... business clothes, baby sitters, tens of thousands wasted in fuel...All of this wasted time and money when 50 percent of the people could easily do it from home.
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Those are the secondary economic effects not even factored in to this report. Add to it the reduction in lunchtime traffic for restaurants if people are working from home.
Getting up and going to work everyday is half the battle. You take that away, people start to get lazy, it”s inevitable. Then when the government starts paying some of them to sit at home and do nothing, they have no incentive to work at all anymore. That’s what’s been happening the last few years with those covid payouts. Fewer and fewer people want to work anymore.
Where I work, some of the hardest workers you would least expect are suddenly retiring in their 50’s now. People’s parents are dying, so they’re inheriting some money, and deciding to go ahead and spend it, instead of passing it down as it was passed to them. And the retirement packages for this next generation are non-existent, so this cycle is non-repeatable.
Maybe that’s just all happening here where I live. But I can’t even find anyone to come work on my home now whenI need it. Or if I do, the work quality is shoddy. I live in a gated community and our cars are now being broken into at night if they’re left out of the garage now as well. These are all trends showing the end of the working class. Again, maybe it’s just here, but I doubt it.
A third reason is that WFH allows one to avoid much of the office politics and drama.
Also, it's a shame that adults dress like slovenly children now. I do gig work during the winter months to stay busy (can't snowmobile and ski every day) and so drive into the main office of one of the companies I contract with once or twice a week. It's largely empty because even the upper management works from home. But what few employees are there look like they are dressed for drinking beers at the sports bar. I gave up wearing a tie even tho' it feels like I'm naked every time I walk through those revolving doors.
...as someone who over the past 50 years has had hundreds of employees and who has tried “work at home”, this “work at home” fantasy is a stopgap (meaning ok if you have no choice when the next democratic party Covid type scam comes along) NOT a permanent solution. NOBODY really “wants” to work at home, they just think they do. Human nature is to “get up, get out and GO”.
>> Blackstone will swoop in and grab these for a song, then convert them to rentals. <<
It’d be pretty great if someone did. Too much office space, not enough living space. Of course, you picked Blackstone because Blackstone is evil. You might find that there are a lot of people around here who don’t regard EVERY big-money, big-city billionaire residential real-estate developer to be evil.
“ Those are the secondary economic effects not even factored in to this report. Add to it the reduction in lunchtime traffic for restaurants if people are working from home.”
The sooner democrat hell holes are depopulated of productive citizens, the sooner they lose financial, political, and social power.
Maybe we can build walls around them.
For the opposite reason of medieval city fortifications.
It’s one of those large shifts in history, which just happen because things change. The laptop computer has turned the whole world into a mobile work space, making the downtown business district redundant.
We met a young business man who lives in a nice RV with his wife and kids. They travel all over and he works wherever they stop. They were headed for a three week stop in Yellowstone.
You all hear me? IT WORKED. The market didn't crash, it cratered. The Great Recession ensued, and that yielded ... President Trump.
And it would work AGAIN, if some GOP Senator with b@lls would leverage this news -- the commercial investors now carrying empty skyscrapers, no back rent, and bad debt; and issue a new, 2023 "IndyMac" letter specifically to unwind the already-weakened global commercial real estate market -- just as Schumer did in 2008.
It's time now for the handful of conservatives left in the Senate to stop d---ing around and kick the stool out from under Xiden and his puppet-state cadre.
Ping.
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