Silicon Valley: Supply in Need of Demand

Landlords failed to disclose how much they had to fork over to office tenants to get even these reduced rents. Since we have holdings on the Peninsula, we know the real numbers first-hand.

By John E. McNellis, Principal at McNellis Partners, for WOLF STREET:

“Britannia est insula. Italia est paeninsula.” The first two sentences of my freshman year Latin book were easy to understand: England is an island and Italy a paen or almost island. After that easy beginning, Latin tumbled into incomprehensibility, but the thought stuck that England was fully insulated and peninsulas only a bit less so. Decades later I learned real estate’s two-word formula for lasting success: supply constraint.

Islands—small ones anyway—are perfectly supply constrained; peninsulas can be nearly as limited. Until the virus struck a year ago, business islands like Manhattan and peninsulas like San Francisco’s were fortresses high-walled by supply constraint. Until the virus rolled up its siege wagons, smug landlords (such as ourselves) considered full occupancy a birthright and rents a stairway to heaven. In short, we had forgotten the other half of real estate’s magic formula: demand.

On April 7th , the San Francisco Chronicle reported that office rents in the City had dropped 14.7%. On the same day, the Wall Street Journal reported that, “…landlords are offering long- term leases at discounts up to 13% below rent rates reached in the first quarter of 2020…”.

These numbers are so understated—so laughably wrong—that the articles should have come with Twitter warnings about their veracity. Why so off?

The landlords failed to disclose how much they had to fork over to tenants to achieve even these reduced rents. Since we have no holdings in either San Francisco or Manhattan, I’ll focus on the Peninsula where we do, where we know the real numbers first-hand.

Here’s Palo Alto’s office story:

Asking rents downtown haven’t changed since 2019; landlords are still quoting about $96 per square foot per year for prime office space. Leases are, however, inking 10% to 15% lower than that; but here’s the kicker, landlords are only getting deals signed by nearly doubling the upfront money they hand to tenants. Landlords are now giving tenant improvement allowances up to $80 per square foot more than in pre-Covid deals and throwing in an extra 3 months of free rent.

If your tenant signs a 5 year lease on these terms, your net rent works out like this: $96 annual rent minus 15% minus $16 excess allowance ($80 annualized over the five year term) minus $4.80 excess free rent ($24 annualized over the five year term) equals $60.80 rent. Or 37% — not 14% — less than you would have achieved at the beginning of 2020. If you impute an interest carry (you should) on the $104 a foot you’re handing your tenant on day one, the numbers are even drearier.

Why not just sign a lease at the effective rate of $60.80 and skip the side giveaways? Because landlords, like car dealers and their sticker prices, desperately want to save their face rates. They fear that, if widely known, the $60.80 would become their rent’s new ceiling rather than floor.

Back to demand. As of this writing, there is little; the FAANG’s may be kicking tires, but they’re writing precious few offers. A top Palo Alto broker suggested that, in a normal market, one might see a dozen larger leases (10,000 square feet plus) signed a year. There has been just one in the last twelve months. Put another way, demand is down 91.7% over the last year. To a casual observer, it feels worse.

Is this the end? The second inning of a painful blow-out? No. Likely not. To paraphrase Hugh Fennyman from Shakespeare in Love, “Strangely enough, it will all turn out well.” When asked by his skeptical moneylender how, Fennyman replies, “I don’t know. It’s a mystery.” I have no idea either, but somehow demand will return and rates will stabilize. They always do.

Turning briefly to the Peninsula’s residential market. For-sale housing is robust and anything listed under $3 million is getting multiple offers. A senior Compass broker opined that home prices should end up 10% higher this year than last.

The apartment rental market is less cheery. Rents are off 20% to 25% and, for those landlords unwilling or unable (because of, say, lender debt covenants or internal expectations) to mark their rents down to market, vacancy rates are soaring. “The tide was all the way out on December 15th, but it’s been creeping back ever since,” said the manager of a sizeable apartment portfolio. “Tesla is now hiring, Stanford Hospital is hiring and the kids are starting to move out of their parents’ basements. And Google is requiring that its workers all return by September 1st. I’m expecting this summer to go gangbusters.”

Hopefully, it will. And hopefully, despite our lovely supply constraint, we won’t take demand for granted again. Islands and peninsulas may be better insulated than, say, Kansas, but they still get frost bite in a deep freeze. By John E. McNellis, author of Making it in Real Estate: Starting Out as a Developer.

A “distributed operational workforce” with a net reduction in demand for office space faces a business premised on endless growth. ReadWhat Companies & Office Workers Said About Work from Home: Landlords Are Out of Luck

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  85 comments for “Silicon Valley: Supply in Need of Demand

  1. Island Teal says:

    First…Now that is a first. Good article and well stated. As all things in Sillycon Valley the reality of commercial RE pricing is somewhat less than as presented to the outside world

    • Cas127 says:

      Very valuable article because it provides some insight into the extent of “inside baseball” game playing that goes on behind the publicly quoted “market numbers”.

      Not particularly unique to CRE…same sort of thing goes on in most relatively opaque/lower transactional volume markets.

      It is how the insider veterans scalp the newbies and con the public (see college tuition price discrimination…)

      But it points up the tremendous value of macro informed “rationality checks” (think Wolf’s charts).

      If some quoted price/”industry standard” violates common sense/broader economic trends, it is time to tune out the sales patter and start digging into 3rd party research without any incentive to deceive.

      But that takes time and patience, so quick summaries like this post are very worthwhile.

    • EdYooper says:

      This is a global phenomenon.

      I’d expect landlords play the same game in Des Moines and Lexington as the market falls.

    • shandy says:

      I suppose this is a good article comparing to the latest real estate drek?
      I, myself cant see a problem ahead (or last three years) for rental property owners.
      Just don’t be stupid and freak out.

    • McNellis John E says:

      Thanks Island appreciate it j

  2. MCH says:

    Very interesting info regarding how the commercial real estate is doing. But do you believe the likes of Google, Apples, etc are going to expand in this region? There seems to be a sure but slow drain of tech base away from the bay area. Much to the chagrin of any city that are receiving that influx of SF bay area refugees. And if I were Apple, or Google, or Facebook, I would be reading the writings on the wall, CA by hook or by crook has got to raise revenue. So, either the talent pool will migrate because they don’t want to pay taxes or the companies will migrate because they are going to get hammered.

    Residential sales though seem to be driven more by the lack of supply in this case. On the peninsula, existing home supply seem to be down across the board. Part of me is curious about why that is. Is it because of the fact that gains are possibly higher than the $500K allowable for primary residence sale? It doesn’t seem too likely. May be the people are too tied to their jobs here, although with the mobility that has been gained through WFH, that doesn’t seem likely. I am quite curious as to why there hasn’t been more housing on the market. There must be some kind of inventory building. Shadow inventory as Wolf likes to call it.

    This is almost the best time to rent, it seems.

    • Chris G says:

      “But do you believe the likes of Google, Apples, etc are going to expand in this region?”

      Absolutely, for instance, take Google’s Downtown West project in San Jose. Google’s Development Agreement was released on 4/6/21: “The multinational tech giant aims to build about 6.5 million square feet of offices—though it is studying the impacts of building up to 7.3 million square feet of office space in its proposal. Those offices, some of which could reach about 290 feet high, would be surrounded by 4,000 new homes, a spate of hotel rooms and 500,000 square feet of retail.” Source: San Jose Inside

      More generally, Google plans to invest more than $1 billion in California RE in just 2021. Source: SF Chronicle

      I think it’s also overstated how much WFH will be allowed by Big Tech. Many of the largest companies and firms want their employees back in offices shortly. For example, Google is capping WFH after September 1st at 14 days per year (anything beyond that will need formal application). Source: CNBC

      • Claire says:

        How much water will those thousands of new homes use, and why should people conserve and let landscaping die so that profits can be taken?

        “California Gov. Gavin Newsom declares drought emergency in 2 counties-The Golden State is now in its second year of drought”

        • Rcohn says:

          The drought is also causing concerns that water levels will be so low that electricity will be curtailed in Az, NM, NV and parts of CA.
          . So CA might not only have draconian restrictions on water usage , but cutbacks on electricity use as well.
          How will all those TSLAs be recharged?
          And remember fire season is only 2 months away. Estimates of moisture levels in vegetation are extremely low so the fires could be worse than the last 3 years

        • Joe Saba says:

          build build build
          then LIMIT WATER – oops we overbuilt(ie to many mexifornians)
          in AZ
          well at least we still have GROUND WELLS and WE WILL PUMP TIL THEY GO DRY

        • 91B20 1stCav (AUS) says:

          Claire/RC-here it comes worldwide. Freshwater isn’t only vital for life, but also for tremendous amounts of industrial processes and as necessary as petroleum-check Taiwan’s current dilemma vis manufacturing/agriculture/drought.

          may we all find a better day.

        • ram says:

          Same problem in Australia. Uncontrolled immigration into a country with very little water and very little fertile soils. In other words, the vast majority of the country is desert, but they are felling rainforests to build McMansions for new immigrants, mostly from China and India.

      • Eddie S. says:

        Only time will tell how much WFH sticks, and yes, some firms want their employees back in the office, but if you look past the CNBC headlines there are MANY companies (Salesforce, Twitter, Atlassian) who are moving to a more or less permanent remote work force. Most others are moving to a ‘hybrid’ where employees are in the office 2 – 3 days per week. And that doesn’t take account companies that are moving out entirely. Oracle has a huge campus as does HP Enterprise – both heading to Texas.

        Anyone who thinks that Silicon Valley will be back to everyone in an office 5 days a week like 2019 is dreaming.

      • Wisoot says:

        Catherine Austin Fitts would describe the lockdown as a Real estate acquisition plan orchestrated to allow the Mr Globals of the world to buy up 6mil sq ft of RE to consolidate their position. Solari mapped Fed Banks and CV pandemic – analysis is compelling – featured in planet lockdown documentary.

      • Javert Chip says:

        Chris G

        So I crunched some numbers from your informative post. My back-of-the-envelope assumptions might not be highly accurate, but they sure are eye-opening:

        o 12,000 incremental new residents (assume 3 people/house, 4,000 new houses)
        o 500,000 sq ft of retail

        That pencils out to 42 sq ft of incremental new retail for each of 12,000 incremental new population (men + women + children). SOMEBODY’S NOT READING THE B&M NEWS! Note: the ration for this development is TWICE the 2018 USA average.

        Below are the “top 5” retail sq ft per person from around the world:
        1) USA 23.5
        2) Canada 16.8
        3) Australia 11.2
        4) UK 4.6
        5) Japan 4.4

    • DougP says:

      I think the low inventory (residential) is in part due to the fact that if you do sell, you have very tough time finding another place to buy so people, unless they have to sell, don’t. Unless they are moving out of the state or immediate area, people in the Bay Area are staying for now. Especially if they have what everyone else wants, a SFH.

      Eviction moratorium and mortgage forbearance ending will be a burp in this at some point. That is when the shadow inventory will be brought to light.

      • Javert Chip says:


        Age of homeowner, length of time in house, and CA Prop 13 tax shelter all come into play.

        1) Assume significant numbers of houses are owned by couples within 5 years of retirement

        2) Assume they paid $300,000 for home 20 years ago & now worth $3,000,000 (that’s only 12.5% appreciation per year)

        3) CA homeowner property tax (1% appraised value in yr 1; tax amount can only increase 2%/yr – not the tax rate, just the tax amount).
        a) $3,000 in year house was purchased
        b) $4,400 20 years later with annual 2% increase

        4) If home sells at $3,000,000, 1st year CA property tax for new owner is $30,000

        Full disclosure: back-of-the-envelope calculations. I’m an ex-CA residential real estate owner, not a real estate expert

        • MCH says:

          Not to worry, that will end at some point, prop 13 that is. Unless the jackasses screw it up so badly that they lose the state back to the dumbos, almost impossible at this point. To get to that point, they would literally have to become Dumbos or become like the southern jackasses of the 50s in terms of their policies.

          Eventually they have to knock off 13 to support the revenue needs of the states. After all, they can’t always count on having a jackass in the WH to keep bailing them out.

  3. GotCollateral says:

    Demand for commercial real estate has permanently changed and all this “Hope” to prop up CMBS + Comerial loans + exct, which were preticated on _ever increasing_ demand is just a pipe dream… no amount of bailout/foreberance olympics will change that… and the longer this goes on, just gives more time for enterprising actors to build up cheap tail risk positions against it all…

    • Cas127 says:

      “Forbearance olympics”



      Performative Forbearance by Politicians.

      Now, if only the politicians would forbear the performances.

      But then they wouldn’t be politicians.

      • GotCollateral says:

        Hahahaha yeah,

        History says politicians and those who pad their pockets the most, respond best after the not so metaphorical guillotines have been deployed :P

        Luckily for them, they have the millitary protecting the k-street lobbies satellite offices nearby atm that they can continue to ask for support, as long if they can afford the increasing costs of gear from china :P

  4. Thomas Wolfe says:

    Anyone know why ETFs like SRET haven’t cratered?

    Is it that the Fed’s buying MBS or that commercial real estate makes up a small percentage of REits?

  5. Micheal Engel says:

    1) Kids are still in their bedroom, while their parents are paying $75k/y
    for college, – no discounts – taking students loans. But that’s not a problem, because the rate of change of the value of their house y/y is higher than $75K/y.
    2) Kids are still in their bedroom, because they are afraid to go. They are not good to go. They cannot survive in the wild and colleges became dangerous and wild. Zoom is physically safer and your classmates don’t know that u are a nerd.. 3) It’s all about power. Empty nest is one step before getting old, so mom wouldn’t let her baby go.
    5) Once they leave, they will never come back, pursuing their own career, their own life and family, besides for a short visit.

    • Cobalt Programmer says:

      What is the most expensive streaming service? Not the Netflix or Hulu. The answer is Harvard. Your last point makes sense. Young birds who flew away from nest do not come back. They build their own.

      • Cas127 says:

        Most expensive streaming service…Harvard.


        It is like today is Zinger Friday.

    • Shiloh1 says:

      “…the kids…are afraid…”

      Thank God I was in my teens in the 70s and my twenties in the 80s.

      • timbers says:

        Yes, me too. I was a different world back than. Easy to meet people (although that’s likely more due to youth). But youth aside, there was a feeling you could go anywhere, do anything. So many options ahead of you that if you screwed on one of them, you just moved on to the next.

        • cas127 says:

          None of this should be a surprise.

          The “peace and love” baby boomers indentured the children they didn’t abort.

        • kitten lopez says:

          that’s why it’s interesting that i agree with Mr McNellis about everything eventually being okay with commercial real estate because of the cycles, BUT i ask: “WHO and WHERE is coming up in these generations with the chutzpah to start a business?”

          besides chain stores and enterprising immigrants, american kids aren’t even stand out employees. they’re domesticated… thingies.

        • Javert Chip says:


          “…The “peace and love” baby boomers indentured the children they didn’t abort….” – any resemblance between that statement and reality is purely coincidental.

          o Millennials signed themselves up for $1.8 Trillion of college debt (believing they’d never have to pay a dime of it back)

          o Millennials began to vote around 1998, were big voters for Obama in 2008, and now outnumber Boomers. Millennials now own this mess as much or more so than everybody else. US national debt at end of year:

          a) 1998: $2.9 T – Millennials begin to vote
          b) 2016: $19.6T – Obama leaves office
          c) 2020: $26.7T – Trump leaves office
          d) 2021 – who the hell knows?

      • joe2 says:

        You missed out of the 50s and 60s rise of the Age of Aquarius. Although the 70s and 80s beat the crap out of the current Age of Screaming Totalitarian Victimhood.

        You can monitor the rise and fall of civilization by the music.

        • Cas127 says:

          Actually, it is an important and interesting question as to approximately when and why the US started its descent into failure.

          I think any answer that ignores a 50s/60s/70s/80s era news media oligopoly habitually retailing palpable DC horsesh*t…pretty much misses the mark.

        • Motorcycle Guy says:

          Just to add to the discussion as to how we arrived at where we are today with the younger generation; we failed to experience the Fourth Turning which was due to occur in the first decade of this century.

        • 91B20 1stCav (AUS) says:

          Joe2/Cas/MCGuy-reckon it’s more of a historic ‘business cycle’-the stronger and wealthier a civilization becomes as time moves on, without necessary and widespread critical study, more and more of its citizens gradually lose knowledge and any true appreciation of the forces, hardships and efforts that originally brought their ‘nation’ to the dance. Eventually, the ‘virtues of the past’ retain little more than lip service, and the lead in the worldwide race to newer, truly hungrier, and more internally-cooperative grouping of humans. (There is NO ‘exceptionalism’ any more than can be permanent ‘laurel resting’).

          The chips then historically trend in random spray towards the table…

          may we all find a better day.

        • ram says:

          You can also track the fall of civilizations by the currency. When the USA dropped its backing of the US$ with silver, that was the beginning of the end. All civilizations end with debasing the currency — somehow it reflects that dishonesty and cheating have become socially acceptable.

  6. Micheal Engel says:

    1) The asking price is 100/sf a year, but they are actually getting only $60/sf.
    2) The landlord is bleeding.
    3) The bank have bleeding NPL.
    4) The tenant monthly rent, after moving in the new renovated space, when it’s good to go, and after paying lawyers and RE agents their fees for cash, for their work, is still $85/sf. y/y.
    5) When a small business owner pay over $100/sf x 2,000 sf for his small office plus $60K for rent, or home mortgage ==> he works for the landlords and for the gov. That’s what the ledger said.
    6) So who made the money after the contract was signed : the electricians, the carpenters and the lawyers. They got cash for their work.
    7) And who will have a future cash flow : The elevators repairmen’s co.

    • joe2 says:

      That’s what happens when you calculate you business cash flow on leveraging debt. That is a dynamic strategy that can fold whenever you hit a speed bump.

      I think the SBA is getting worried about their EIDL business loans backed by only business assets of marginal businesses. They are doing things that look like they are trying to rope in personal asset guarantees. But unless you are really stupid it’s too late.

  7. Micheal Engel says:

    8) When the pandemic crisis will be over, old buildings will become
    industrial parks, artists studios, small offices with low rent, with jump start incentives from the state and the city and without carpenters incentives.
    9) Otherwise ==> they will become a whore house, employing enslaved women.

  8. David Hall says:

    Some coastal and island areas are in flood zones. The beaches of Florida and the Gulf of Mexico states are subject to storm surges. A beach does not take a direct hit from a hurricane most years. Waves from tropical storm force winds eroded beachfront more frequently. Beach renourishment costs tax payers money. There are lakes where they once strip mined sand to fill in low lying areas. Property insurance went up $700. from the storms last year. Some sea level rise predictions scared waterfront investors.

    Part of California is on one fault line or another. Major earthquakes are infrequent, but potentially expensive. San Francisco was shaken up before. Supposedly they have been building stronger houses these days.

  9. timbers says:

    I don’t take those seriously. But be aware….the US has lots of biological labs (clustered around Rus/Ch), and suspect just as we do the mostest hacking of all others combined x10, then proceed to blame it on who ever we don’t like at the moment, same is probably true for “warfare” labs.

  10. Sam says:

    “We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.” – Charles MacKay

    • 91B20 1stCav (AUS) says:

      Sam-otherwise known as ‘shiny lights on sticks’…

      may we all find a better day.

  11. Minutes says:

    Lets get those cap gains up some more. This is what CA voted for and wants. 75% a nice round number for total taxation. Just a few more stock options. Thanks. Dot.Gov

  12. Beardawg says:

    Nice recap Mr. McNellis. It’s great to see true numbers laid out in detail to juxtapose against the MSM’s distorted propaganda.

  13. Lisa_Hooker says:

    Nothing is what it is published to be.

  14. Gerry says:

    This article is Fantasyland. Even before the pandemic, real estate values in Manhattan were heading south. The controllers here have sent American manufacturing jobs overseas, mainly to China. Many Chinese goods are sold on Amazon, not at retail stores, eliminating the middle man – the brick and mortar store. Now, with a third of the restaurants in Manhattan permanently closed, Broadway shut down and people scared to ride the subway, why live there? 35 years ago, the NYC Garment Center employed over 300,000 mostly unionized workers. Their ILGWU union leaders sold them out, allowed companies to outsource their manufacturing after payment of liquidated damages (a payoff) to the union. In California, things seem to be even more corrupt, with a company like PG&E allowed to incinerate large swathes of land in places like Paradise [ But refusing to replace the rotting wooden power pole outside Wolf’s headquarters]. Commercial rents reflect a small part of the story, the story being that the United States is a failed manufacturing state that is running on borrowed money created by the Rothschild-Rockefeller controlled Federal Reserve Bank.

    • char says:

      Garment industry is a low cost industry, NY a very high cost place. Those two don’t mix. Those jobs would have left anyway. Probably even more without the structured wind-down

    • Javert Chip says:


      Wow, what a dystopian fantasyland you paint. It read like the typical ahistorical American who hasn’t traveled or studied widely, has no desire or capability to understand the world, yet makes absurd claims.

      Behaving like that, you need to expect rebuttals:

      It’s pretty obvious from the Punic Wars on, global economics, technology and culture have been ever changing. This process is somewhat exponential, but the last hundred years or so have seen explosive change. Some find the resulting instability threatening (or worse); others see it as an opportunity.

      In Homo Sapiens’ 315,000-year history, only during the last 50 years has half (or more) of humanity been lifted from abject poverty, had some medical care, and a life expectancy exceeding 50 years (we won’t even mention infant mortality or clean water).

      Your quivering pronouncement that the United States is a failed manufacturing state is easy to rebut using actual 2014-18 data, and SURPRISE! the numbers tell a different story:

      o The top-10 global manufacturing nations’ share of manufacturing grew from 71% (2014) to 74% (2018)

      o China’s global share grew from 26% (2014) to 29% (2018)

      o US global share grew from 16% (2014 to 17% (2018)


      o The remaining top-10 are (descending order): Japan, Germany, S Korea, India, Italy, France, UK, and Russia (running around 1-2%)

      The world is ever changing, the rate of change is increasing, and things aren’t perfect. Viewed from any point in history, the story is pretty much the same. There is no need to run & hide under a rock; as entitled and educated as you pose to be, you should consider you have a moral obligation to get off you dead butt, visit the world & actually make things better.

      ps: I doubt Wolf’s rotten pole caused any of paradise to incinerate.

      Cite for data (most recent I could find):

  15. SocalJim says:

    Silicon Valley is so last decade. Over the hill.

    The new industry is Biotech and Pharma. That is what is going to explode in the decades ahead.

    Boston is the runaway leader in those fields. Boston is the town of the future.

    • DougP says:

      Perhaps, but everything is tech related these days and the center of tech is Silicon Valley. Phones and such gadgets are such a small part of what tech does, but what most people think of.

      There is no Pharma, biotech, military, finance, health, transportation, communication, education etc. without what tech allows. And for now that is Silicon Valley.

      • timbers says:

        SocalJim is right. Lots of talk how Big Names offering insane salaries to raid existing staff at other firms and not just Covid. New cancer therapies. Bristol Myers can’t hire fast enough for their new factory to clone T cells from patient, and put them back into them to fight cancer.

        And Silicon Valley couldn’t come up with in a timely fashion with help testing for Covid, while South Korea and other could? SC highly over rated and vastly over paid.

        Capital Gains tax to death our vaunted SC.

        • Wisoot says:

          Blanket standardised pill popping a thing of the past – roll on – at last! The fish are begging for pure waters. Pissing in your own pond – I ask you – School? For what?

      • timbers says:

        FWI…this pertains to Boston area. Meanwhile…Apple lauders it’s hundreds of billions in foreign profits in a hedge fund locations in Nevada.

        Tax Apple. And make her hire Americans to makes it’s product.

        Apple is a vampire feeding off USA.

        • wkevin says:

          Timbers- “Tax Apple. And make her hire Americans”

          Since the US is going to have a welfare/social safety system, there have to be border protections-i. foreign workers can’t work in the US without some kind of vetting (skills, and other issues, medical, etc.) ii. capital can’t leave the US and have the output from this capital (factories) come back to the US without “taxes”.

          Apple doesn’t have to be named. It’s a problem with all of the industries that do this.

          Slap the tax to even the playing field in the labor market, and watch US socioeconomic problems reverse fewer unemployed, fewer drug addicts, fewer career criminals, fewer mental health problems…

          The big corporations (and their cronies, e.g. US Chamber of Commerce) do not want this- regardless of politics.

        • lenert says:

          (Look at all the government largesse granted over the last 40 years like longer and stronger patent monopolies, industry deregulation, privatization and trade deals that distribute ever larger PRE-TAX income shares to the wealthy and powerful.)

        • Lynn says:

          Timber, do you know the names of those hedge funds/llcs in Nevada? What are they?

        • Javert Chip says:


          Yea, I’d like to see your explanation for that undocumented charge as well.

          Apple didn’t need a hedge fund to repatriate hundreds of billions in overseas profits.

          In 2018 & earlier, US corps faced a 35% rate to bring profits earned overseas back to the US.

          Apple & Trump negotiated a 15.% repatriation rate & Apple committed to bring back $300B

    • polecat says:

      I say bulldoze the entirety of BigDigital Grift Engine, and turn it all back into productive living orchard from whence it developed!

      What say you’all ..

      • Xavier Caveat says:

        Apples never grew that well there, more of a stone fruit place.

      • lenert says:

        Cut the terms of patents and copyrights in half and see what happens to share prices. They will be begging for the tax cuts instead.

      • Javert Chip says:


        I’d vote for simply enforcing the existing anti-trust laws

      • Billybob says:

        Yes! Let’s take a multi-hundred-billion dollar industry that is the envy of the world and plow it all back into orchards.

        Simply one of the dumbest ideas I’ve ever heard.


    • Cas127 says:

      “The new industry is Biotech and Pharma”

      No industries have incinerated more IPO money than Biotech and Pharma.

      Huge percentages of IPOs, with many, many, many, many fewer success stories.

      To the extent that you have to wonder who pours money into generations of these doomed enterprises.

      Best guess…well heeled doctors who lack the time/inclination to read beyond the promises and who are continuously cultivated by the brokerage industry.

      Sorta like pharma reps, without the t*ts.

      (Actually, *exactly* like pharma reps…anatomy and all).

      • Javert Chip says:


        “…No industries have incinerated more IPO money than Biotech and Pharma….”

        I don’t think so:

        1) 2020 venture capital investment:
        a) Internet = $16B
        b) Healthcare = $8.5B
        c) Other = $12B

        2) As public companies in 2020, Uber & LYFT lost a total of $8.6B (GAAP) in 2020

        Interesting attitude about half the human race.

    • MCH says:

      Have you looked at South SF?

    • Candyman says:

      Hope you are right, for currently it is vastly behind. It is closed, shut down and dying. I know, my shop in the financial district is suffering. most offices closed. A third of retail stores closed permanently. New mayor clueless.

  16. Tom Jones says:

    Seems like spoiled by outrages rents, landlords, unlike Wall Street didn’t get free money from the Fed., so they are quietly waiting for an economic surge to be able to rip-off customers again; the same way home buyers are now getting creamed by stratospheric prices. And yes, some how the prices will come back. They always do, and eventually go higher. If nothing else, inflation will make it happen, at least in absolute dollars, if not in actual value of rents.

  17. nick kelly says:

    To say: ‘But what they did not anticipate is the response…which has been unpredictable. Little did Big Tech anticipate the mass migration to working from home…’ is to coyly infer the conspiracy theory that Big Tech had foreknowledge of C 19. The only way you can fault someone for not anticipating a result is if they had foreknowledge. E.g.: ‘he started the fire to collect insurance but did not anticipate its spread to the entire block.’

    So let’s examine this connection between falling lease rates and the idea that Big Tech unleashed germ warfare, or knew about it, because how else could they have anticipated ANY result?

    This RE hit is not a Big Tech problem it’s a benefit. The landlord’s distress is the tenants’ benefit. If a FANG or other has to to do a one- time payout to get out of a lease, they do it and re-lease at long- term lower rate. The response from tech and employees has generally been: ‘why didn’t we think of this before?’

    So if we are going to infer the claim that Big Tech knew about, or caused C 19 and somehow see a connection to lease rates, at least make it coherent and say that far from ‘not anticipating the result’ they DID anticipate it and that’s why they did it. That’s a conspiracy theory with legs, or at least internal logic: Big Tech unleased C 19 to get lower rent.

  18. Jdog says:

    The response has not really been unpredictable. The government and multi national corporations never really miss an opportunity to further their agendas regardless of the circumstances.
    Every crises presents opportunities, and those opportunities are acted upon aggressively.
    To those who do not understand the agendas, the actions taken in a crisis often seem incompetent, or even foolish, but you can be assured they are not. They are carefully calculated to achieve goals which are not apparent to the common citizen….

  19. Yort says:

    56.7% CA capital gains taxes, under the new proposed rules, will have an effect on both residential and comercial property. I think it will amplify the California exodus by both corporations and the wealthy. 56.7% goes to 43.4% if rich Californians move to a zero income tax state…TBD if/when the new capital gains taxes on the wealthy get passed…

    Ironic enough, if team blue gets their way and reverses the SALT tax $10,000 deduction limit, that $87 billion windfall per year will cause property taxes to fall due to tax deductions increases for the wealthy, which is ironic as the states with zero income tax usually have very high property taxes. This will be part of the equation for wealthy people and businesses to move to zero income tax states, even though most MSM states that the deduction is for NY/CA high property tax states only. For example, writing off 43.4% of your 2.5% property tax on a $3 million dollar mansion in Austin, Texas (Tesla CFO just bought a $3.29M house in Austin listed for $3.7M)…that is $32,550 -$10,000 previous limit = $22,550 extra saved per year in property taxes!

    Thanks team blue…”build back richer”…HA

    • Yort says:

      Per Bloomberg today…crocodile tears from the bottom 99.68% (note the new capital gains tax increase only affect the top 0.32%, 1/3 of the top 1%…included the top 10 richest who are worth more than $1 trillion alone):

      Rich Americans Face (Team Blue) Tax Hike With Anger, Denial and Grief

      “Billionaire venture capitalist Tim Draper isn’t persuaded. He said raising federal rates to as high as 43.4% would sound the death knell for Silicon Valley and American job creation.”

      Charles Myers was sitting in a first-class seat on a flight from New York to Dallas when his phone started blowing up Thursday. News had just broken that the wealthiest Americans could soon face a tax rate as high as 43.4% on gains from their investments.

      The chairman of Signum Global Advisors wasn’t thrilled.

      “Raising capital gains taxes hurts the capital markets,” he said in a text message.

    • MonkeyBusiness says:

      Premature talk. Wait till the market drops 10%, and all this talk about raising taxes will simply stop.

      Another virtue signalling kabuki from Dems. They got elected because Big Tech and Finance threw in their weight behind them in the last election, and now suddenly the Dems will hurt their corporate sponsors?


      • Ron says:

        So true so corruption all talk rich don’t pay taxes remember Leona Helmsley went to jail for telling the truth warning shoot to rest in country club 90 % of people better quit being ostriches burning head in sand while tax dollars are stolen Elon Musk is a billlionaire on taxpayer dime

  20. Renee says:

    In our town we almost bought an old historical building with apartments on the second floor and stores on the ground level for a couple million four years ago.

    Now the current “owners” have sunk at least half a million into revamping the apartments, and apartments turned into upstairs offices. All upstairs units, apartments and offices are for rent, month after month at ridiculous prices. Sitting empty.

    I bet they are having a hard time making the mortgage, plus their business has been affected by the plebedemic. Can’t wait to buy the improved property in a couple years for a million after they are foreclosed!

  21. c smith says:

    ““I don’t know. It’s a mystery.” I have no idea either, but somehow demand will return and rates will stabilize. They always do.”

    Not a mystery at all. The answer is spelled: the FED. Two trillion dollars cranked into the system in 13 months salves EVERY wound, if not necessarily immediately.

    • kitten lopez says:

      yeah i’m all for blaming the FED for everything, too, when i’m not accepting The Inevitability of Everything when you think of Boorstin, Postman, McLuhan. / Forget reading anything (speaking to you short-attention span people)– it’s all implicit in Einstein’s famous quote about not being able to solve the problem with the consciousness that created it. that’s also in our children. we made their DNA into DUH.

      it’s genius how the FED is the gorilla no one sees while counting the baskets. it’s brilliant how utterly distracting our three branches of government are with that funny “checks and balances” concept, distracting us from who’s really shooting us in the collective head and doing unspeakable things to our collective corpses.

      so i agree with you there, BUT i was taking that comment and Mr McNellis’ saying, “Strangely enough, it will all turn out well,” to mean that humanity will always muddle through, even if this ends with Charlton Heston falling to his knees again at the top of the buried Statue of Liberty, yelling: “You blew it up! Ah, damn you! God damn you all to hell!”

      so even if it’s curtains for us all now, even the moose came back to Chernobyl, and strangely enough, that IS things still turning out well. sort of like bleeding face down in a gutter with a knife in your back and remembering that God Loves You. / makes it better.


      so i appreciate McNellis’ breakdown of how that side thinks so i can learn how to negotiate once i’m again in a place to even negotiate. when i was in books/film, i had fun learning how publishers/producers thought so’s i could ask for and get what i wanted with creative questions and clever negotiations. things often break down over numbers and money when so much “in kind” can be traded that’s worth sooo much more than money (TIME).


  22. Lynn says:

    So, an average of $60.80 pr sq ft rent.. But those are only the ones that *have* rented.. So the real average would be even lower, really.

    Are any of these office building owners considering remodeling into residential units yet?

    • KGC says:

      It would take a decade (minimum) in CA to rezone to allow such a conversion.

      • Lynn says:

        It would depend on where it was and if it could be politicized. Also, if it fit the mandates in an area for low income housing it could pass through quicker with county backing, possibly even county funding.

  23. Stephen C. says:

    Washington D.C. non amicus vester est.

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