A lot of offices are still empty and it's becoming a major risk for the economy

https://text.npr.org/1174938708

by mooreds • 3 years ago

17 43 3 years ago

text.npr.org

cs7024• 3 years ago

It's not "becoming" a major risk. It already is a major risk:

* As long-term office leases expire, more tenants are giving notice of non-renewal, because they don't need as much space anymore.

* Many office buildings cannot fulfill their monthly debt service obligations if tenant collections drop below ~80% leased, give or take, at the old $/sqft.

* Many regional banks are loaded up with loans to office buildings likely to default in the near term.

* Downtown restaurants, pharmacies, shops, and other retail operations have lost a lot of foot traffic. Many are on the verge of shutting down.

* City governments depend significantly on downtown economic activity for tax collections. Local governments are likely to see a big hole in their finances.

All of this has been on economists' radar for well over a year:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4124698

908B64B197• 3 years ago

Time to retrofit into housing!

Those who built smarter buildings that are easier to convert will come out on top. Those who didn't... maybe they should have put their money in VC instead of rental properties!

x86x87• 3 years ago

This is going to sound rough, but who gives a fuck? How is it my obligation to pay money and waste my time sitting in traffic to prop up commercial real estate? Or banks? Local governments... Oh, poor local governments!

The future is now and the pandemic showed that it's feasible to do a lot of the work remotely. Companies that jump on it will thrive, the ones that do not will slowly sink.

cs7024• 3 years ago

If society doesn't find a way to work through these issues before they turn into a crisis, we're bound to see (a) a wave of building bankruptcies, (b) a wave of small-business failures, (c) a wave of regional bank failures, (d) a wave of regional tax-collection holes, (e) significant stock and debt market losses for pensions, endowments, 401(k) plans, individuals, etc., and (f) higher local taxes for everyone, including you.

TurkishPoptart4• 3 years ago

Exactly. All those ailing businesses must simply relocate to reach their customer base (which obviously sucks, but that's how market economies are supposed to work). Downtown Seattle, for example, has become a shit-hole (open-air drug market, closed businesses, drugged-out vagrants, lack of law enforcement) but that's not _because_ of empty offices; it's just another pull factor for remote work wherever possible. Why risk getting assaulted on a bus or pay for parking?

algem• 3 years ago

converting these buildings to homes would solve a lot these issues. Local business can’t survive from locals? What about the inverse of the increased economic activity in the community these workers live in instead of commute to? There has to be solutions that work for everyone besides forcing everyone back to office.

Tanjreeve2• 3 years ago

The same people wailing about their commercial real estate investments going south will probably start wailing about their residential investments going south if a glut of residential property was released onto the market from relaxed zoning. The only solution according to the MSM is going to amount to communism for property investors.

tonyedgecombe• 3 years ago

We've been doing that in the UK and it hasn't gone well. Office buildings make poor homes. Better to tear them down and build something more suitable.

sdwr• 3 years ago

What are the solutions?

- vacant buildings suck, but there's no urgent cost to ignoring them for 5-10 years

- multi-use "free-for-all" buildings like those big apartment blocks in Hongkong. Doesn't mesh w/ western sensibility.

- convert to apartments. Works in theory, but city centre would have to remap target customer from <office worker> to <resident>.

winrid• 3 years ago

Time for HubHaus Extreme?

andrei_says_• 3 years ago

How does the “economy” measure the billions of hours that are no longer wasted in commuting? The $millions not wasted on gas? The decrease in pollution? The increased quality of life of millions of remote workers who spend the extra hours working out, doing yoga, preparing healthy meals or spending a bit more time with family?

Or, you know, working a bit longer for their employer?

If landlords’ profit is the only measure then yes, this is a difficult time for commercial landlords who refuse to adapt in any way.

sixo• 3 years ago

all else being equal the economy prefers you spend all that money. As long as there's a lot of surplus money floating around, better to get more of it moving.

Less commuting will eventually equilibrate, one hopes, to: * lower $ and psychological overhead on jobs that used to commute * meaning more jobs and businesses get to exist * wages might go down due to competitive pressure, or might go up, depending on the shape of the landscape * some of the money and saved will be diverted to other activities like the things you listed * or things get worse! who knows! it's path-dependent!

andrewdubinsky• 3 years ago

This is prepping the ground for a major bailout of commercial real estate because of its moribund effect on the economy.

Mostly just starting the chant for bailing out the really, really wealthy and those who benefit from CRE. (City governments, insurance companies, mega corps, and commercial banks).

This is not a public outcry, but watch how they do it by creating a story then an echo chamber, making it part of the "recovery", blah, blah. CRE will get a fat earmark in some recession funding, just watch.

comte7092• 3 years ago

Exactly, this isn’t about the economy, it’s about lobbying and PR for particular private interests (though there are effects on the broader economy)

EricE2• 3 years ago

Or the new business popping up where people now are? It's not a zero sum game - but a huge loss for all the 15 minute city cultists.

boppo1• 3 years ago

Economists are the successor to court-clergymen: interpret arcane texts no one else has the time to read in order to justify the king's actions.

ElevenLathe• 3 years ago

I assume you know this already from the way you put the word on scare quotes, but for everyone else: there is no "economy" in a sense that it even can be said to be good or bad. There are only people and transactions (on a spectrum between freely negotiated and forcibly imposed) and the people are either better off or worse off after each transaction. Ideally, everyone involved is better off after a transaction, including bystanders, and no one is coerced into anything, but this standard is not always (or ever?) met.

Anybody who tells you the economy is good or bad is priming you for some other form of propaganda.

TurkishPoptart4• 3 years ago

Excellent point. Seems like NPR is just parrotting Bloomberg on this point and not considering any positive benefits. I keep hearing that in the Pacific Northwest, office buildings are converting into apartments to increase housing supply, but I haven't seen any news organization confirm it. If true, that should be a cause celebree for NPR.

xkcd-sucks• 3 years ago

1st Lt. Milo Minderbinder: Yossarian, I want you to do something for me. [removes item from small bag] I want to serve this to the men. Taste it and let me know what you think.

[Yossarian takes a bite]

Yossarian: What is it?

1st Lt. Milo Minderbinder: Chocolate-covered cotton.

Yossarian: What are you, crazy?

1st Lt. Milo Minderbinder: No good, huh?

Yossarian: For Christ's sake, you didn't even take the seeds out!

1st Lt. Milo Minderbinder: Is it really that bad?

Yossarian: It's cotton!

1st Lt. Milo Minderbinder: They've got to learn to like it!

Yossarian: Why?

1st Lt. Milo Minderbinder: Look, I saw this great opportunity to corner the market in Egyptian cotton. How was I supposed to know there was going to be a glut? I've got a hundred warehouses stacked with the stuff all over the European theater. I can't get rid of a penny's worth. People eat cotton candy, don't they? Well this stuff is better - it's made out of real cotton.

Yossarian: Milo, people can't eat cotton!

1st Lt. Milo Minderbinder: They've got to - it's for the Syndicate!

Yossarian: It will make them sick! - why don't you try it yourself if you don't believe me?

1st Lt. Milo Minderbinder: I did - and it made me sick.

mjklin• 3 years ago

It goes to the syndicate. And everybody has a share. The cork for New York, the shoes for Toulouse, the ham for Siam, the nails from Wales, and the tangerines for New Orleans. Didn’t you get your share?

aaroninsf2• 3 years ago

"We didn't mean THAT when we said disruption."

Adapt or die, economy. And get used to it, the disruption has hardly gotten started.

DoingIsLearning2• 3 years ago

The plutocrats would like a word.

aaroninsf2• 3 years ago

That they would.

Without predicting any specific outcome or scenario, though, I do think we are just-getting-started,

the triple threat of climate change impacts, AI, and inequity-cum-ascendant-fascism, broadly construed, make for a lot of destabilization... more than the tiger-jockey plutocrats are ready for.

If I did make a prediction, it would be that disequilibrium is going to as per usual be felt first and hard by those who always take the first fall.

But I am hopeful that we emerge from disequilibrium with the current order dismantled.

Revolution etc. are funny, as with so much else, slowly then suddenly. Etc etc.

xkcd1963• 3 years ago

Sounds good to me. It proves that they are not really needed and were overvalued. They could be changed to affordable housing maybe.

travisporter• 3 years ago

Knowing nothing about economics, I’m wondering why this can’t help the housing crisis of not enough supply

DoingIsLearning2• 3 years ago

Not coincidentally I've noticed a significant trend of opinion pieces in Bloomberg, WSJ, Fortune, etc. (quite arrogant in tone) consistently attacking remote work from all kinds of angles.

This must be really hurting influential wallets.

TurkishPoptart4• 3 years ago

This seems to be a knock-on effect from the west's absurd response to a coronavirus. If they didn't lock people down, this would be a non-issue.

revlolz• 3 years ago

Government funded news wants you to know that our political elite have tired of the Proles not funding their lavish failing city policies. You are to promptly return to office servitude where more taxes can be levied upon you for your frivolous and dangerous driving. What, you do not desire tremendous inconvenience? How selfish you are. All of these under served small business who do fuck all for you will suffer! Think of the chi- economy! Think of the economy!

secretsatan• 3 years ago

If all these sky high real estates costs crash, won’t that just mean cheaper real estate? Making it easier to setup new businesses that can capitalise more on their labours, growing the “real” economy instead of handing off their profits to an investor class?

Nasrudith• 3 years ago

Sunk cost fallacy strikes yet again. Seriously "office" and "sunk cost fallacy" are becoming synonymous these days. It is downright embarrassing that they can't even offer a temptations. They don't even to think to suggest something like taking advantage of cheap office space for 'oversized' offices which justify the inconvenience of getting there by having far more than you could fit in a home office.

A lot of offices are still empty and it's becoming a major risk for the economy

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