Landlords Are 'Handing Back the Keys' with Offices 23% Empty

The problem is that investors who have been working in the business since 2010 have no idea what a real economic recession looks like bc the fed keeps on swooping in to save the day. Asa result, a lot of investors levered up their books.

The investment business is not a free market bc the downside risk is no longer present.

I think the answer has to be a punitive vacancy tax: like if a commercial restaurant space is idle for 3 months, the tax rate for every property with the same commercial owner goes up every month. These properties being idle has ripple effects throughout a neighborhood which shouldn’t take years to recover.

The impact on city revenue will be significant right when problem think SF is pulling out of things. And the city knows it. They’ve projected it clearly but no one will listen.

The owners of capital look out for themselves. Seriously, there is more class consciousness among the obscenely wealthy, than there is among the plebes.

A bit of this is like things being described in unlike manner, a bit is fundamentally different situations (needs and relative scale.) A person needs at least one home, and rarely has more than one. If they shed one because they can't afford the mortgage—whether or not that is a good financial decision—they still need a new one.

A commercial landlord that sheds their Nth property still has N-1, and can continue working as a commercial landlord without a problem.

Also, a homeowner that does a deed in lieu, short sale, been foreclosed on, etc., on a home loan has probably had forgiven or defaulted on a lot greater share of either their income/revenue or total debt than a commercial landlord that sheds the Nth property for similar reasons.

But generally, not dragging out an unmanageable loan and cutting the bleeding via short sale or deed in lieu where practical is considered prudent for individual borrowers with home loans.

Does it hurt your credit? Sure. But that's a temporary thing, and wirth shedding the drag on your finances for in many cases.

Homeowners who stop paying mortgages do not have access to cash, so there is no utility in doing business with them.

Suppose there was death penalty for this type of behaviour. If you default of $100M of debt you are executed, no limited liability shroud, no bankruptcy, no backsies, no do-overs -- just cold steel. Your head in a bucket, and your family destitute in the streets.

This type of behaviour would cease to exist almost immediately.

That is a quite misleading restatement of the facts. 2 of 144 million homes in the US were foreclosed in 2008, and 17% of those were deemed "strategic". That's 0.2% of homes.

Whatever one thinks of the rest of the book, everyone should internalize the part of Graeber’s Debt in which he explains that connecting moral duty to personal debt under impersonal capitalism (if not, perhaps, to debt owed someone you know) is grade-A bullshit.

It’s just business. Make the move that is best for you, period. Sometimes that’s default! It’s probably nice for lenders if people believe there’s some moral duty attached, but that moral duty is only ever gonna go one way, so don’t fall for it. They’re not doing you a favor. It’s business. They make profit because there’s risk.

I think it's one of the dumbest things ever to happen in corporate America and once this whole thing blows over everyone will say: of course it didn't work. But because shareholders something somethimg it was their duty to attempt it.

The economic incentives will push toward remote being the norm for most office jobs, whether they like it or not.

Maybe downtown SF is still “cool” (for whatever value and age group you want to assign that to) and I just don’t know the Bay Area as well as my own city.

Lenders are going to take this into account. I imagine that commercial real estate lenders are realists though, and expect their debtors to exercise their right to walk away from deals that go south. So lenders may consider it primarily a reflection of the state of commercial real estate, and secondarily a reflection of those companies' ability to operate in a bad market, and a fairly minor update on how the debtor will behave in future deals (because they already expect this behavior).

Home mortgage borrowers defaulting is more unusual and may say more about the person, given that a high proportion of the population will hold onto their home even if the value of the home drops and the mortgage gets underwater. This expectation gets priced into the terms of the home loan. So an individual who's shown that they're willing to exercise the default option if the market turns has a different risk profile.

The only thing I find really inexplicable is those few submarkets where vacancies are high and rising, net absorption is negative, and they are still expanding the inventory by 2% or more annually. That's truly baffling but maybe those investors have reason for optimism.

It has impacted the market for office building construction. Offices are starting to feel like malls: they exist and serve a function, but aren't strictly necessary.