Armchair opinion: They should sell the properties to make up if they're having a deficit. Not predicting how this market situation would play out sounds like mismanagement.
The problems with this are several:
- The value of a commercial building is a function of rentable value times expected ownership period. If you own a machine that prints $40k/mo for 10 years, then it's value is $4.8m.
- Most landlords do not buy the land outright but instead buy everything with mortgages. This is true for both commercial and residential real estate. And everyone is leveraged to the hilt.
- The reduction in commercial office rentals has caused a reduction in the actual value of the real estate in question[0]. Since landlords are leveraged, they can't sell without going underwater.
The entire real estate market has an interest in keeping land prices high - it's a sort of class collusion. So there's a lot of systems in place to deny the inevitable, kick the can down the road, and so on. For example, banks will actually agree to repayment pauses when a building is between tenants, because it beats having a landlord liquidate a bunch of underwater properties and actually realize losses on something that is literally government-engineered to stay expensive.
[0] There's an interesting wrinkle to this in that normally you actually wouldn't be allowed to do this. When you buy a building to rent it you also agree to a price floor set by the bank. If you rent for less your mortgage explodes - as in, you immediately have to recollateralize (pay back) the building value that you destroyed by undervaluing your rent.
Normally, government buildings ("Held for public use") don't pay property taxes. This can be a serious issue in municipalities where large portions of the non-residential real estate is held by a higher-level governmental entity, such as Jackson, Mississippi, where the state government makes up a large bulk of the functional real estate, and thus does not contribute to the municipal tax base (while still making substantial infrastructural demands).
[0] NY state example: https://www.osc.state.ny.us/files/local-government/publicati...
Cities could convert these office spaces into homeless shelters and save money.
Yes, by default commercial buildings have centralized plumbing for common facilities. That is easily remedied with a few holes added into the concrete, and new plumbing run.
Enough windows? WhatTheHuh? Commercial => Residential building conversions do often end up with some "unique" floor plans sometimes referred to as "shotgun" layouts due to their long and narrow designs. This ensures each unit has some windows (most often you can't open them as the original design didn't open). Interior spaces get converted into other common area/use spaces without window access.
Could this be a problem for fire codes? Having multiple ways out of a bedroom for example. I've been in commercial buildings that seem like total death traps in a fire. Even if you get manage to break a window you'd have little chance of surviving the jump, and any kind of ladder long enough to reach the ground would be impractical.
tl;dr It can be done. You're better off with older styles of office buildings. It's expensive so you end up with luxury apartments.
> Cities could convert these office spaces into homeless shelters and save money.
does not follow from this:
> Unhoused homeless people actually have a non-zero cost to the cities they’re in, whether it comes to incarceration or other costs.
The problem is the homeless, not their unhoused/housed status. Never saw so many ambulances on a daily basis as on a hotel that was repurposed for homeless. (Owner was pretty happy having his crummy hotel filled at a $200/night rate ;) )