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The long-anticipated office reckoning is upon us
https://www.axios.com/2023/03/16/the-lo … is-upon-us
Interesting that in this graph:
Office_Space.png
you can see that vacancy rates never went down all that much after 2008. So the owners decided that it made more sense to keep it empty for years and years than lower the rent, much to the surprise of AustralianFatFancier. But it is easy to hide a bunch of vacant office space because people can't see it.
The same thing is going on with retail spaces (which you can see are empty) and, I believe, residential real estate (which again, you can't very easily tell is vacant). Nobody will actually analyze how many vacant houses and apartments there are because all of the people who have the resources to want to keep the charade going.
I believe that this is all by design.
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Tom LeykisRe: The long-anticipated office reckoning is upon us
I hear back from people in my former home town. Downtown retail, which is obvious for all to see, is just about dead and buried. Company owned stores are hanging on, but other retail is either empty (kiss of death) or with some kind of "almost free" deals. Residential occupancies are not doing so well, but the RE professionals are keeping that as hidden as they can, to prevent a value collapse. Other business occupancies, offices and other spaces are going empty as they don't want to pay the HUGE expenses involved.
Load up San Francisco with poorly educated deadbeats who think they're entitled to $5 million each, just because of their skin color. Jessie Jackson's wet dream come true. Look for me 4 states away.
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Re: The long-anticipated office reckoning is upon us
Office real estate tends to have longer lease periods of 3-5 years, so leases will be a lagging indicator to many companies seeing a need to reduce their office footprint.
The company I work was in the midst of renewing/expanding office space when the pandemic hit. I know there are some office die hards where I work, but I'm betting that week-to-week, each office space is maybe 25% occupied most days of the week, though it's probably 50%, or possibly even a little higher on the day they cater in office lunches.
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Re: The long-anticipated office reckoning is upon us
The thing is, how long can they keep this charade going?
The down-slopes somewhat represent the economic recovery from the previous recession.
You can see the strong recovery from the early 90s to the year 2000. Then the dotcom crash and the economy recovered somewhat, but only to about halfway where it had been. Yeah, there were more people not working in offices as technology made it possible, but rents never adjusted to get vacancy below 10%.
Then the 2008 recession hit and there was an even more pitiful recovery. Yet office buildings were still being put up despite vacancy now staying above 15%. Just like all those empty storefronts - why not get something rather than nothing? Why have it sit empty for 10 years?
There's a lot more going on than meets the eye.
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Tom LeykisRe: The long-anticipated office reckoning is upon us
Who knows what the hell is going on in that business, especially nation and world wide. Globally speaking, my investments have been modest and have turned out very well indeed.
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Re: The long-anticipated office reckoning is upon us
wrote:
… the owners decided that it made more sense to keep it empty for years and years than lower the rent...
Sorry, no. They’d be willing to lower the rent for a quality tenant willing to sigh a long term lease. The problem has been finding such a tenant.
Renting to some shytco that goes bust in a couple years can end up being more expensive that just letting space sit empty
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Re: The long-anticipated office reckoning is upon us
VP Shytskin T Pillowbiter wrote:
Sorry, no.
\
Sorry, yes.
That extra vacancy since 2008 was a bunch of offices sitting empty for years and years and years. They chose to have it remain empty rather than lower the rent.
Commercial leases are stacked in favor of the landlord. Much more so than residential. So the idea that the landlord was going to have some Section 8 monkey like your mother not pay the rent, trash the place, the landlord not be able to evict in a timely manner and the landlord not be able to sue the tenant doesn't apply.
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Tom LeykisRe: The long-anticipated office reckoning is upon us
wrote:
Sorry, yes.
That extra vacancy since 2008 was a bunch of offices sitting empty for years and years and years. They chose to have it remain empty rather than lower the rent.
Commercial leases are stacked in favor of the landlord. Much more so than residential. So the idea that the landlord was going to have some Section 8 monkey like your mother not pay the rent, trash the place, the landlord not be able to evict in a timely manner and the landlord not be able to sue the tenant doesn't apply.
That commercial real estate is a whole different animal. My sister found that out when she unloaded the Oakland, CA warehouse. Fortunately, she did and is now living large in Arizona.
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Re: The long-anticipated office reckoning is upon us
Tom Leykis wrote:
My sister found that out when she unloaded the Oakland, CA warehouse.
Right after the hippies burned it down? 
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Tom LeykisRe: The long-anticipated office reckoning is upon us
wrote:
Right after the hippies burned it down?
As far as I know, it's still there. I very much doubt I will ever be there again.
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Hell_Is_Like_NewarkRe: The long-anticipated office reckoning is upon us
I could see a lot of Class A and B office space in Manhattan being converted over to apartments at some point. This is assuming NYC doesn't continue to back-slide to where it was when Dinkins was mayor (before Giuliani and Bratton turned things around).
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Re: The long-anticipated office reckoning is upon us
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Re: The long-anticipated office reckoning is upon us
"I live in an apartment in Chippendale, on my floor there are 9 apartments however only 4-5 of them including ours are occupied since the 2.5 years I've lived here. Why are landlords leaving their apartments empty considering how much rents have gone up recently? I can understand still receiving capital gains over time but aren't they missing out on an easy $700 - $800 a week leaving it unoccupied?"
https://www.reddit.com/r/sydney/comment … in_sydney/
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Cache_MoneyRe: The long-anticipated office reckoning is upon us
Residential is taking a hit also, particularly in Silicon Valley, where layoffs and falling stock valuations are affecting prices.
I sold my home in Los ALtos for $4.99m in Summer 2021. It then zoomed up to $5.8m in value (according to Zillow). Now it's showing at $4.8m.
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Re: The long-anticipated office reckoning is upon us
U.S. commercial-property loans set to mature in 2023 and 2024 total nearly $900 billion. Against a backdrop of higher borrowing costs, falling prices and an increasingly risk-averse attitude among traditional sources of financing, these mortgages are coming due in a tougher capital-markets environment, and some could face challenges refinancing.
According to our analysis, commercial mortgage-backed security (CMBS), collateralized loan obligation (CLO) and investor-driven lenders are behind more than half of the approximately $400 billion in loans coming due in 2023. CMBS lenders are the largest single source, accounting for more than one-third of the outstanding balance. Bank loans maturing this year (provided by international, national and regional/local banks) will account for a smaller share of loans coming due than CMBS alone.
https://www.msci.com/www/quick-take/cmb … 3740236548
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Re: The long-anticipated office reckoning is upon us
Heekee wrote:
Nobody over 250 lbs in this thread, please. Thanks.
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