‘Zombie Offices’ Spell Trouble for Some Banks - The New York Times
‘Zombie Offices’ Spell Trouble for Some Banks
This is the real reason for companies wanting people back to the office.
All this talk about collaboration and team spirit is just the publicly given reason for wanting people back to the office.
The real reason is that now the owners of the buildings are losing money.
Cry me a river.
Let those banks burn. I could not care less. Let the commercial real estate market burn with em.
We don’t need them.
You do know if that sector fails, so does your pension, and probably a whole load of the economy.
Price of doing business. :)
No but seriously, it's a bit annoying that these guys are holding everyone hostage in a way. If they don't make bank, we all suffer? Seems wrong.
Pension, lol. What is this, the fifties?
When were you born, 1950? Who the fuck has a pension at this point?
Not really. The office market is not that huge and the vacancies overall are also not that bad. It's not like every single office is suddenly empty.
On the flip side: where these offices are located, housing is extremely expensive, so you could transform some offices to apartments, pivot projects currently in construction and maybe even demolish some older buildings.
These headlines are just a sign that the current management class is utterly incapable of reacting to anything but "line go up". They can't understand that they can't exploit their way out of this for once.
Didn’t you and I already debate this?
Your argument is no different than saying the stone chipping business will collapse because pesky bronze smelters are making swords.
A broad portfolio doesn’t have a particularly heavy real estate position. Maybe some state pension schemes are - I think you mentioned the Canadian one last one - but it’s not like the office buildings become worthless from one day to then other. Some will remain occupied offices, some will convert into residential accommodation. Others will get torn down and redeveloped. The economy will adapt.
Yep, been saying this for years now, the vicious and irrational hatred against work from home employees is driven by two main factors:
Another part of #2 is they can no longer be toxic and verbally abusive, like they could in person. Anything virtual might be recorded and every email is a record.
Thats a key element as well, the insane corpo manipulation that only exists if you can prove it even though everyone who doesnt up their head up either their own ass or someone elses knows is absurdly rampant... but youre too busy to record it all!
If only there was some solution to unused corporate office space and the housing crisis that has tents in every city?!?
Oh well. Better give the bank a bailout and stop thinking about it.
Wait...are you suggesting we solve a problem? Or even two problems simultaneously? That's absurd! We need tax cuts, deregulation, and corporate bailouts....I may not know the problem, but I know the solution. /s
That doesn't make sense. The companies that want people to come back to the office are the ones paying rent. That rent doesn't get better or worse if people come back to the office.
These companies tend to own or have long term leases, so either they are stuck paying rent and have to justify the expense or they own an asset that is depreciating in value and they could stop that from happening by spending no money to force their employees back into the office. You have to think about the big money, too. Real estate is a cornerstone asset for big money, many banks and real estate empires hold these enormous office buildings and society trending towards WFH means those buildings are rapidly losing their value.
Justifying the rental expense doesn't really make sense, because they end up paying more in utilities in addition to the rent. If you're still on the hook for a lease and have most employees WFH, just downsize when the lease ends or move everything remote if possible.
Seems like banks are worried about the loan holders defaulting and are pushing companies to bring employees back to bring up demand for commercial real estate?
Yes, thank you! I hate this constant narrative that back-to-office is always tied to commercial real-estate investments, or that there's some magical tax incentive.
Usually what you have is: bank lends money to a commercial real estate company that owns the building. Commercial real estate company leases out office space to one or many companies. When those companies reduce or terminate their leases, the commercial real estate company struggles to pay their mortgage and defaults. Commercial real estate loses. Bank loses. And if commercial real estate had pooled investments to fund the building (along with bank loan), then those investors lose as well.
There are some large companies that own their own buildings, but that's more of an exception.
But those rent paying companies have very wealthy boards who are invested in commercial real estate.
And the companies are controlled by venture capitalists, who are smart and distribute their investments. So they have interests in various companies, including the real estate companies.
Oh won't somebody think of the shareholders.
Oh wait, I'm doing it right now. Mua ha ha ha ha ha ha!
It's sad that problems for banks are never problems only for banks. They always turn into problems for everybody else
Apparently literally everything is technology according to lemmy
RTO/WFH definitely impacts tech workers the most, I think that’s just obvious.
The pandemic triggering a cultural shift to WFH is a big part of the problems in the commercial real estate market. Basically, America becoming 10% more technologically sophisticated may have unhinged the financial system. Story about the impact of tech on society, I guess?
The logic seems to be, "if it impacts tech workers or people interested in tech in any way, it's technology".
All I can think about is that Ali G skit about how his friend "ain't got no techmology" and the expert asks "does your friend live in a house? A house is technology."
In a way it is. Modern office buildings are only possible due to technological advancement.
I just ate ravioli. I’m sure they were packaged in an automated fashion. I’m gonna now post about ravioli in c/technology since it’s all the same. For now here’s some recipes https://www.tasteofhome.com/collection/ravioli-recipes-thatll-fill-you-with-joy/
Damn, squatting on real estate is backfiring. I'm heartbroken
I will never have sympathy for landlords.
Easiest 'job' on the planet.
Fuck em
For sure. Business investments go up and down all the time. That’s business
I’m more concerned about trains/transit. After all these years, we (US) are finally investing in improving transportation within and between cities, just as commutes have been cut and many cities may be depopulating.
I live in New York. The Wall Street area has been turning older buildings into living spaces for a while. One old office building became an NYU dorm, and the Woolworth Building [once the tallest in the world] is now luxury condos.
And you know what's nice about doing that? It's people present 24/7 and that means stores and restaurants that can be open even past office hours!
This is simply sunk cost fallacy. Companies signed leases. Now they regret it but can't back out so they've got to try to pretend it's worth it even if it costs their employees money out of pocket.
It's not really about owners it's more about leases and the company leasing the property "not getting their money's worth"
Often they have signed leases with themselves. With original owners, holding companies etc.
This is a way of extracting value from a corporation without paying it as a dividend or salary. Dividends go to all shareholders. Lease payments go to one specific one.
So obviously if there's no reason to pay these leases anymore, somebody powerful is going to be very upset.
I had to start going back to the office today. I'll eventually split time between two buildings, but my main office is practically empty. Been here 3 days in a row, and I'm the only one in my area that stayed the entire day. The first day 4 of 5 other people left at lunch. The last person left about 4:15pm.
Yestersay I was by myself until about 10am and that person left at 4. I'm here by myself today and I don't suspect anyone will show up late.
On the other side of the floor where the breakroom is, there's maybe been 7 people total across the 3 days I've been here lol.
Yeah it's like that now. People come in late and leave early. I do that too since it's fine. Only one office day is required and I make sure to come in late and leave early to beat traffic. Everyone does. :)
I use it as a day of socializing with the team. Just talking. Not much work.
Yeah, I get the socializing aspect and it hasn't been bad coming in. I've been wfh for the past like 4 years so it's nice to put on actual clothes instead of wearing joggers and t-shirts every day lol. You're lucky you're only required to come in one day a week. We have to come in 3 days (eventually we'll be monitored to make sure we come in 3 days) but at least we can pick the 3 days every week.
On the plus side, we have assigned cubes (no hotel cubes thankfully!) and since I was part of the first small group to come in, I was able to change cubes.
However, I still think it's BS that companies are forcing the back to work crap with such strict boundaries.
For me, it’s important as a mental health thing. Working from home, I tend not to see other humans and not go anywhere I don’t need to. I’m also poor at establishing work-life boundaries.
Meanwhile, going into work means getting presentable, interacting with people, not forgetting a lunch break, and I tend to stop working when the place empties out.
It’s also important for career advancement. I’m poor at self-promotion, so working from home is “out of sight, out of mind” no matter how much I do. It’s easy to say that management needs to figure that out, but it’s in my self-interest to make sure they realize when I get shit done
lol I wrote this over a year ago
Meanwhile my company wants to double or even triple the amount of office space we lease in the next 2-3 years, but building management is quoting us prices that are even slightly higher than they were in 2020.
Prices only go up. If a price is allowed to fall then the gravy train stops and the owner class gets really salty.
Kinda sounds like the board of your company is full of real estate developers who still win if you guys go tits up.
No not really. We're already hybrid remote, our business is just growing. We're already hot desking but that will only get you so far. We currently rent 1 floor of a skyscraper, we want to also lease the completely empty floor above us but the prices are what they were when we signed our current lease a few years ago.
So more or less, since many businesses are only keeping their offices because they have multi-year leases preventing them from simply packing up and going fully remote or downsizing to a smaller office, we can expect occupancy rates to continue falling and slow-burn exacerbating the commercial real estate crisis. And really, the problem here is just that banks are overinvested in commercial real estate, not knowing that a pandemic would alter work patterns in a lasting way. So again, we're all in for a fun ride on the roller coaster that is capitalism, literally because of problems caused by real estate speculation.
Because banks fucked up and we have to solve it
If you're holding onto something useless and eating up your budget, like, that's on you, bro.
What's that you say? Rezone these as residential and make more housing you say?
Fwiw, turning most of these buildings into livable spaces is a lot harder and more expensive than you'd expect. For many of them, it would actually be cheaper to just raze it and create a new residential building, even if it maintains the same outer dimensions.
I just hope something can be done with the empty structures. Turning them into housing is easier said than done for many buildings.
It's easier said than done, but it's not that difficult. It's mostly reconfiguration of plumbing and zone controls on HVAC. The electrical is easier to distribute.
If you commit to doing it the right way, and tear it down to the structure (but leave the facade alone), it's not terribly difficult.
The problem is that the building owners want to do it cheap, and it won't be cheap. It will be more economical in the long run than fully vacant building though.
Iirc one of the biggest challenges was plumbing right? Especially for tall buildings.
This is a good post, but I'm not sure it belongs in technology. Hmm.
The connection is mostly that tech companies have been wanting people back to offices for years now, so it kind of made sense to place this also in tech. But I know what you mean.
That is true, nevermind me.
I'm a union commercial electrician where I spent a decade building and improving tenant spaces in commercial towers in Seattle and Bellevue. There's a huge dip in our work now that there aren't high rises being occupied. I'd like people to work from home, but my blue collar job can't be done from home. If we can change what these buildings are used for I wouldn't be worried.
Google here in Fremont area on the other hand is expanding their space by occupying a larger foot print with a smaller work force per square foot. That's a good way to keep us working.
I don’t know anything about being an electrician - commercial or otherwise, so I’m curious to hear your side.
When all those people go to working remote, it’s not like they’re no longer in need of electricity. Presumably their home demand is higher and we might even see people adding new office spaces to adapt their home. Maybe the public grid needs to change to support it? Won’t this mean that there will just be a different type of demand for electricians?
Are there reasons this would be less attractive to electricians? Pay, job security, or something else?
There are many different types of electrical workers. I'm a commercial inside wireman. I'm licensed to install electrical infrastructure and maintain electrical infrastructure in commercial and industrial complexes. I have a wide range of work I can do, but to put it simply I only have a job if: Complexes are being built (I'm doing construction) Complexes are being used (this is mostly industrial since commercial spaces have building engineers that mostly took over our maintaince work).
People working from home eliminate both my outlets of work. Residential electricians make significantly less than I do, and their work is pretty similar but dedicated to homes. But even their work would be cut because if we're talking office employees making an office at home, there's not much if anything required of any electrician for someone to set up a computer and a desk in their home. The grid will be using much less power due to drop in facilities.
But it's not just my job as an electrician. It's construction in the city as a whole and even the city economy. Because outside of the residential district in cities, people working from home in the suburbs aren't utilizing the city infrastructure and commercial goods.
Fremont in Seattle has a large presence with many employees. The tech here tries to stay very competitive so Google was providing their employees with beautiful breakfast and lunch amenities. This created such a blow to Fremonts local restaurants that Seattle had to implement a special tax for serving food in your complex. Basically food cannot be free.
This is but one industry being impacted with employees no longer having a presence in the city high rises they're employed at. Construction slowing or being fully eliminated will remove our presence in the city, majority of tradesmen. Tech will invest less because employees will take care of their own facilities by working from home. Now the economy takes a hit, we don't have work in the city, restaurants don't have customers, and the jobs of the office workers are suddenly finding themselves not needed as much either. Now residential high rises in the city are being vacated. The towers are losing employees and residents. The city stagnants. Economy crashes.
Of course this is pretty dramatic, and very generalized. But people working from home effects A LOT including a few steps down, their own careers.
Oh no.
Anyway.
This is the best summary I could come up with:
Employees sent to work from home at the start of the pandemic have not fully returned, a situation that, combined with high interest rates, is wiping out value in a major class of commercial real estate.
The past week brought a taste of the brewing problems when New York Community Bank’s stock plunged after the lender disclosed unexpected losses on real estate loans tied to both office and apartment buildings.
When a string of banks failed last spring — partly because of rising interest rates that had reduced the value of their assets — analysts fretted that commercial real estate could trigger a wider set of problems.
In other cases, banks are using short-term extensions rather than taking over struggling buildings or renewing now-unworkable leases — hoping that interest rates will come down, which would help lift property values, and that workers will return.
The value of bank assets has taken a beating amid higher Fed rates, Mr. Piskorski and Ms. Jiang found in their paper, which means that mounting commercial real estate losses could leave many institutions in bad shape.
“Commercial real estate is an area that we’ve long been aware could create financial stability risks or losses in the banking system, and this is something that requires careful supervisory attention,” Treasury Secretary Janet L. Yellen said during congressional testimony this week.
The original article contains 1,246 words, the summary contains 223 words. Saved 82%. I'm a bot and I'm open source!
If they can't afford to lose money, they should stop being poor.
They should stop buying avocado toast and make their coffee at home!
It’s really not that hard.
They should sell the buildings...
So, I've thought about it and we have a housing shortage and an excess of offices. Seems like a solid solution. Takes a lot of work to make an office into a home, but it's more profitable than leaving them empty.
But no, that would help people, and the cruelty is the point.
But nobody wants those buildings.
Skill issue