Office vacancies in San Francisco jump to a record 33%
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- ICE vehicles are contributing to poor air quality/climate change: WFH improves it (less commuting, lower traffic, etc)
- Rural areas are losing population, suffering from poverty: WFH improves it (relatively affluent families can move there)
- Suburban areas have poor walkability/local shopping/facilities: WFH improves it since people will spend more time there.
The people who seem to be fighting this are corporations that hold commercial real-estate (and the media companies they run). Really just goes to show that most of their statements about the environment are just nonsense (looking at Apple in particular).
While the executives enjoy all the benefits of being remote :)
I agree that WFH is positive in all the ways you mentioned. If all companies really believed it improved overall productivity we'd be there already.
I find it a little galling though that the "Pro WFH" side needs to prove it, but the "Nay WFH" side doesn't simply because we've arbitrarily pinned that as normalcy. I've read studies that support both modalities, and based on comparing their methodology it seems very easy to construct them to show any conclusion you set out to show.
I'd argue given the benefits I set out above (and others), a higher burden of proof should be asked for in-office, rather than just accept it as the De facto standard and setting the bar high to challenge it. If they both started on even footing WFH would win because the benefits are quantifiable, whereas in-office are anecdotal.
PS - In the above I even forgot all the family benefits of WFH.
Also if your vision of WFH is that everyone sprawls out then it doesn't solve some of your other issues: people will still need to use their vehicles to get places (because unless we solve the root issue of 'too few homes' then those people will be spread out from each other or services to not create more cities with too few homes) and their sprawled out suburban communities will not suddenly become more walkable. They'll just drive everywhere.
But if those same employers are OK with employees who want to and can productively work from home, they're also justified in largely ignoring the preferences of employees who would prefer a bustling in-person office.
Especially among execs who have so much wealth that commercial real estate holdings, much less the ones they can directly influence, are in the noise.
Those same individuals also own companies that pay rent, and so also have an incentive to reduce the amount of money spent on that.
I don't think anyone in the managerial class is looking at their E-Trade asset mix, and deciding that they should change company policy to protect their investments. One decision at one company isn't going to move the needle one iota. And even if it did, it would move another needle the other way (companies are tenants, not landlords).
Much easier to sell the real estate and purchase more shares in companies that were once tenants.
Anyone with the political connections to get a residential conversion approved. The wealthy elite are uniquely positioned to profit from this in a civically inactive and politically insular city like San Francisco.
Congratulations, you’re basically back to square one of filling empty real estate, now at additional cost. And thus why the incentives are to try and ride out the status quo by forcing people back into offices.
Nevermind the knock on effects of retaining and growing the on street retail base that has fled entirely commercial sections of many urban cores. You don't get a safe, friendly neighborhood when the streets are deserted every evening after 5:30pm.
https://www.nytimes.com/interactive/2023/03/11/upshot/office...
Again, we also have to think about what the incentives would be for preserving the value of the general case of the asset class, not whether individual buildings are convertible.
NYC already has seen many extreme building conversions, for example turning large apartments into micro-apartments. Many other cities have not had the economic pressure for conversions to occur.
When these buildings default and their property taxes go unpaid, the locality will have to do something with these properties, and often the financing available to municipalities is much better than what the general market can get.
There may be an incentive for executives tied to local real estate, though. e.g. owning a home in the Bay Area, and seeing it get devalued as everyone is moving away. Residential prices have been falling in the Bay Area... but then NYC has been pretty stable and there's still an urge for BTO there among the banks. Finance is much more relationship driven than Tech, though.
I suspect this is the real reason big companies are so incessant about RTO. They have to stay or breach the contract which would cost a ridiculous sum of money. Funny enough I’ve observed the exact same behavior when buying colo space or circuits in a datacenter. The previous person would sign a 10yr contact and act like we saved a ton of money, then we’d be stuck paying $10,000/mo for a 100Mb internet connection long after prices dropped an order of magnitude. Unfortunately there is no requirement for critical thinking skills to sign a contract.
In general there tend to be conventions around lease durations, and in a hot market you don’t have much bargaining power to change the terms. The better the tenant, the more leverage you have though.
In general the risks of locking into long duration contracts needs to be weighed carefully, as we saw with SVB
I know it’s a little more complicated than this, and I know there are jobs with Reasons to be in the office (I enjoy one) but still… now you have TWO problems.
There are multiple equilibria. I like hybrid work. That doesn’t mean others shouldn’t be allowed to require office time. The market will work this out in tech; employees have bargaining power.
Partially disagree.
Maybe I'm not representative, but most of my family's driving is specifically _commuting_. All other weekly errands add up to less than one day of commute driving. Actually, less than one way of one day of commuting.
Unless you compare a "fully rural" drive-60-miles-to-get-groceries lifestyle to basically a "downtown manhattan" walk-to-the-office one, I'm skeptical that total car-miles will increase when transitioning from WFO to WFH.
Most "completely non-walkable" suburbs will still have a grocery store within a few miles, usually in a so-called super center with a bunch of other stores. I don't have data to back this up (other than talking with coworkers), but my sense is that people who talk about transitioning to a "rural" WFH really mean "move to a small town" or "move to the outskirts of an exurb".
So, even if they become completely car dependent, they're still reducing from 50 commuting miles per day to 2-3 "errands" miles.
Hmm ... walkable neighborhood has even become more livable and walkable, all my car uses could now be public transport or car sharing.. needing one now maybe at most once or twice.per month, sometimes less.
> we solve the root issue of 'too few homes' then
Yes.. but on the other hand you can mix only so many homes around offices.. which would make my neighborhood less walkable again.
Also I neither want to be location dependent for job selection, nor do I want to move due to jobs? Kind of arrogant privileged view, on the other hand, why not just leave the space for people that actually really need to live nearby their working location, like the merchant, the doctor, etcetc?
> Some of us simply want our job to provide us with a space where we can work that isn't 10 feet away from where we spend the rest of our day
If you really have that luck to be able to live that close to your office, great.. but how long will this hold? I idiot actually moved pre-pandemic closer to the job, just that they wanted a cheaper location and reorganize and moved then farer away, lol, so I had 2 month of 10 minutes to work :) Until I get that back I prefer not to was so much time travelling for barely nothing.
A lot of people here just want to work from home and the range of social and economic problems they work backward to have WFH solve is astounding.
Postwar suburbs have poor walkability. Neighborhoods laid out before the car infatuation set in are still decent places to live.
They were fairly walkable but people typically needed to use the streetcar to get to work in the central core of the city. They're a little less walkable now, at least where I live, because the corner stores no longer exist, people go to big box grocery stores.
Streetcar suburbs aren't considered suburbs now?
What's this in reference to, with Apple? I don't recall any communication that their in-office policy was related to the environment.
It's not that they're nonsense, they're simply whatever those corporations deem to be most profitable to say. To expect differently is misguided.
It's exceedingly rare for what's most profitable to project/say to align with what's most profitable to do. Even for individuals... "do as I say not as I do" is an idiom older than dirt.
Doesn't make it right, corporations are incentivized to behave like psychopaths. But it's not nonsense, it speaks volumes to what a given business is appealing to. In my experience they're often most vocal about the aspects they're actually behaving the worst in.
I mean I don't love to drive in west coast cities that are congested, but in most of the country you can drive at highway speeds on the highway, except for rush hour, which in those places lasts one hour and during which you can drive at highway speeds minus 10 mph.
Not empty, but not as full as it used to be, I also enjoy commuting because its the perfect place to read.
The BART website clearly states that they are able to provide current operations due to COVID funding which runs out in 2025. They plan to stop offering weekend routes, stop running after 9PM, reduce train frequency to every 60 minutes, etc.
From my perspective, there's a website that has the word crisis in the URL, a chart that shows a ~40% loss in revenue due, and the two-year SF budget shortfall is trending up - recently revised from $720M to $780M. I find it challenging to take away an alternative perspective when none is offered up on the website beyond "be a transit champion."
I wasn't able to easily look up our highway spending budget.
My comment was about America, but point taken. Road infrastructure in Japan has heavy use tolls.
> Americans simply prefer sprawl and cars when it comes down to it.
Americans aren't a monolith, and transit increases land values so it's unlikely Americans prefer sprawl, all else equal.
The vast majority are not, the systems in a bunch of Asian cities (mostly in Japan, HK, Taiwan, Singapore) are the exception due to a few reasons, most notably because they use distance-based fares and land around stations often belongs to the operator bringing in massive commercial revenues.
Not profitable != not financially viable. At some point, anything that loses too much money becomes not become viable. Transportation isn't exempt from this.
>Interstates aren’t profit centers.
US highways do pay for themselves <https://web.archive.org/web/20170712175437/www.rita.dot.gov/...>, and help pay for other modes of transportation. Transit receives the biggest subsidy per passenger-mile, with rail and airlines in between.
(For those wishing more detail: From the executive summary <https://web.archive.org/web/20170628114204/http://www.rita.d...>:
>*Highways*
>* Users of the highway passenger transportation system paid significantly greater amounts of money to the federal government than their allocated costs in 1994-2000. <https://web.archive.org/web/20170628114204/http://www.rita.d...> This was a result of the increase in the deficit reduction motor fuel tax rates between October 1993 and September 1997, and the increase in Highway Trust Fund fuel tax rates starting in October 1997.
>* School and transit buses received positive net federal subsidies over the 1990-2002 period, but autos, motorcycles, pickups and vans, and intercity buses paid more than their allocated cost to the federal government.
>* On average, highway users paid $1.91 per thousand passenger-miles to the federal government over their highway allocated cost during 1990-2002.) track
* This includes an important subsidy from urban road users - who are federal funding ineligible - to highway users. * Federal funding is only 25% of highway spending, the rest being state and local funds. * Most road expansion capital projects deliver worse increased passenger throughput per dollar than highway projects.
Regarding costs, a good rule of thumb is the best performing road networks pay for half their expenses with user fees (Texan highways). Some poorly performing ones like Maryland are at 20% (http://www.actfortransit.org/archives/testimonies/2009Apr29T...). Owen D. Gutfreund’s Twentieth-Century Sprawl is a good reference.
The final logical mistake in this line of analysis is looking at per rider subsidies between roads and transit, since American transit systems are uniquely inefficient precisely because of the burdens on transport laden by the road system. You can’t build densely because everyone thinks their cars won’t fit in the new urban geometry, but density is a precursor to successful transit. So we are stuck in an equilibrium where we prop up despots around the world for gasoline while everyone hates their commute.
Those statistics are probably closer to what you want.
I find the reports interesting and they change through time and for example the breakdown by day of the week.
...maybe they see you coming?
And yet there are people in denial. This /r/sanfrancisco post is unintentionally hilarious. <https://np.reddit.com/r/sanfrancisco/comments/11z2cz5/americ...> I think they think that "People leaving SF" = "Trump wins", or something.
https://therealdeal.com/texas/2023/04/10/austins-office-mark...
In any case, Austin'w population is growing 2% annually. SF growth rate is essentially 0.
Excess capacity is a problem if it stays excess capacity.
On the other hand, in SV we got a year's free rent, so we took enough space to fit our guess for what we'll need in 18 months. I imagine that will be reported as what rent we'll pay when we finally do start paying, without averaging in that year of no revenue.
San Francisco in particular has done everything it can to reward speculation and higher prices by opposing development, thereby greatly enriching those in real estate.
Weathering one to two years of missed rent might be very well worth what they can get on the other side. In anti-development areas like San Francisco, the profits from real estate appreciation are one of the most important aspects of the financial side of the property, and rents often take a back seat.
They’re also leveraged. Renting at a lower rate threatens insolvency.
Assuming they don’t refinance. Which a lot of them did when rates were low.
Interestingly: I have heard that, for loans on commercial real estate, having vacant space with a high rent is better for the landlord than having a paying tenant and lower rent. Specifically, that banks:
1. Often allow the landlord to defer a fraction of the mortgage payment (proportional to vacant space) to the end of the loan
2. Often require an additional payment (to reduce the LTV) if the average rent of non-vacant units falls below the level when the loan was originated.
So, landlords keep the space vacant because a) they can; and b) reducing rent means they have to pay the bank extra money they may not have.
But nevertheless I’ve heard there are some cost optimizations to be had when the office is fully empty too.
De-regulating downtown zoning for conversion and tax breaks (https://sfstandard.com/business/mayor-breed-introduces-tax-b...) are both likely to be tried, though what impact it will have seems limited in the near term.
If it does rebound, it might not be until the next generation of startups reaches mid to late stage on the other side of the current lending crunch, presuming they don't exclusively work remote or choose NYC as their primary hub.
Building boomed in SF during the GFC (2008 et seq) so there was extra capacity as things recovered, and eventually space was at a premium again. The real estate glut helped early stage startups.
> presuming they don't exclusively work remote or choose NYC as their primary hub.
I love NYC, and am even on a couple of boards of actual tech companies in NY, but c'mon it doesn't make a lot of sense for tech businesses, except I suppose some fintech. Advertising, online retail, sure, I suppose, but those rarely need bespoke technology, much less anything novel. But California's level of investment last year slumped to only 3.5X NY...it has a long way to go. And much of that slump was in SF -- SV held up much more strongly, as you could also see in the real estate article posted on HN today (NYC commercial vacancy rate isn't as high as SF's, but is higher than SV).
These hot spots thrive on network, and nowhere are the networks more intense than NY, but on the tech side the biggest, most active network in the USA, err, world, is still in the Bay Area.
The fact is that SF has added way more jobs then housing for decades.
IMO this is a great opportunity for SF to re-balance their jobs/housing situation. I have no doubt that SF and surrounding cities will act promptly to turn this into an overall win! \s
They rather have 0$ than what the market can bear as long as they wont have to lower rents.
Normally, your CRE is plumbed for 10 TPH. If you convert it into residences, then you're looking at 1000 TPH.