They literally need to be torn down. I’m looking at you, banks who own a bunch of run down 70s built properties in Cupertino praying Apple will somehow want to inhabit these terribly unattractive buildings. They won’t and the buildings will remain empty and a blight on the neighborhood.
If you never build parks, you’ll never have parks. Everywhere needs parks and there really isn’t an upper limit to the marginal utility of more park space. If you want to add housing, add it densely, vertically, and adjacent to existing parks.
Don't forget to minimize outdoor lighting and make it the right color temp (2800k). We need to keep city light pollution in the city as much as possible and set an example of how to do outdoor lighting right.
The land is worth a lot, even the shabbiest office building on top of the land is still worth quite a bit, it's the demolition and remediation costs that cancel the latter out, because they are also quite a bit.
Someone still needs to buy the land and then pay out of pocket for the demolition and remediation costs.
In my city, there are quite a few office buildings started or built during the pandemic. They are "see throughs" because there are no tenants and it's probably not likely there will be anytime soon.
There should be some occupancy rate baked into the analysis as well, no? It doesn't make sense if it's mostly/purely on the basis of the rent, a property with 10 units that has one tenant on a sky high rent but otherwise is completely unoccupied is much worse off than a 10 units property with 10 tenants paying 20% of the sky high rent.
Worse off cash-flow wise, but better off balance-sheet wise.
Now you and I, we're all about the cash flow. But there are serious accounting complications when the balance sheet changes.
Plus it's not a good look to reassess asset values up and down all the time (it's a red flag to the tax man) so its better off trying to get a long-term view, not a short term one.
But to answer your question, no occupancy is not generally a factor when considering a buildings value. It's too volatile to be a useful input against a long-term asset.
Got it, it makes sense but at the same time (as with most accounting) it... Doesn't?
A property can take a loan based on their balance sheet asset value which is based on the rent price, if those rents are too expensive for the market and keep the building mostly unoccupied it means that the asset value is inflated, since it cannot achieve its supposedly sheet value as the rent is not attractive and won't generate cash flow, if/when the building as an asset is sold the buyer will want to have it to generate cash flow and that requires renting out as much as possible for the higher amount possible, so at some point the whole charade just implodes?
Wrapping my head around financial tricks is quite hard sometimes, some of it just feels like smoke-and-mirrors way too detached from reality. Is it because it's mostly purely quantitative rather than qualitative in the 2020s?
Think of it this way, on the one hand the building changes in value a bit every month. Sometimes it's up, sometimes it's down. And sure, there might be a bank-loan against the building.
But buildings are not revalued all the time. They typically revalue when they change hands. You might have it revalued (up) if you want to get a bigger loan, but it's not like the bank is running around revaluing buildings in case they went down. (It's not good for them to acknowledge it's underwater either.)
Both parties are optimizing for the _long game_. If the market is in a short-term slump (think < 5 years) then it pays the bank to wait for a recovery, and it pays the company to hang on.
Yes, if done at scale, across an industry, then the wheels can come off in a big way (as happened in 2008) but for short term fluctuations there's a polite understanding that it's in everyone's interest to carry on through the downswing into the next upswing.
Land value tax is enough imo. Wasting land potential and speculation is heavily disincentivized by it. Penalties for not renting would be gamed in no time.
It's a short term workaround, as it has no impact on real value and they have to pay the bank anyway without that income stream; so if someone feels their operation will go insolvent, that's a way to postpone it at the cost of some extra losses, but not prevent it.
I recall seeing some famous mix use buildings out in the Pacific Northwest where the shops were on the ground floor and apartments above.
Imagine having that instead of some aweful looking building built in the 1970s.
As a kid growing up in a very small town, my grandmother use to tell me how she would walk a mile to the train station and ride up to Hartford during the Great Depression. All those train tracks are gone now.
It is hard to think we could have had a great rail system that was fast and efficient in this country.
I find it interesting that somehow CRE meant nothing to me when I started reading the sentence but I quickly guessed it means Commercial Real Estate when I reached the end.
Cheering on office space becoming worthless is fun, but if course nearby residential housing is next. Once you can really work for your company from anywhere, the value of your house within 30 min commute to your FAANG employer drops by quite a bit.
Once your FAANG company realises your they can hire someone who "works from home" for 5 figures instead of 7 figures, thanks to a modest cost of living in their different country, you are in real trouble.
I largely agree but would note that one thing which killed a lot of outsourcing projects were timeline and language barriers. If you’re in, say, Pacific time there’s still a lot of room to go down from Bay Area salaries while avoiding both of those problems. I think we’re about to see the largest experiment yet of how well people can really run remote development projects.
Not sure. You wont get the best people by being cheap. If FAANGs are making monstrous profit they don’t want to rock the talent boat. If you have a company making crazy profit and the people making that happen get paid 5 figures those people just leave and get YC to pay 6 figures for a small slice of their next idea.
Cheap housing? Oooh noooo. All the boomers who bought up multiple homes as an "investment", to extract rent from younger generations, will get hosed? Oooooh nooooo.
For housing to be affordable, the rule of thumb is the monthly cost needs to be about 1/3 of your (net? gross?) income. so either housing costs need to come down or your income needs to go up.
We get screwed when we have no real leverage to increase income. You can grow it somewhat by job hopping, but even that has limits as you age. Even if you save and invest, divorce and medical bankruptcy will fuck you over.
And vertical farms are among the most pointless things one can do... Transforming office space to housing would solve, or at least help solving, a real world problem so.
Those mods can be done hilariously cheap vs starting with a raw block of land with no utilities. Just having a foundation with exterior walls and utilities ran to it, even undersized, is massive time save.
To start with,for many conversions you might need changes to the exterior walls to be able to pack in enough flats with required access to windows, depending on your local regulations, so it's not a given even the exterior walls would be untouched.
It certainly can be done - given many have been done, but it's not at all a given it'll be cheaper for all properties vs. tearing it down (which would still keep the utilities to the property, of course) and starting over.
And it would still be pointless and the opposite of profitable. With enough VC money on the other hand... It seems the vertical farming hype is over quite a while so.
And yet in the UK two separate companies are opening second and third vertical farm locations on the back of demonstrated profits with their earlier endeavours.
The questions then are why are V-Farms profitable in some locations and not others, where are the locations with cheap enough energy that can compete on local area transportation costs against salad and table vegetable farmers with higher transport issues, etc.
FWiW I agree that back fitting V-Farms into vacant "designed for office use" isn't likely to be profitable, they're better with (see link) open greenfield warehouse spaces with loading docks and a clean slate to optimise layout for tray handling, lifting machines, etc.
Didn't read your source, but I did follow the reporting on the death of vertical farming on HN a while ago. Confirmed everything I knew about the field. That someone can make it work, great (we'll see long term so). We are still lightyears away from the agricultural revolution for which people stoll try to sell vertical farming.
I like the low hanging snark joke, goes well with the subject matter at hand!
Edit: Just read the article. Nice PR piece for two vertical farm companies. All that articles contains is claims from the founders and their companies, nothing else. Could be ripped straight of the company websites. Also, 3.6 acres... that is nothing.
Since we need both, appartments and farms, let’s extend that to: convert office building into appartment and have horizontal farm vs convert office building into vertical farm and build new appartment.
In Germany the bloodbath in the commercial property market coincides with the legalisation of cannabis and the formation of local grow clubs on 1st April. Just saying!
It's probably in jest to joke that the newly emptied out office spaces could be converted to vertical farming of cannabis for growers' clubs which are going to be legal from April 1st in Germany.
To be honest, if these growing clubs could cover rent + electricity + water in my opinion it is not really that bad of an idea to take over empty office buildings, most legal cannabis is already grown in very controlled environments, open plan offices would be pretty good for it.
