The research firm’s top property economist likens the decline in office demand to what malls have experienced over the last six years—and sees a similar outcome.
There is a captive market for residential real estate, and a glut of commercial properties…
Everyone MUST live in a home while offices and other commercial spaces are a “nice to have” - so the businesses and individuals with extra capital have gobbled up the residential property to further push us into the “own nothing and be happy” economy.
I like the idea of transforming the old commercial properties to condos, but there’s a ton of issues with retrofitting - which is the result of zoning and differences in building codes. Then there’s the zoning issues themselves.
So… as usual… we are beholden to politicians doing the right thing for their constituents, and not their donors. These commercial properties are going to sit idle, and decay until it becomes a “true” crisis (buildings collapsing, mass squatting causing major health and safety issues) - causing untold costs to fix them to accrue in the meantime.
It’ll never happen, but my grandiose solution is to deliberately crash the housing market via legislation limiting ownership of single family homes. This would boost the “velocity” of cash (lowering inflation), allows taxpayers to own (solves housing crisis), and would renew interest in the commerical real estate.
Mass squatting. Hmm. That’s an interesting idea. I wonder if local governments will turn a blind eye, sort.of how they did in Brooklyn warehouses that rented out space to artists (which the artists used as live work spaces, unofficially).
Some of these offices are extremely small and don’t have bathrooms (there was an article in Curbed IIRC about psychiatrist offices that were empty because most patients are now doing Zoom sessions). But they would make good SROs (they just need to retrofit the bathrooms to have showers). They are about the size of a studio.
Some countries have actually legalized squatting in certain situations (like if a building is long term empty) to put some fire under the landlord’s ass to either find a paying tenant or sell. And honestly I think it’s an inelegant but effective solution.
It’s not productive to have real estate units sitting empty in the middle of the city and we simply shouldn’t allow it.
I worked for an engineering company that had “secret” projects. So when you were assigned to a secret project, you’d move all your desk stuff into that project area where everyone coming and going had to enter a security code to get through the door. But the size of projects would vary over the weeks. I remember one Friday I finished my work on a secret project along with several other people in the desks and drafting tables near me. The next Monday, we found that our desks were in the same place, but they’d moved the wall; so we were outside the project area - or actually we had been absorbed into a different project area with a different door code. So in those big buildings, there may be small offices, but they are easily reconfigured.
I wonder if squatting in high-rise office space might give rise to sort of communal life - something more social than single-family units of today. It will be an interesting social experiment
Just wanted to chime in and say that ive been seeing a lot of great comments, often great stories, from you and wanted to thank you! I love them!
In my family, if a kid (such as myself, for example) tended to talk a lot, they’d say “he was vaccinated with a Victrola needle” (because, for the younger readers who are possibly ignorant of history, vaccines were originally applied by scratching the skin surface with a needle, and a Victrola was an early record player with an actual needle for converting the grooves into vibrations - so perhaps some of the capacity for endless automatic patter carried over with the vaccination)
One of the first places I lived when I moved out of my parents house was a converted hotel in a really old part of Los Angeles. My studio unit had a bathroom, but no kitchen. I lived off of microwave Trader Joe’s meals and stuff I could cook on a foreman grill. Cheaper units were basically just bedrooms that shared communal restrooms. We may be seeing more of this setup in the future.
I think it’s less likely they’ll turn a blind eye these days. Oakland was similar but there was a massive crackdown on artists wherehouse spaces after the GhostShip fire (36 people lost their lives) .
Would love to see the ones that could be easily retrofitted into housing go that way and the ones that can’t go to another purpose like farming.
Hopefully many offices will be converted into permanent living spaces instead of temporary ones.
While coverting offices to living spaces would be good for cities, there’s no lack of living spaces.
There’s just a glut of dragons hoarding them.
No idea if this is a common turn of phrase or your invention, but I love the “dragon” reference. People get so upset when I tell them we should “eat the rich”, but not even Gaston is against killing dragons that are hoarding the village’s wealth and killing our children!
People get so upset when I tell them we should “eat the rich”
And then they vote for genocidal fascists without feeling the slightest pang of conscience. Honest libertarian pacifists, they ain’t.
that’s because murdering and killing the poor and dark skinned is completely morally acceptable.
but killing one white billionaire is a unacceptable tragedy.
It is possible to retrofit but as u/dismalnow points out zoning is a big issue but there is also issue of economics. These building need to be sold at a steep discount for redevelopment to be economically viable. This requires that current owners book their losses and sell but they won’t until they can’t refinance, first wave is due 2024-2025. Many bagholders will have to face the music, let’s see what they will do. I am sure smart developers are already stacking cash for deep value shopping. With that being said many Class B/C office towers are utter trash to a point where it is more economical to just level them. I don’t know why local governments allowed them to be built…
U da real MVP
meanwhile average folks can’t afford modest homes. When I was young condos were cheap alternatives to free standing houses (ok except for luxury ones). Now they all claim to be luxury and I have no idea who manages to buy these things. Single family freee standing homes in an area you won’t be shot is beyond anyone who works for a living.
parents buy them for children who help pay off the mortgage with their 100K job.
generational weatlh is a thing the popular media refuses to acknowledge. that is the reason most of these places get snapped up.
I live in Boston. Vast majority of people who even making 200K can’t afford a home. So their parents give them a nice 250K or more gift, and boom suddenly that million dollar condo/home is affordable for the couple. these people also never had student loans or medical debt like the average person would. they also often inherit cars and other large ticket items from family, further reducing their cost of living.
my salary has gone up 50% in the past few years. but housing has gone up 100%. There is no ‘getting ahead’ in this market via salary alone. you need family money. i paid for my own education, and had loans and etc. I’ll never own property unless i win the lottery or move to a rural bumfuck area.
This isn’t surprising given the enormous social shift to working from home. I’m just surprised how slowly corporate valuations are sliding. I think we’re going to see some major moves soon as leases and mortgages come up for renewal.
Great. Now do residential real estate!
Start converting offices to cheap housing and we can fix both.
Given the high rates of immigration and uncontrolled overseas capital flows to Western countries, demand will continue to rise indefinitely. There will be crashes along the way, but I only see one direction unless migration significantly slows or nations face major long term economic hardship.
Those are all good things for economies! They offset demographic declines.
Well, immigration is good for the GDP, but the GDP is a terrible measure of outcomes for citizens. For example, almost all the GDP gains of the last 40 years in the US have gone to the top 10%. So for the 90%, they’ve had to endure all the costs of high migration, such as high house prices, but none of the benefits.
Would the inverse be true? Would reducing the GDP therefore increase outcomes for citizens?
Rising or falling GDP is not a good measure for the benefit of the population if the distribution of the GDP in the population is not taken into account.
The average GDP of pretty much all western nations has been rising for the past 70 years.
However, in the last forty years the share of GDP for the average western citizen (mostly through the static or failing real value of wages) has, at best, remained static and in several places fallen.
To put it another way, nations have become wealthier while most of their people have not.
So while GDP growth reflects national economic progress, it doesn’t necessarily ensure improved welfare for all citizens, particularly in light of the increasing income inequality seen in many societies.
Challenges related to demographic shifts, notably aging populations in Western countries, can further exacerbate these issues, potentially leading to wage stagnation and straining public services. However, immigration, especially by young, educated individuals, can help mitigate these demographic challenges. These immigrants contribute significantly to the economy, the labor market, and notably to the tax base, which can help alleviate these pressures.
Young, educated immigrants often contribute more in taxes than they receive in public services over their lifetimes. This positive fiscal impact can be channeled into public services and infrastructure that benefit all citizens.
In terms of real estate and housing, it’s important to understand that the housing market is influenced by a myriad of factors beyond immigration, including interest rates, building regulations, local zoning laws, and broader economic conditions. While increased immigration could theoretically drive up housing demand, it’s just one piece of a complex puzzle.
Further, the broader economic benefits brought by immigrants, like strengthened public finances and economic vitality, can indirectly alleviate housing concerns. For instance, the taxes paid by immigrants can be invested in public infrastructure and affordable housing projects that benefit existing residents. Additionally, the economic activity stimulated by immigrants can drive investments in residential development, potentially increasing housing supply.
Therefore, while concerns about housing demand are valid, they need to be contextualized within the broader economic and policy landscape. Immigration and real estate markets interact with each other, but they also operate independently and are shaped by a multitude of factors. In this regard, it’s essential to leverage the economic benefits brought about by immigration effectively to ensure they benefit all citizens, including in areas like affordable housing.
It’s a good thought experiment, but perhaps a better one would be, “had GDP not increased over the last 40 years, what would be the impact to the lower and middle classes?” In such a scenario, I think there is a real risk that wages would not have kept up with inflation. In which case, the ability for Americans to purchase foreign imports would be materially impacted. I.e. more expensive televisions. So, on closer inspection, perhaps that is a benefit of high migration to the lower and middle classes.
Of course, this needs to be balanced with said higher house prices (among other issues). In 1980, the house price to income ratio was 4.69. It is now 7.76. This is national, so the situation is much worse in cities. As housing is typically the largest purchase anyone will make, it’s not clear to me that this trade is equitable. I would give up cheap televisions if I could purchase my house for much less.
Awesome. Turn them into low income housing. And before anyone chimes in with “it isn’t cost effective” some buildings are easier than others. Let’s start with the easiest ones first.
No need to worry, Im sure the investment banks are slowing moving their holdings into pension funds and similar.
Space in cities is valuable no matter the use. If you were hoping the owners of these spaces would lose money you are focused on the wrong thing.
The interesting part of this is what these spaces might become if they are not offices for the top 10%.
If y’all haven’t seen Louis Rossmann’s video on this topic, it’s a good and simplified explanation of why this is happening.
Hopefully some of them will be turned into indoor/vertical farms, though the insulation would most likely need to be beefed up to minimize power costs.
Interesting. My wife and I were discussing the possibility of opening a laundromat in the next couple years. I wonder if the possibility of cheap real estate would help in the short term, or somehow hinder this down the road.
