The Future of Cities

[Not A Serious Person]

Since this thread has veered significantly since Page 1, here's something related -- a NYT piece on many major tech companies trying everything they can to lure workers back to the office because they think it fosters creativity and accountability:

https://www.nytimes.com/2023/06/20/business/return-to-office-remote-work.html?campaign_id=9&emc=edit_nn_20230622&instance_id=95727&nl=the-morning&regi_id=108420427&segment_id=136436&te=1&user_id=d36dcf821462fdd16ec3636710a855fa

Now that tech hiring has stagnated -- with the likes of Microsoft, Apple, Google, Salesforce, Meta, etc, actually freezing or even reducing their workforces -- maybe the companies finally have leverage to bring people back in, at least on a hybrid basis? I guess we'll see.

See the story above, they have been trying to get everyone back for three years, this is the umpteenth time that companies have tried this. Why will it work now?

[Not A Serious Person]

Perhaps instead of listening to what one doomer says, perhaps look to what the investors and banks have actually decided was a good idea.  Might there be problems or financial woes?  Yes, of course, but that is investing.  Your solutions seems to be to throw your hands up in the air and say, "Nothing to be done!  Sky is falling folks!"

This is about investing in office conversion. The math does not work (except in specific buildings which are a small minority of the buildings in a city center).

Other things can be done besides money-losing uneconomic conversions.

[Not A Serious Person]

https://en.wikipedia.org/wiki/100_East_Wisconsin
https://www.jsonline.com/story/money/real-estate/commercial/2023/03/10/100-east-office-tower-conversion-to-350-apartments-to-happen-by-2026/69994734007/

I guess someone already had the idea to swap to luxury apartments in Milwaukee.  Oh shoot, I thought that idea was all mine! 

Perhaps instead of listening to what one doomer says, perhaps look to what the investors and banks have actually decided was a good idea.  Might there be problems or financial woes?  Yes, of course, but that is investing.  Your solutions seems to be to throw your hands up in the air and say, "Nothing to be done!  Sky is falling folks!"

This article makes my point, conversions are incredibly expensive and result in high-end apartments/condos. They are not the way to solve the affordable housing problem.

And note that will take 3+ years ... it would take less time to build a similar building from an empty lot ... because conversions are that complicated.

[MU82]

See the story above, they have been trying to get everyone back for three years, this is the umpteenth time that companies have tried this. Why will it work now?

It's already working now for some companies, including Google and Microsoft, which have massive workforces in expensive cities. It's not working as well for some others. It's too early to make a declaration - for me, anyway. If you want to take the extreme view and call it a done deal, that's your prerogative.

[Hards Alumni]

And that one guy is more credible than you.

I should hope so, but despite what he says the reality is that he's wrong.  There are developers renovating buildings.

That's the reality.  I'm sorry it hurt your feelings to be proven wrong so easily.

[Skatastrophy]

This article makes my point, conversions are incredibly expensive and result in high-end apartments/condos. They are not the way to solve the affordable housing problem.

This may be your belief but it is incorrect. Building high end RE solves the affordable housing problem.

Private developers/capital are inherently risk averse. They build high end RE/condos or convert buildings in dense desirable neighborhoods because there is already demand.

Now, if that demand isn't met by new high-end development you know what people like me do? Snap up affordable housing and gut-reno it to make it high end housing, problem solved for me and problem created for others.

More supply is always the answer. Expanding a city’s housing supply exerts downward pressure on market rents. It's obvious, and here's a study - https://research.upjohn.org/cgi/viewcontent.cgi?article=1334&context=up_workingpapers

[Hards Alumni]

This article makes my point, conversions are incredibly expensive and result in high-end apartments/condos. They are not the way to solve the affordable housing problem.

And note that will take 3+ years ... it would take less time to build a similar building from an empty lot ... because conversions are that complicated.

Any housing additions puts upward pressure on supply, and therefore downward pressure on demand, thereby decreasing prices.

Unless you're trying to refute basic economic theory.

[Not A Serious Person]

It's already working now for some companies, including Google and Microsoft, which have massive workforces in expensive cities. It's not working as well for some others. It's too early to make a declaration - for me, anyway. If you want to take the extreme view and call it a done deal, that's your prerogative.

Kasltle is the largest key card security system in the country. They have been offering a metric on office usage since 2020. It is the generally accepted measure on returning to the office.

It has stalled at 50% for about 18 months. In other words, about 2.5 days a week in the office and 2.5 days at home.

It suggests that we are not returning to the office, no matter how many times their is a demand to return.

And the reason is simple ... pay more to come to the office and less to stay at home. Very few companies are doing this.

Until they start paying premiums to return every day, it is not happening.

[Not A Serious Person]

Any housing additions puts upward pressure on supply, and therefore downward pressure on demand, thereby decreasing prices.

Unless you're trying to refute basic economic theory.

Before you make up more stuff ... read this.

(again, conversions will happen. But it is not the big solution you keep insisting it is. It only works for selected niche buildings.)

April 27, 2023
https://www.brookings.edu/research/myths-about-converting-offices-into-housing-and-what-can-really-revitalize-downtowns/

Myths about converting offices into housing—and what can really revitalize downtowns

[Not A Serious Person]

I should hope so, but despite what he says the reality is that he's wrong.  There are developers renovating buildings.

That's the reality.  I'm sorry it hurt your feelings to be proven wrong so easily.

You should just take the L and stop.

[Hards Alumni]

Before you make up more stuff ... read this.

(again, conversions will happen. But it is not the big solution you keep insisting it is. It only works for selected niche buildings.)

April 27, 2023
https://www.brookings.edu/research/myths-about-converting-offices-into-housing-and-what-can-really-revitalize-downtowns/

Myths about converting offices into housing—and what can really revitalize downtowns

Over recent decades, numerous cities have provided public support and subsidies for office-to-residential conversion, and evidence suggests that these interventions produced a public benefit. In
post-9/11 New York, the conversion of 20 million square feet of office space into housing was part of doubling the residential population of Lower Manhattan. Downtown Los Angeles experienced a renaissance after the passage of an
“Adaptive Reuse Ordinance” in 1999 that allowed conversions of older commercial buildings without adding parking, resulting in the direct creation of over
12,000 units of housing over 20 years. More direct financial subsidy includes the recent
Calgary incentive program that provides $75 per square foot to convert offices into housing, or Philadelphia’s prior
10-year tax abatement that converted 8.2 million square feet from over 40 office buildings, increasing the Center City neighborhood’s population by 54% between 2000 and 2020. These experiences demonstrate the potential of adaptive reuse. But they vary considerably in their exact details, which merits careful consideration.

So what I'm saying, works.  Thanks.

[Hards Alumni]

You should just take the L and stop.

Probably some self-reflection on your part would mitigate the continued embarrassment.

[Not A Serious Person]

This may be your belief but it is incorrect. Building high end RE solves the affordable housing problem.

Private developers/capital are inherently risk averse. They build high end RE/condos or convert buildings in dense desirable neighborhoods because there is already demand.

Now, if that demand isn't met by new high-end development you know what people like me do? Snap up affordable housing and gut-reno it to make it high end housing, problem solved for me and problem created for others.

More supply is always the answer. Expanding a city’s housing supply exerts downward pressure on market rents. It's obvious, and here's a study - https://research.upjohn.org/cgi/viewcontent.cgi?article=1334&context=up_workingpapers

You forgot that rich white people that now live in expensive properties in the city will not sit by and allow their market to get swamped with supply leading to their home values going down.

That will place restrictions on it via building codes and limiting tax abatements.

[Uncle Rico]

You forgot that rich white people that now live in expensive properties in the city will not sit by and allow their market to get swamped with supply leading to their home values going down.

That will place restrictions on it via building codes and limiting tax abatements.

Aren’t rich people leaving cities?  Now they’re staying?

[Not A Serious Person]

Aren’t rich people leaving cities?  Now they’re staying?

I said the exact opposite ... it is the poor and middle class that are leaving.

It is privileged white people like you defending them (while you live far far away).

[Uncle Rico]

I said the exact opposite ... it is the poor and middle class that are leaving.

It is privileged white people like you defending them (while you live far far away).

That’s true.  I live in a gated community to stay away from people like you

[tower912]

That’s true.  I live in a gated community to stay away from people like you

Minimum security prison  does not equal gated community.

[Uncle Rico]

Minimum security prison  does not equal gated community.

Listen here pal, as a member of the law and order party, we make sure there ain’t no prisons near us

[MU82]

Charlotte isn't in the Rust Belt or Midwest, but we also have a situation where everyone was working remotely for a couple years. Now, many of our largest corporations are demanding employees come back uptown (which is what the folks here call downtown; ain't that homey?). Talking about Bank of America, Duke Energy, Honeywell, Wells Fargo, Truist, Atrium Health, etc.

Still, there is a lot of vacant office space -- nowhere near pre-pandemic occupancy.

Despite this, Charlotte continues to grow, and people are falling all over each other competing to live uptown or in neighborhoods within a mile or two of uptown. Houses, condos and apartments in the area are fetching serious bucks and many small businesses are being cannibalized by larger ones that can afford the rent.

Some office space already has been converted to multi-use -- housing, entertainment, restaurants, smaller offices. Many companies are keeping their space as they wait to see what the landscape will be in the next few years. It will be interesting to watch.

Like any major city, Charlotte has less-safe areas, ones we avoid. Like any major city, some of our safest, priciest areas have crimes committed there. That's life.

[Not A Serious Person]

What should be done?  The Mayor of SF has an idea ...

June 22, 2023

San Francisco Mayor Floats Razing Mall in Crisis-Ridden Downtown
https://www.bloomberg.com/news/articles/2023-06-22/san-francisco-mayor-sees-downtown-where-stadium-replaces-mall

San Francisco Mayor London Breed called on investors to redevelop the city’s struggling downtown core by converting or even demolishing empty buildings to make way for new growth.

“I think we have to start re-imagining what the downtown can be,” Breed said at the Bloomberg Technology Summit in San Francisco on Thursday.

[Not A Serious Person]

This comes back to the major economic and cultural change in the wake of the pandemic that should now be viewed as permanent, remote work, and work from home. We can argue all we want, whether it is good or bad, it has already happened, and we are not going back. 

Out this morning ...



https://www.bloomberg.com/news/articles/2023-06-23/commercial-real-estate-reset-is-causing-distress-from-san-francisco-to-hong-kong

The creeping rot inside commercial real estate is like a dark seam running through the global economy. Even as stock markets rally and investors are hopeful that the fastest interest-rate increases in a generation will ebb, the trouble in property is set to play out for years.
--
What PGIM analysts have called “the great reset” of values is likely to be agonizingly slow. It took six years for US office prices to recover after the 2008 financial crisis, even though that episode was centered on residential real estate. “This time we think it’ll take 10 years,” says Richard Barkham, global chief economist for CBRE Group Inc.

Commercial real estate’s woes will add to the stress on a financial system that’s already reeling from this year’s crisis in regional banks. And as the downturn deepens, it stands to have a transformational impact on some cities as they contend with empty buildings and lower property tax revenue.

[MU82]

Conclusion:

Shaka won't be able to field a team before his new contract is up.

[Not A Serious Person]

Conclusion:

Shaka won't be able to field a team before his new contract is up.

c'mon, you can do better than this.
Try again

[Hards Alumni]

This comes back to the major economic and cultural change in the wake of the pandemic that should now be viewed as permanent, remote work, and work from home. We can argue all we want, whether it is good or bad, it has already happened, and we are not going back. 

Out this morning ...



https://www.bloomberg.com/news/articles/2023-06-23/commercial-real-estate-reset-is-causing-distress-from-san-francisco-to-hong-kong

The creeping rot inside commercial real estate is like a dark seam running through the global economy. Even as stock markets rally and investors are hopeful that the fastest interest-rate increases in a generation will ebb, the trouble in property is set to play out for years.
--
What PGIM analysts have called “the great reset” of values is likely to be agonizingly slow. It took six years for US office prices to recover after the 2008 financial crisis, even though that episode was centered on residential real estate. “This time we think it’ll take 10 years,” says Richard Barkham, global chief economist for CBRE Group Inc.

Commercial real estate’s woes will add to the stress on a financial system that’s already reeling from this year’s crisis in regional banks. And as the downturn deepens, it stands to have a transformational impact on some cities as they contend with empty buildings and lower property tax revenue.

I don't disagree with any of this.  Also, I thought I read a while back that commercial real estate was undergoing some credit default swaps...  I could be misremembering though.

[Not A Serious Person]

I don't disagree with any of this.  Also, I thought I read a while back that commercial real estate was undergoing some credit default swaps...  I could be misremembering, though.

Office Real Estate is arguably the single worst stock market sector.
I cannot think of anything worse.

And if the stock market is a forward-looking indicator, and office properties have reversed a generation of gains, it speaks volumes about where the market thinks office real estate is and where it is going.