Commercial Real Estate Office Sector Crushed by Work-from-Home, Tsunami of Supply in Q3: Manhattan, San Francisco, Houston, Chicago, Los Angeles

“Sublease Pandemic?” Office leasing activity plunged or collapsed, depending on city, even as companies dumped huge amounts of suddenly unneeded office space on the sublease market.

By Wolf Richter for WOLF STREET.

In the third quarter 2020, the commercial real estate segment of office space in Houston, Manhattan, Chicago, San Francisco, and Los Angeles – each representing a different area of the US with different economic dynamics – has gotten hit hard by the stunning shift to work-from-home (WFH) and the sudden corporate realization that, after years of hogging all available office space for future use, they need to get rid of this space.

There are big differences between the cities. But all of them are getting hammered by a tsunami of sublease space, where companies that leased the space long-term need to shed this space, and the only way of shedding it, other than defaulting on the lease, is to put it on the market and sublease it. These companies will take lower than market rents, thereby driving down overall rents. A surge of sublease space is toxic for commercial real estate.

“Total availability” – sublease availability plus availability of space directly leased by landlords – has soared in all five markets, as has the “total availability rate” (availability divided by total office space), while leasing volume has either plunged or outright collapsed. With transactions nearly frozen during a supply glut, pricing is hard to nail down and will take longer to shake out.

Manhattan wheezes under the weight of sublease space.

Sublease space soared by 2.5 million square feet (sf), including 191,000 sf from Starr Companies at 399 Park Avenue and 147,000 sf from Omnicom Group at 1 Hudson Square.

This drove overall market availability in Q3 to 13.3%, even as leasing activity plunged by 45% year-over-year to 4.7 million sf.

Class A asking rents fell 5% year-over-year to $93.43 per sf per year; but the “taking rental rate” – the rate at which leases are actually signed – fell to $84.39 per sf. Overall asking rents dropped 3.1% to $80.29 per sf, “due largely to the pricing impact of sublease additions rather than a shift in direct availability repricing,” Savills Research reported. By submarket, rental rates ranged from $122.38 per sf at Plaza North to $56.31 per sf in the Financial District.

In addition, average concessions jumped by about 25% to 14.3 months of free rent. Plus, tenant improvement allowances rose by 5% to $115.87 per sf.

“Even if owners remain hesitant to significantly lower direct asking rents, the reality is that the gap between asking rents and taking rents is widening, and generous concessions will result in declining effective rents,” Savills said.

That the lease activity didn’t plunge even more was due to Facebook signing the largest lease of Q3 for 730,000 sf at the redeveloped James A. Farley Building in Midtown.

“Evidence is mounting that occupiers may seek a more permanent WFH shift, which could lead to a 10-20% structural reduction of aggregate demand for office space across the market,” Savills said.

“When discussing WFH in quarterly earnings calls, more than 80% of S&P 500 companies expressed positive sentiment. Even a more permanent shift of WFH for just one-to-two days per week across these companies could drive a potential reduction in space demand of 9-18%,” Savills said.

“Trophy assets will benefit from a flight-to-quality trend as organizations transition the use of office space from ‘performing work’ to centralized collaborative meeting places for culture and innovation,” Savills said.

San Francisco got rug pulled out from under it, leasing volume collapsed.

Leasing activity collapsed by 88% year-over-year, and by over 50% from Q2, to a minuscule 300,000 sf. There was only one lease over 50,000 sf.

Sublease, already high in February, has more than doubled since then, to over 7.5 million sf, the highest in San Francisco’s history, according to Savills Research.

Overall availability, driven by sublease space, soared to 17.7%, more than double the 8% availability in 2015. Availability ranged from 13.4% in the Financial District South to 34.8% in the Jackson Square submarket.

“This glut of lower-priced sublease space has spurred some repricing,” Savills said. Overall asking rents fell 6.5% year-over-year to $75.98 per sf per year. Class A asking rents fell 10.8% year-over-year to $79.55 per sf.

However, with leasing activity having collapsed to near nothing, there hasn’t been “opportunity for true price discovery, and quoted rents remain artificially high in relation to the tsunami of sublease inventory and rapidly rising availability,” Savills said.

Some of the companies that have put office space on the sublease market, after re-evaluating their space needs, include Twitter (100,000 sf at its HQ) and AirBnB (61,000 sf).

And Pinterest, which had signed the largest lease in San Francisco in 2019 (490,000 sf), recently agreed to pay nearly $90 million to terminate that lease.

“Some companies are exploring permanent work-from-home policies as well, allowing employees to move out of the Bay Area and continue employment,” Savills said. “This will continue to impact the market now – and in the future – as companies restructure their business strategies and downsize office footprints.”

Houston, worst hit: double whammy of Oil Bust & WFH.

At the end of Q3, overall office availability in Houston rose to a new record of 27.9%, up from around 17.5% in 2014, when it was already high following a Texas-magnificent construction boom. Class A availability jumped to 29.1%.

In terms of submarkets, availability ranged from 8.4% at Medical Center/South – health care and life sciences being a big industry in Houston – via 29.5% in the Central Business District, to a catastrophic 50.7% in North Belt/Greenspoint, according to data from Savills Research.

But leasing volume in Q3 plunged by 47% to just 2.0 million sf.

Overall asking rental rates have been wavering in the same narrow range since 2014, with the overall asking rent currently at $29.15 per sf per year. The Class-A asking rent at $33.67 per sf per year is down about 6% from 2014. Over the years since the oil bust began, companies, when their leases came up for renewal, upgraded to the latest and greatest office space, leaving their old digs behind and vacant. But that too appears to have ended now, as “cost-consciousness has come to the forefront with tenants actively seeking out lower-cost options.”

“While optimistic landlords are slow to implement downward asking rent revisions, the reality is that the variance between asking rates and taking rates is widening and concession offerings are becoming increasingly competitive,” Savills said.

The largest lease signed in Q3 was by JP Morgan Chase for 252,000 sf at 600 Travis Street in the Central Business District.

Chicago Downtown sublease space surged, as leasing volume plunged.

Leasing volume plunged by 73.3% in Q3 compared to a year ago, to below 1 million sf, and overall availability soared to 18.6%, the highest since 2000, driven by sublease space that soared to over 5 million sf, Savills Research reported.

Given the “glut of newly available space, both direct and sublease,” overall asking rents have begun to skid in Q3, to $40.63 per sf per year.

Los Angeles sublease space doubled in six months.

Office lease activity in Q3 plunged by 61% year-over-year, to just 1.6 million sf, as most companies “are continuing to put long-term real estate decision-making on hold with short-term extensions accounting for many of the leases that did close in the quarter,” Savills Research reported.

Available sublease space nearly doubled since February to over 7.0 million sf in Q3. This pushed overall availability to 20.1%, the highest since 2012. Class A availability rose to 19.6%.

“Quoted asking rents are holding firm, even in the face of a softening market, although these are expected to decrease in the months ahead,” Savills said. Overall asking rents were flat with Q2 at $3.66 per sf per month ($43.92 per sf per year).

Class A asking rent ticked up by 1.8% to $3.89 per sf per month ($46.68 per year). “However, this increase in average rents was solely due to high-priced availabilities in under-construction projects, as most landlords of existing buildings have been hesitant to reduce quoted rents despite increasing downward pressure due to tepid demand and a sharp rise in availability,” Savills said.

On Tuesday during morning rush hour, I walked through the Financial District of San Francisco and took photos to document the spookiness of it all. Pedestrians used to rush to work on crowded sidewalks, balling up at red lights, then stream across the intersection, and cars used to be stuck in traffic, and throngs of people would pour out of the Montgomery BART and Muni Metro station. Used to. Read... Haunting Photos of San Francisco’s Desolate Financial District During Morning “Rush Hour”: Visual Effects of Work-from-Home

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  80 comments for “Commercial Real Estate Office Sector Crushed by Work-from-Home, Tsunami of Supply in Q3: Manhattan, San Francisco, Houston, Chicago, Los Angeles

  1. Rcohn says:

    Let’s look at the ramifications of this article
    1. If work from home continues ,occupancy rates will stay very low
    2. There will be massive bankruptcies among owners of office buildings in many cities
    3 .owners of mortgages on these buildings will be hammered
    4. Real estate taxes on these buildings will be lowered as owners sue the cities for revaluation of the buildings value
    5. Businesses which depend upon traffic from these buildings will not reopen
    6. Rents on apartments will tube as fewer people need to live near these office buildings. Prices of apartments also will tube
    7. Many Businesses which depend on the residential population will have no choice but to close
    8. Either mass transit serving the cities will have to cut back drastically or they will have to find other public agencies to subsidize them
    9. Because of all of these effects tax revenues will also tube.
    10 Cities will have no choice but mass layoffs of public workers

    • Apple says:

      As rents lower, business that were previously priced out will move in.

      Call it reverse gentrification.

      • A new day is dawning with new opportunities. The birthing of businesses that will be more competitive and profitable.

        • Joe Saba says:

          I will be looking when I start seeing it 1st hand
          so far nothing is really happening
          17% of FHA homes are in forbearance and cannot be sold(per FHA)
          consequently housing inventory is REAL LOW and PRICES ARE SHOOTING UP EVEN HIGHER
          we need to let bankruptcy happen to clean out mal-investment of ZIRP policies

        • Randy says:

          Where have you been? Businesses have been consolidating for the past 4 decades. What competition is this your talking about? Damn that’s a purely ignorant statement.

      • roddy6667 says:

        Like what happened to Detroit in the last 50 years?

        • doug says:

          wait for it? like forever?

        • What happens when you build a boom town on a single industry.

        • BuySome says:

          Whoa, when I pointed out the reality of America’s post-WWII collapsing manufacturing a few days ago, the one response was how great that auto industry had been. Never mind the losses of peaceful work like ceramics/dinnerwares, stainless steel flatwares, glasswares, and yes, even those toys (which were a big driver since kids left the coal mines). Everything was under fire. [Though short of food, those former foes weren’t quite as inept or levelled as people believed.] Mice ate our breakfast and grew into rats gorging on our lunch. But don’t worry, there’s steak for dinner…although it might soon look more like tubesteak and beans in a burner box. And there is always room for Fed Jello. Then we can drive those $70K power wagons carrying no hay bales right up to the gates of factories with shuttered doors. Tech will handle the navigation and sound systems just fine. Can you spell “Dumn sh*ts”?

      • rhodium says:

        Yeah thousands of people are going to start running their etsy stores out of a high rise when the lease gets cheap enough. They can also use this office space to store all the junk they’re trying to offload on Craigslist but it won’t fit in their one car garage at the apartment complex.

        I heard bozo the clown was looking for office space to do the paperwork for writing off his haircuts every time he had to get it curled and dyed red. The circus animals at his home office wouldn’t let him concentrate, and besides, he needed someplace more private to discuss with his lawyer the legality of registering himself as an llc to justify categorizing 100% of his expenses as a business cost related to his personal branding effort.

        • Joe Saba says:

          just taxes on closed gas station(converted to office) is $15,000 in our lame city
          better to make upgrades to home
          just bought more filing cabinets

      • Randy says:

        Not likely. After this pandemic who’s gonna want to open a business when it just might get shut down again. I see lots more empty commercial real estate coming. Malls have now become obsolete with the new generation buying everything online. We already have way more retail space than any country in the world. This was the final nail in the coffin for small businesses. Only the monopolies that were deemed essential and that have had historical profits will survive. It’s safe to go to Wal-Mart or Lowe’s where thousands of people go a day. But it’s not safe to get a haircut or go out to your local restaurant or bar. What perverted logic was that? But the sheeple will do as there told.

    • Cas127 says:

      “10 Cities will have no choice but mass layoffs of public workers”

      Gvt workers…last to sacrifice.

      Seems about right.

      • Dave says:

        That is a very outdated statement IMO. In 2020 (and for a many years now) It has been the private sector (Corporate, financial markets etc) that have been the main drag on public finances.

        • BuySome says:

          What, like “The Suits” that are at every city council meeting to ensure their control over every contract award and the re-financing of debts to allow for more spending on pet projects? Nah, that doesn’t go on…never has.

        • Cas127 says:

          Compare the percentage of private sector workers who have lost their jobs since March, to the percentage of public sector workers.

    • Karen S. says:


      I like how you connect the dots. The fallout will be far reaching in my opinion. Only time will tell, unless there is a bailout. Everyone has their wallets open and are pleading for funding.

    • Useless_Idiot says:

      11. The construction industry will finish the current uneeded commercial properties. Than start to taper off by doing mall demolitions and various tenet-improvement work.
      After that it seems the construction industry itself takes a dive. These companies begin to fold and liquidate equipment and workers.

    • Stephen C. says:

      So now that you’ve told us the good news, what about the bad news?

    • Tony22 says:

      ” tax revenues will also tube. 10. Cities will have no choice but mass layoffs”

      S.F. city government will before layoffs, first cut incentives for “homeless” arrivals and maintenance. Homeless will leave in large numbers.
      Only then come the layoffs of overpaid city employees, i.e. $75,000 per worker to clean up homeless poop, $600,000 for unionized city painters to cover a politically incorrect mural, etc.

      Here’s the way money was going to be spent as of June 28, 2019:

      After the homeless voters leave, the housing project city worker captive nations have less stake in the game and the non-profit and for profit city welfare process collapses, hopefully there’ll be a voter rebellion to replace the rotten city government, leading to a rebirth of the city with lower residential and commercial rents, cleaner safer streets and more of a real overall community standard instead of divisive fragmentary “communities.”

      Emphasize the positive!

      • cd says:

        lets hope taxpayers wake up, the SF govt mafia tree is huge in this state…..

        I wish my wife want to get out of here….its turned into a dirty concrete jungle with wind blown political door hang tags littering the landscape while the denizens huddle in their space as the pooping homeless guy drops by…

  2. Sam says:

    Also in the calculus: all the multiples of luxury apt/condo buildouts whose lenders are starting to experience an uncertainty w/developer’s projected [pre covid] revenue generation.
    In the PDX metro area there are thousands of units already offering incentives (w/out price reduction).
    Recent Pdx biz journal noted tens of thousands new apt & condo units expected to come on line in next 24 months.
    “Bloodbath” for write downs of equity holders
    will provide future case studies models.

  3. TownNorth says:

    Also a problem is that a lot of newer office space has been designed as “creative office” with shared break rooms, conference rooms, etc. These will be a tough sell in the era of Covid.

    • Jeremy Wolff says:

      If they are getting $q115/sq ft allowance for improvements and a year of free rent, it sounds like they can redo the office however they want.

  4. Jay 167 says:

    There will be drawn out pain as leases expire over the next few years. The agency that I work for in the Puget Sound is talking about having people work in the office one day a week when we return to work, which means that they can cut leased space by 80%. The lease in our building is not up until 2023. I would hate to be the landlord, the previous owner went bankrupt during the great recession as the building is in a not so nice neighborhood. Look out below!

  5. The Bob who cried Wolf says:

    Everyone has had to deal with customer service through the pandemic and we all know it’s way worse with work from home. Businesses will start to realize that and bring some folks back in. This hand doesn’t know what that hand is doing and they all point the blame elsewhere. It’ll take time but folks will be back at work in some capacity. Married folks will want to get out to work and not be home to hear the chirping, too. Be patient.

    • otishertz says:

      But will the efficiencies outweigh the inefficiencies?

      Time will tell. My bet is on accelerating outsourcing of all air conditioned jobs.

  6. Citizen AllenM says:

    LoL- so a very savvy real estate manager for a major corp could do this one:
    Drop half the square footage, get rid of the worst furniture on the floors, chuck all the obsolete tech (or better yet send home those computers for the WFH crowd. Then, when the sublease footage comes a cropper, create a new SPO- lease the better half back, and move the stuff over.

    Viola! A huge cost savings!

    This is going to be so inflationary!

    Just like the free money in the UK is going to be inflationary, as the liquidity flows out into the covid deserts of dead enterprises and vanishes into the sands of deflation.

    The name of the game is operational solvency, and the last ones standing win.

    Someday this war’s gonna end…

  7. Island Teal says:

    Sounds like a great opportunity for Wewoke to pick up some new inventory for thier plan for office space lease domenation ???

  8. Michael Engel says:

    1) Utopian disruptive startups in SF garages took over existing industries, destroying the slow and old.
    2) The smartest & the strongest leader among the new startups purge the other Utopians, eliminating their competition, because it’s all about power. Only one co survive.
    3) When they dominate billions of people all over the world, they move to fancy offices.
    4) Zenith was a big wave to surf on in the 40’s and the 50’s, until new disruptive unruly companies from Japan destroyed it.
    5) A disruptive virus, rioting and burning in the streets destroy commercial RE.
    6) Amazon Prime Bike compete with Peloton yelling at u at home.
    7) GOOGL & AMZN on WFH conference calls.
    8) When George Orwell “1984” will dominate millions of WFH lives, commercial RE will be back.

    • Frederick says:

      Commercial property was on a downhill run way before COVID or the rioting so it’s bigger than that It just accelerated the trend

    • DanS86 says:

      Zenith in the late 1970s started to develop a digital HD broadcast system. In 1987 NYT reported that Schaumberg IL had a working Digital HD TV System prototype working with amazing picture and sound. Congress (Cronies) would not approve the system which sent Zenith into bankruptcy. LG bought most of the digital assets Zenith had developed.

      • yossarian says:

        @DanS86 sorry but that’s kind of cherry picking the history of broadcast. there were many early hdtv systems with incompatible specs. a consortium of the big players including zenith tested and sorted out all the various approaches and made recommendations that took until 1996 to reach a consensus for a national standard. no one wanted to repeat the mistake of launching a premature technology as happened in japan. imo, what killed zenith, was crappy products despite their engineering brilliance.

    • Lou Mannheim says:

      Off-topic but since you mentioned 1984 …

      Down the road people will look back at this time and marvel at the irony that Apple once ran an ad campaign that warned of an Orwellian future.

  9. Michael Engel says:

    9) WFH in your private living room or bedroom, or work for
    food in the woods.

  10. otishertz says:

    The positive sentiment among managers for WFH is indicative of the efficiencies that corporations will reap from the veiled outsourcing sure to come.

    I thought that paying 60 per foot around the year 2000 at my store was a lot. In order for rent to be aligned with sales that meant I had to produce 600 per foot in sales.

    I would often look at my 12 inch floor tiles in those days, knowing that each one needed to generate $600 for me to survive.

    In general, the only companies able to pay these rents are companies that don’t need the retail location. I’m talking about companies that have a retail location solely for marketing purposes, meaning retail rent is a loss leader for them.

    I always called them trophy stores because they were not there to make money but instead to promote their brand.

    These trophy stores have been crowding out mom and pop retail for a couple of decades. Now they have won.

    However, mom and pop retail is the bread and butter of most commercial landlords. It was mostly decimated before covid. Now it is thoroughly toast.

    As a former retailer, I have schadenfreude about the forthcoming demise of retail landlords. They got very greedy.

    I’m pleased that I only own industrial property currently. I don’t think we’ve seen anything yet in terms of the obliteration of street level retail.

    • otishertz says:

      The equation for retail rent, traditionally assumes keystone markup for most small retailers. Keystone = 50% gross profit.

      That just doesn’t happen much anymore.

  11. Ook says:

    Positing a reduction of needed space in the area of 20% if everyone works from home once a week, seems a little too easy. Hot desking after COVID is problematic to say the least, and people will fight tooth and nail to keep what they regard as a perk in a well located cubicle or office.

  12. Richard Hill says:

    Australian State New South Wales Govt is encouraging state public servants to stop working from home. Reversing WFH to invigorate city. It is a small step from encouragement to compulsion.

  13. nodecentrepublicansleft says:

    I tried for 35 years to understand a cult of personality (1980 to 2015).
    It wasn’t until 2016-2020 that I figured it out.

    I observed this on the floor of a big office bldg in Orlando, FL in early 2001. The tenant (major wireless Telecom carrier I worked for) spent months and thousands of dollars to shave 2 sq. ft. or so off the dimensions of each cubicle to create additional cubicles.

    This expensive, slow, painstaking process was a huge hassle for everybody working there and the poor guys who had to do the work.

    I looked at it and thought: “Jesus, all this disruption and for what… maybe they squeeze a few more cubicle coffins out of it?!?!” They were finally done just in time for 9/11/01.

    Shortly thereafter, our workforce got downsized by 85%. I then had a dozen mini-cubicles just for myself: computer cubicle, file cubicle, break cubicle, etc, etc.

    I often wondered if years later, some other corporate mgr. in that same space thought “We could expand these cubicles by a few feet….”

  14. Brant Lee says:

    Unfortunately, the U.S. has too many good-times businesses that people can live without during a situation like this. With families tightening the belt increasingly, most of our service sector delights are the first to go.

    A country like China can recover much faster because their industry is in demand for basic needs. Right now, Americans need their production much more than our own. It’s no wonder our unemployment checks and stimulus are riding the empty containers back to China via Walmart and Amazon.

    Let’s see, do I pay the insurance or buy clothes and shoes for the kids? Hmmm. Those types of options are beginning to play out all over the country.

    • Seneca's cliff says:

      Are you saying that Aromatherapy studios and Crossfit Gyms are good-times businesses? What could be more necessary after a day of weeding a patch of turnips by hand ( the coming economy) than a place where you can pay to drag around a tire or carry a chain.

    • Mr Wake Up says:

      Good time business – I knew we had issues as a society when the escape rooms opened up. Just think about that, people paying to escape subconsciously imitating escape from some type of suffering which Ironically is what’s part of the problem.

      “A generation suffering from a lack of suffering”

      As far a stimulus funds go received a little bonus via the USPS and tried to buy precious metals with it and payment was denied??

      I felt like I was trying to buy metals with food stamps, interesting experience so I’m left with what?

      Purchasing mas cosas what else!

      Thank you but no thank big mama Fed.

    • Lou Mannheim says:

      Well written. Personally I’m looking forward to the day when the phrase “Mint In Box” no longer has relevance.

      • BuySome says:

        Long past…it then became some variant of Mint in Mint Box graded at somebody’s contrived official standards. Of course, it might not all go away fast just as Proof, Uncirculated, and Very Fine are holding their own in other captured treasure games.

    • MCH says:

      Dear Mr Lee,

      Get with the program please. Low wage manufacturing jobs do not belong in the US, our leaders said so, how dare you to question the audacity of hope?

      The US is a service driven economy, that’s where all the value add is at, at least that’s what our leaders keep telling us.

      What they forgot to mention of course is that we would have to need those services, and the service itself could mean anything, from your computer programmers to your Starbucks barista. And they definitely did not mention in what proportion those services would be high end. After all, even a lowly paid service worker adds value.

      • Tony22 says:

        Americans will look back at the ‘service economy’ the way we used to look back at cleaning ladies and live in nannies plus other servants in middle class homes.

        People are learning how to and are practicing their own services, mowing their own lawns, doing their own painting, plumbing etc. Just look at home improvement store sales.

        Home is where the heart is and the cash is being spent. We are becoming more of a local village economy in many ways. Grand parents moved back into homes, Senior care facilities are death, 52% of 18-29 years olds with parents, gardening, vegetable gardening, garden store sales quintupling, maximum utilization of homes, more local community over fences and neighborhood organizations, these are good things.

  15. Retail vacancies in NJ are skyrocketing…In my industry, we are seeing competitors use the work from home spin as cover to shut facilities and downsize over the next 12 months. Things are going to get worse.

    • Petunia says:

      Even at the supermarket, where I spend most of my money, self space is bare here and there. The product mix is changing. I can’t figure out if it’s to just cheaper items, or it’s by necessity because they are not paying the bills. In any case, if they are filling up less space, they will be making less money, and shrinking the business eventually.

      • Mr Wake Up says:


        Shelf space shifts and drifts are real. And it’s even happening in big box too.

        I have bakery distributor tenant in NYC doing 400k a week in gross sales prior to the “pandemic” fell to 100k we gave him and many others space to figure things out and see where they land. In late June we had numerous discussions regarding survival and the devistation we are facing. He told me I’m too pessimistic and hes a optimistic person come September we will be back to some normal and as long as his sales go to 300k a week he can survive. I insisted it’s not happening look to relocate to a smaller space. He rejected my statement only to be followed up this week with OMG I cant believe how bad it is, they owe bakery suppliers, bakers, drivers, and you can only imagine how the dominos continue to fall.

        Behind the scenes devastation in the real world is loud and clear if u pull the curtain and in the case of smart consumers as yourself – you see it on the shelves.

        • Business people became conditioned by years of above normal economic growth, and the Fed is partly to blame, by papering over every recession. In the recession of the 70’s SoCa commercial developers actually put money to work, building new industrial parks, and housing. New projects is what we need to look at, and I doubt there is anything at all.

  16. Dan Romig says:

    From yesterday’s Minneapolis Star Tribune ‘The Future of Work’ by Jackie Crosby:
    “In February, about 218,000 people poured into downtown Minneapolis for work each morning, more than any time in the city’s history, about 70% of them on buses and trains. Now, express bus ridership from the suburbs is down 91% and light rail trips off 71%.

    Building owners and managers report that only about 12% of the office space in downtown Minneapolis is occupied.

    Target, downtown Minneapolis’ largest employer, decided on a gradual approach for bringing its 8,500 workers back, keeping most of them at home through December.

    In St. Paul, Ecolab doesn’t plan to start bringing the bulk of its 1,580 workers back downtown until Jan. 4 at the earliest.”

    • Petunia says:

      I watched videos of the aftermath of the “protests” there. The destruction was unbelievable, worse than what I saw in NYC from the 60s and 70s. None of the owners I saw will invest there again. I don’t think they could if they wanted to because of the insurance issues. I don’t see those areas coming back for decades.

  17. gorbachev says:

    Wfh is safe right now.Its probably fun as well.

    But when this is over and their co-workers begin getting

    promotions because of human connections there

    will a stampede back to the office.

    • Chillbro says:

      Man, this boomer logic just wont stop haha

      Dont worry chief, we will be alright.

  18. DR DOOM says:

    The young Techies are easily spooked. The WTF thing will open up some great opportunity for future investing in commercial property if the FED does not let PE take it all private with ZIRP fueled pennies on the dollar acquisitions. The Govt. will print money to keep the property maintained so the Oligarch’s can swoosh in at the bottom of the demand cycle and Bada Bing Bada Boom the first fiat Trillionaire is born. The reality is that at the end of the day the FED connected will let you suck on the peach seed, if you are grateful. The Fed has in effect done this to savers already with a decade of no time value of money. As long as the Fed is allowed to free range over the economy any perverted outcome is possible.

    • BuySome says:

      “….any perverted outcome is possible.” Si…”The darkness must go down the river of night’s dreaming; Flow morphia slow, let the sun and light come streaming; Into my life, Into my life.” Yes our own Dr. X has built his creature. And while “there’s a light over at the Frankenstein place” it is in fact “buring in the fire place”, but not with what we expect. Those Zip-o-logs are rolled from paper money and bonds. Perhaps all the Brad’s and Janet’s should avoid driving the station wagon down this backroad to the ballroom before they ultimately encounter the madman swinging a pick at those who disagree with his twisted future. “Crawling on the planet’s face these insects called the human race, Lost in time and lost in space, and meaning.” [All credit..O’Brien R.H.P.S.]

  19. Michael Engel says:

    1) WFH depend on the Civilian Labor Force.
    2) Zoom can only sooth the economic shock.
    3) The Labor Force is down 8.1M from 164.6M (4.9%) to 156.5M // up again 4.3M to 160.8M.
    4) The Labor Force retrace 53%, in a bear market rally, but the LT trend is down. The trend is strong.
    5) In the next leg, the Labor Force can easily shrink by additional
    6.5M from : 160.8 to 154M, for a total of 10M-11M losses from the peak, or 11M:165M = (-)6.6%. The 2008/09 recession was a blip.
    7) That’s not a V or K economy.
    8) The black market is getting hit the most.
    9) Food & energy shortages might develop.
    10) The violent protest will not stop.
    11) East & west salt water cities will develop lawless poverty zones.

    • Anthony A. says:

      “11) East & west salt water cities will develop lawless poverty zones.”

      Some flyover cities already are practicing that. So there’s already a good model in place.

      • BuySome says:

        Not to worry..we can always secure all of our own little Beruit’s by setting up Marine barracks in each. Oooops!

        • Tony22 says:

          Never buy a house that is not defensible. Safe street for kids to bike and skate on? Now it’s safe free fire zones with backstops to mow down the BLMs coming for your Ikea furniture.

  20. Dano says:

    There are two kinds of people in the work world, those who are mentally capable of the discipline to work from home and those who are not.

    Some people can do it, but still prefer an office environment and team collaboration. Others can’t, but can by molded to do so by their type of job. (E.g. customer call center people can be monitored by volume, accounting clerks can be monitored by volume of processed paperwork, etc).

    My best guess, and it’s only a guess, is that when the ‘rona is under control (herd immunity, drug therapy, immunization) some 20-30% of workers will never go back to the office ever again.

    These workers will be the highly talented and motivated, whom companies will be unable to force back into a commute and a cube, or the worker drones who can produce and be readily monitored.

    For the rest, if they can’t keep up productivity, or if they prefer an office environment, or if their jobs just don’t work so well without a collaborative space, it’ll be back to the traditional working environment.

    I spent many years in the “HR environment” helping companies secure talent. My personal appraisal of the employment world was when it came to hiring (especially critical jobs) companies always sought out “the best if the best, followed by the best of the rest, and rounded out with the rest of the rest”. When it came time to lay off, they’d let them go in reverse order.

    For the “rest of the rest”, this will yet again be a wake up call. Hopefully one that teaches many of the ‘woke’ generation that, really, no one wants or needs their opinions at work daily.

    For the “best of the best”, this is an incredibly empowering time. They’re going to be able to set up their lives as they see fit and companies are going to let them do so—because if they don’t some other company will. Good times or bad, no organization can afford to lose “the best of the best”.

    The one trend I’ll be anxious to see in a few years is that of job mobility and retention by these top people. When they finally become mini-companies within their larger firms, perhaps with their own dedicated one or two person staffs showing up to their home or satellite office, will they ever want to leave?

    Interesting times!

    • sunny129 says:

      ‘those who are mentally capable of the discipline to work from home and those who are not’

      This cognitive ability to function optimum either at home or office will usually get developed during the ‘study’ years of learning – efficient and priority of issues at hand’ use of time. one trait of successful in business or any field of life.

  21. Seneca's cliff says:

    For many years green economy enthusiasts have touted the concept of high rise vertical farming as the answer to food and energy problems. This crash in the value of urban office space may be a golden opportunity. Now all this former class A office space can be turned in to vertical farming setups with wind and solar on the roof. The newly unemployed can get jobs tending the crops in these “farms of the future.”

    • Tony22 says:

      Dose of reality for the day: Roof space is tiny compared to square footage of high rises, plus there’s already A/C and heat equp up there. Sun only hits 1/4 of a maximum 3/4 of a square building’s surface walls during the day. The floor above casts a shadow except in the winter when the sun is lower. Blocking infrared light with glass means lower growth, after you build soil and water.

      Now big flat warehouses, that’s a differen roof story.

      I suggest you start a small biointensive garden in the ground. A small portion of our south facing backyard, 25′ wide by 45′ produces all the greens we can eat, but that took decades of practice, we had to paint the house reflective white, etc.

  22. sunny129 says:

    “Doing more of what’s hollowed out our economy and society” is a slippery path to ruin’

    ‘The Crisis of Competence is increasingly visible, but delusions of grandeur still hold. As everyday life decays into developed-world status, we’re told the problem is the hospital or university or corporation no longer has sufficient revenues to cover its bloated expenses, and so the nation must borrow additional trillions to bail out virtually every entity in the land.

    The concept of financial viability without access to ever-expanding debt has been lost, and with that lost, resilience and competence have also been lost. The status quo’s “solutions” are nothing more than doing more of what’s hollowed out our economy and society…

    h/t CharlesH Smith

  23. Is WeWorks positioned to do anything with this? This is their brand of synergy. I see Uber and Lyft pushing legislation to make gig workers a permanent fact of life. Maybe Soft Bank can make enough buying S&P calls to buy up a few of these buildings. Maybe government will get interested? There will be new bureaucracies in disease control, for certain. These buildings, esp in earthquake prone SF represent huge liabilities, (the ground shifts beneath them, a great deal of the city is on reclaimed wetlands) so they will probably top some of them to relieve stress esp if the offices are vacant. Can’t imagine who will pay for all this, oh wait, yes I can.

    • Chauncey Gardiner says:

      Now looks to me like WeWork and Softbank were simply ahead of the curve. Serious issues. The fate of many commercial buildings, that of the lessees, lessors-debtors, their creditors, and perhaps even that of the city itself is “still unlearned”. Kinda reminds me of the lyrics to a 1949 song “MTA”, by Jacqueline Steiner and Bess Lomax Hawes, later popularized by The Kingston Trio:

      … “Well, did he ever return?
      No, he never returned
      And his fate is still unlearned.”

      Perhaps the gentrification of cities like San Francisco will begin to reverse now. That development might not be an altogether bad thing in terms of affordability for young people, and the energy and creativity they can bring to a city. It may be that we are in the early days of Schumpeter’s creative destruction. Ironic, in a way, that it’s in such close proximity to the corporate homes of those who popularized the concept.

  24. Michael Engel says:

    1) Suppose 1981 US 10Y peak was a buying climax @ 15.8% and
    the 2020(L) @ 0.8% is the response.
    2) The half way between them is 8%.
    3) The 15.8% peak can be breached only if US10Y will build a cause.
    4) In order to build a cause US10Y must osc between recessions and
    inflation, mostly in the lower half, between zero and 8%.
    5) It will be tough.
    6) In 1945(L) @1.7%, a 150 years 10Y downtrend have ended.
    7) The 1830’s were tough.
    8) The 1930’s were tough.
    9) The 2030’s might be tough and must be tough in order to build a cause.
    10) Recessions density were the easiest after 1981 peak, only x4 and
    not deep. That might change in the next two decades.
    11) When US southern half was destroyed, recession density was high,
    x11 recessions including 1921.
    12) The 1820’s era, post Napoleon and Andrew Jackson kicking GB behinds, were also tough, especially for Lord Liverpool.

  25. Harvey Cotton says:

    We have a structural oversupply of commercial real estate…and we have a structural shortage of affordable housing, endemic homelessness, and housing insecurity. I have no idea how we can solve these intractable problems. /s

  26. Implicit says:

    Hanging from their fingertips from the same high rise buildings’ windows that they use to see the future so clearly from.

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