Last time it tried to sell the building was in 2019. Now the office market is an entirely different ballgame.
By Wolf Richter for WOLF STREET.
The office market in San Francisco – the epicenter of working from home and of corporate headquarters move-outs – has been in a sour situation since before Covid, and it has gotten a lot worse. At the end of Q2, nearly 28% of the total office space was on the market available for lease. Only a little less terrible than the office markets in Dallas/Fort Worth and Houston.
But since the end of Q2, lots of new office space has been dumped on the sublease market. Salesforce put 412,000 square feet in Salesforce West tower on the market in July, representing about half of its headquarters space there. Twitter told employees in July it would shutter an entire building. Just about every day, more tech companies are trying to cut their footprint in San Francisco.
Now Craigslist is at it. And the pricing situation is interesting.
Craigslist has put a nine-story 135,200 square-foot office building at 222 Sutter Street on the market, for a second time, according to The Registry. The building, located in the North Financial District, also has some retail space. So good luck with that in this neighborhood. This time around, its asking price is $60 million.
Craigslist is not in this building. Its headquarters is on Market Street. For Craigslist, this building is an investment property. It leases the building out to other tenants. But the building is only 22% occupied.
Craigslist bought the building in 2012 for $53.8 million. The new asking price is just 11.5% above where the sales price had been 10 years ago. Even a minor further price reduction, after fees and closing costs, could wipe out any gains altogether.
Craigslist tried to sell the building in late 2019. The office market in San Francisco had peaked in early 2019, and by Q4 2019, the overall availability rate had started to rise from the below-8% range in early 2019 to nearly 10%. At the time, Craigslist’s asking price was $100 million. At that time the building was 68% occupied. When Craigslist couldn’t sell the building, it took it off the market.
It’s an entirely different ballgame – hence the 40% price cut.
The first time the building was listed, the availability rate in the San Francisco office market was less than 10%; now it’s 28% and getting worse just about every quarter.
In 2019, the building was 68% leased; now it’s 22% leased.
Asking rents for Class A office space – which this building is considered to be – have fallen by about 15% since late 2019, according to Savills.
Despite the drop, at around $75 per square foot per year for Class A buildings in San Francisco, office rents remain hugely expensive and are still a massive disincentive to rent office space in San Francisco – especially when working from home is a functional alternative for many companies.
The vacancy rate, and the future expected vacancy rates, once the leases terminate across the City and even more space comes on the market, are so somber, there are discussions now, including with city officials, on how to convert some of this vacant office space to housing, because what else are we going to do with it?
Investors in office buildings have to wonder: How low do we have to go with rents to attract tenants in this environment? And they have to wonder: at what price do we have a reasonable chance of making money with this building, given this situation?
Obviously, being 22% occupied now, the building’s rents haven’t gone nearly low enough to fill up the building.
A lot of tech companies have put a lot of sublease space on the market that they just want to get some money for during the remaining years of the lease, and they’re pricing those office spaces more aggressively even as there aren’t a lot of tenants looking for office space. This will be the competition.
At this point, it’s really tough trying to figure out what the clearing price might be, with the market as messed up as it is – still horribly over-priced, and still horribly vacant. And that 40% cut in asking price nearly back to the purchase price a decade ago – as huge as it is – is just another effort to stimulate interest and find the clearing price in this environment.
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Craigslist seems like a 1990s website. Wish they had a better app for buy/sell like OfferUp.
They probably regret not unloading the building in late 2019.
Go away, millenial; stick to your cloudphone. People like you ruined the Internet.
LoL!
The reason companies are reluctant to mark down offices and houses to real market value is because it will cause Assets in many balance sheets to plunge thereby destabilizing our economy that today seems riding high on Asset speculation rather than real goods and services production.
Gbanga,
Everything after ASCII was a regression.
If we stuck mainly to a text based internet, everybody in the US could have internet access for a buck a year via POTS or 2G wireless.
And wouldn’t the world be a better place if more people read wikipedia articles rather than watched high def porn?
(Only semi-kidding. Except about the porn. *Completely* kidding there. Keep your hands off my porn, internet textualists.)
LOL! I’m a baby boomer. Worked with computers that used punch cards. I know how to operate a type writer.
I cut my teeth on Fortran and punch cards doing engineering calculations.
I kept a couple of the tools to retrieve mutilated mark sense cards. It must have been fun to slice a V in the payment card and cause confusion.
At JC, the engr dept had a whole room full (15-20?) of mechanical calculators. We used to divide a number by zero on all of them, close door, and split, letting them all just clack away till discovered. Noisy little buggers.
AGREED!!!
I love Craigslist! I’ve used it to buy and sell misc. stuff, and to advertise rentals for the past 18 years. In the Boston area we have a very active site, and it is still the go-to site for housing. It is one of the few sites on the Internet that hasn’t been utterly commercialized and financialized to death, and it is geared to encourage person-to-person commerce, barter, and recycling in your local area.
I find it refreshing that the interface hasn’t constantly been “updated” to look “modern” with mostly useless features and visual and aural clutter, and pop ups in your face to collect even more data than the 45 trackers and cookies that are already being used to track you. (I don’t use the phone app, so can’t comment on that but suspect the data mining and tracking is even worse).
CL is easy to use and you don’t even need to create an account, and the vast majority of its categories are FREE. It uses ZERO trackers and even the map function uses the open source OpenStreetMap, breaking ties with the google monopoly. (Nice map utility that I use often, although it helps to learn a little metric system.)
Just wanted to add, I’ve also used Craigslist to get rid of many items in the “Free” category, and to advertise curb alerts or free piles, so that many serviceable or useful items and materials can be re-used.
I recently used CL to get rid of an old stove and very old dishwasher that I pulled out of an apartment. The stove was still working but was in terrible cosmetic condition so I put it up free, somewhat doubtful there would be any interest. Surprisingly I was contacted by several metal scrappers, and arranged with one to pick up the stove. I then asked him if he wanted the 50 year dishwasher too (they used a lot more metal back then) and threw in other misc. pieces of scrap metal laying around the house, even some empty dried up paint cans.
The guy came, loaded up his pick up and took it all away and I didn’t have to pay for removal. Sweet!
…and to repeat an old engineering joke:
“…if it works really well, it doesn’t have enough ‘features’, yet…”.
may we all find a better day.
I guess it may be area specific (or maybe it depends on the ad type), but I completely stopped using CL as it is literally a scammer central. Try listing any piece of electronics, and you will instantly get 3 or 4 messages with sob stories about being deployed overseas etc., basically a preamble for an ole classic check scam.
At some point I just stopped seeing any value. I hate FB, but FB Marketplace is where action is now (and, as a result, it is slowly becoming another scammer central too)
IN-your last paragraph illustrating yet again a less-illustrious constant of our all-too-human nature. We can always try to run from it, but we can never hide—the unpleasantness and uncertainty of personally confronting dishonesty (of others and our own) is the only tool we really have (…we will still ‘…rely on the kindness of strangers…’, however…).
may we all find a better day.
Different time, different country, but I assume the same dynamics exist where there seems to be a disconnect between prices and the supply and demand equation.
I once tried to rent some office space that I was watching for some time for the small business I was getting of the ground and made an offer to lease a space that I knew had been empty for more than a year. The agent rejected my offer, and when I pointed out that the space had been empty for an exceedingly long time, he just shrugged and said: “I don’t care, it belongs to a retirement fund, so we have no urgency to rent it out.”
This lack of accountability is promoted by bailouts.
We keep bailing out donkeys as they keep losing in horse races. If this goes on longer we would have replaced our breed of Made in USA Race Horses with Made in China Donkeys, and would stop expecting any wins.
SS-unfair to donkeys! as life ALWAYS goes on, with no ‘finish line’, i’d want a sturdy donkey for the long haul vs. a fragile short-term ‘racehorse’! (seriously, i agree with your point, but think ‘Donkeys-Race Horses’ are juxtaposed, here-tough to plow your 40 acres or pack your prospecting gear with a race horse…).
may we all find a better day.
MULES,,, the ”ALL AMERICAN (mutt) ” version is THE BEST equine of them all,,,
Quite similar to WE the PEONs of USA who are ”mutts” of the very best kind, as has been demonstrated many /times/decades at this point in time IMO…
While some would have USA ready to bend over to the oligarchy once and for ever, if for no other reason than to just, ”get it over and let us bee”…
That is NOT going to happen soon,,, and maybe not ever until the sun does it’s thing and we all go to nirvana of our choice…
Awful choices of politicians will continue to change toward clear or at least clearer choices, and many choices going forward will NOT be between ”crooks” as has been the case lately.
Agree that Donkeys are hard workers and earn their living unlike our cash burning unicorns.
Maybe should have replaced Donkeys with cash burning unicorns.
SS-i like it!
may we all find a better day.
Agreed about the lack of accountability promoted by bailouts.
Not the donkeys – which are wonderful, loyal beasts of burden. Give me a donkey any day over a temperamental race horse.
Supply & demand theory offers useful insights into the pricing of fungible consumer goods in competitive, open markets.
Using supply & demand theory to explain pricing of highly illiquid assets used for speculation, money laundering, and tax shelters will only tell you a small part of the story.
Off topic but
Inflation in the United Kingdom has surged to a new 40-year high and is now in double digits. Official data for the month of July shows the consumer price index accelerated to 10.1% from 9.4% in June.
They tell the truth in the UK and because no midterms this November so inflation rises.
The UK is in a very different position in several key respects than the US. The UK is a large importer of energy. There is an undersea gas pipeline from Norway to the UK. There are no large UK oil wells and minimal UK fracking. Nor is the UK self- sufficient in food. These imports must be paid for in dollars purchased with depreciated pounds.
True, the UK is spared the endless elections of the US, but the above has more to do with its higher inflation than an absence of midterms.
The UK has plentiful energy supplies, the problem is the Greenies make the insane rules.
Nothing could better illustrate the madness than DRAX. This coal wood fired power station supplies 7% of UK power demands.
Converted from coal to wood pellets it requires 14 million tons of trees – mainly in the USA – annually, to provide 7 million tons of wood pellets. The carbon impact is far larger than the original coal burner.
To put this in perspective, and considering modern lumber processing, 800,000 timber framed and sheathed new homes could be built yearly.
As an aside, Lord Deben, the genius behind the insanity, is chairman of the UK’s ICCC. (Independent Committee on Climate Change.)
Sorry Wolf – I needed to relieve my blood pressure.
IANCAD; Agree completely. Those wood pellets come from my neck of the USA (Carolinas), and they label the power generated as “renewable” (partially Green).
Burning wood is considered carbon neutral, as wood is a renewable resource. Coal, oil, etc., are not carbon neutral as they’re not renewable. Think about it…
Funny that the UK has to import wood to burn. I guess no forests. Too many people in too small of an area.
Ironically, there are internal Conservative party elections coming up very soon, to determine the new Prime Minister. I would say the current government does not have a good reputation for the telling the truth, almost as bad as Biden and Trump.
Burn the sector to the ground. But, commercial real estate deleveraging and bankruptcies will take time to unravel.
They will news to show that they are losing money before there will be any interest shown
I think that empty space has more to do with attrition than it does anything else. Craigslist is a shell of its former self.
“Craigslist is not in this building. Its headquarters is on Market Street. For Craigslist, this building is an investment property. It leases the building out to other tenants. But the building is only 22% occupied.”
I’m waiting for Wolf to tell you to RTGDFA, haha
Craigslist has never had more than a few dozen employees. They are the poster child for how a tiny company can disrupt and entire industry.
Investment manager not being one of those employees evidently lol.
Occupy it!
Upscale hi-rise detention center for the SF rabble?
Pedestrian umbrellas mandatory. Incoming!
Homeless shelter? Limit of one tent per room.
Houston and Dallas
Many of their buildings were built in the 1980s or earlier during the period of Oil embargo, Interstate pipeline growth, and oil consumption growth.
Then the savings and loan collapse and Continental Illinois Bank collapse which was the largest bank to collapse in 1984 until the banking crisis in 2008.
That collapse of the oil and gas business has never recovered with the buildings vacant for decades. Companies built new buildings closer to the workforce as downtowns in Houston and Dallas declined.
Good luck with these buildings becoming residential buildings. Always possible but they were not designed for that purpose.
Based on the analog of oil and gas office space demise I think there is no chance for the San Fransisco office space to recover.
The Houston and Dallas space as analogs still are vacant.
The Link at Uptown is under construction. Its supposed to be 25 floors of class AA office space. Perfect for holding those alcoholic anonymous meetings I guess.
I don’t know about Dallas, but I live in Houston and you could not be more wrong about the downtown area here. There are multiple brand new skyscrapers, both residential and commercial. The baseball, basketball and soccer stadiums are all downtown. It has absolutely exploded.
The office vacancies are mostly in secondary markets, like Greenway (the area around the old Summit, which is now Joel Osteen’s church), and older buildings in the energy corridor (which are the “buildings closer to the workforce” you describe).
You are about a quarter century behind reality.
“ You are about a quarter century behind reality.”
More likely about 14 years behind *really* cheap money and juiced stocks…
Osteen is two thousand years behind…..but still getting richer with it, and I guess getting rich is our only game……unfortunately for our species. And what use is a God with no worshippers, that’s how they get their kicks, right?
Insects will love it, though, although they are pretty dominant right now. Not to mention the single cell set, which have ALWAYS been #1.
NBay-kinda makes me think of the time the Incas were having a major interempire scrimmage and paid little mind to a guy named Pizarro and his small band wandering onto the field…
may we all find a better day.
Because of it’s unique beauty and potential environmental blessings –IF and only IF managed properly — SF Bay area WILL once again go bursting forward sooner and later with clearly proven ”green, etc., policies and practices.”
But, again, IF and only IF managed properly on all aspects,,, but most certainly on the ”social” aspects…
Most interesting city in the world,,, but possibly second to London IF and only IF London will get it’s stuff back together as it so clearly had done during WW2…
Best of Luck to both of these wonder full cities!!!
You’d think this would be a bad time to put up new office space in SF, and yet, there’s a project for a 50,000 sq ft building at 531 Bryant St., replacing another building. What gives? Can we expect yet another article about questionable RE investment decisions in the near future?
I’d be curious to see an interactive map that shows all the empty or partially-empty buildings in the downtown SF area.
Is this the future everywhere, or is SF unique because of it being the hub of all things related to the interwebs?
SF IS actually unique IMHO miteyurn!
But, as mentioned above, SF and the entire bay area will come back to its glory IF and only IF it is managed properly.
Alioto and his ilk had many of their policies ”right on” right on both the money and the social aspects that provided a safe place for everyone to ”do their thing.”
AS IT SHOULD BEEEEE!!!
Surely there were some outliers, but from my direct experience, the Hell’s Angels and such like knew their limits and were at least somewhat responsible about not killing innocents, etc.,
MUST beeee that way again, and sooner than later!!!
Otherwise, just total WILD WEST once again,,,
that nobody really wants or benefits from that kind of scenario should be very clear at this point in time.
Given how heavily the city and state tax residents and how undesirable and oversupplied the market is, not to mention the costs of running and maintaining the building, it is at least theoretically possible the building is worth less than nothing.
“possible the building is worth less than nothing.”
Gosh MC, maybe they should pay you to take it off their hands. You’d be doing them a favor
“city and state tax”
You have a point about those taxes, but honestly, somebody has to pay for all that corporate welfare or they’ll get their subsidies from somewhere else, and they can’t just put it on the national credit card like the feds do. And besides, it can cost billions to provide an attractive business environment. It all adds up.
I live in a small town (suburban Philly) with a (still!) hot real estate market. A builder bought a little house for $250K on an eighth-acre lot across the street, razed it and put up a million-dollar home.
I told him I knew what he’d paid and asked him what he thought my property was worth, with its third-acre lot. He guessed $400K but $450K if the house wasn’t on it.
Ouch! I’m living in a teardown.
Not sure there is a substitute available for cities. Spread everything out and then what? More trains and buses, or more cars and congestion? It might seem too expensive to do, but restoring these buildings for housing may be the only choice. Either that or tear it all down and start from scratch. And include modern mass transit in the program.
Idea: let’s convert all of this vacant office space into apartments. There, solved two problems for ya.
You’d never be able to get them rezoned, Kevin, not after all the trouble the tycoons went through to get the RE markets rigged just right.
You can be sure somebody’s already thought of doing that and ran up against wealthy vested interests. It’s why you can’t have anything nice, not to mention affordable.
Nice try though. You get points for innovative solutions, even if you’ve already been sold out well in advance. Welcome to America.
All you people who have generalized and ”put down” the possibility or probability or profitability of converting buildings of any kind from one approved usage to another, without consideration of the specific project, need to get over it…
Every remodel/rehabilitation/reuse RE situation has its challenges and its benefits… just like every other situation or location or whatever…
Certainly, cost efficiency should reign supreme, or at least paramount;;;
but, equally certainly, global health, including social and societal effectiveness should always be part of any and all considerations.
“Every remodel/rehabilitation/reuse RE situation has its challenges and its benefits”
You’re making this way too complicated. For an industrial loft you just spray paint the cinder block walls and put in some laminate flooring and Bob’s your uncle.
Gentrification is very fashionable.
I have read that converting an office building into residential housing is more expensive than just tearing it down and starting over from scratch.
Completely different building codes.
Of course you could change the codes to make it cheaper/easier but good luck with that.
Note…your building department may vary.
Where did you read that? In your fevered imaginings? In Britain, under the cover of “freedom”, developers have free rein to convert commercial to residential use without any need for a formal planning application.
Since when do ‘libertarians’ bother with such things anyway? Wouldn’t that go against your religion?
Darn that freedom. We need more commisars.
The building at 222 Sutter St. was put up in 1908. In the late 1970’s and early 1980’s, there was a W&J Sloane store on the ground floor selling high end furniture. The retail space has been empty for many years. The neighborhood has seen better days and many nearby retail stores sit empty as well.
In the 1950’s when the US had an industrial economy. Detroit had the highest per capita income in the United States. But then for many reasons, but the main one being a slow transition to an “information economy” the industrial buildings of Detroit ( and other rust belt cities) began to empty out. I am sure many people at the time had the same thoughts that RE folk in SF are having today. What is the clearing price? What new use will come along to use this space. But a clearing price was never reached for the Packard building or any of the other massive buildings of the Industrial Age. Perhaps as the ” information economy” winds down to be replaced by something else its “hubs” of activity will also wind down like Detroit did. History doesn’t give any locations special providence to be immune from the winds of change. Perhaps one day San Francisco will be a fishing village and home port for Pirates with most of the skyscrapers dismantled for scrap.
The difference is that the Bay Area has a climate that a high percentage of people like. The highs are consistently between 55-70 and the lows between 45-55. You can often get away with no heat in the winter and no AC in the summer. You can go outside with a light fleece or cardigan the entire year.
Detroit, on the other hand, does not have a climate most people like. No one lives in the Midwest because of the weather. They live in the Midwest in spite of it.
Very well said. Having first hand knowledge after living in the Bay Area, So Cal, Tx, Ala, Mo, NY and PNW during different times of my life weather is 100% a driving factor. 👍😉👍😉
Yep. Obviously everyone has different tolerances to hot and cold, but weather is absolutely a primary factor for people who like being outside, hiking, walking, and so on.
The people who are content sitting on the couch all day and watching TV don’t care about climate of course, but that’s not most people.
There is another aspect of weather. The frequency of storms, floods, wildfires or other that destroy infrastructure. People may keep up with cold winters to not get everything flattened every now and then.
“No one lives in the Midwest because of the weather”
You got that right!!!
My dad grew up on a farm in South Dakota. As soon as he finished high school he got the heck out of there. I used to spend my summers out there on the farm. It was really nice in the summer. But the winters… no way!
“In the 1950’s when the US had an industrial economy. Detroit had the highest per capita income in the United States.”
Detroit was systematically gutted to undermine the labor unions in the auto plants. The FIC could no longer get the government to suppress labor and send armed militias and assassins against union organizers, not after FDRs reforms protecting worker’s rights, so the FIC successfully resorted to economic warfare instead. Happens all the time. And yet, to this day, the FIC has been unable to destroy the murals of “Detroit Industry” by the great marxist painter Diego Rivera, despite many and ongoing attempts.
Labor unions systematically gutted their employers as well, it’s not just a cut and dried one-sided story. U.S. automakers were pillaged by bad management and strangled by labor demands simultaneously. By the 80s, your beloved UAW workers were being plainly outperformed by import manufacturer’s labor and flexibility. U.S. automakers lost market share throughout the 90s because they couldn’t deliver the low price and high reliability of foreign competition. American consumers were simply deciding to get more for their money. By the early 2000s, U.S. Automakers were so hopelessly choked by UAW pension costs and inefficient labor that they were a solid decade behind foreign competition technologically and were reaching insolvency as a result.
It’s not a coincidence that as soon as the UAW’s stranglehold was weakened coming out of the GFC, American-made cars immediately gained interiors that looked like they were designed in the correct decade with widespread offerings of other features that had been delivered by foreign manufacturers for years like independent suspension.
UAW concessions freed up a lot of R&D money which changed Detroit’s products profoundly for the better… Direct proof of the UAW’s effect over the years. It couldn’t be clearer that union demands played a huge role in the implosion of the U.S. auto industry. Very few unions (in any) have ever figured out a good parasite doesn’t kill it’s host until after that host is dead.
NT
Nice fairy tale.
Total twist of the facts.
We understand you hate unions.
Toyota opened the NUMMI plant in Fremont ( now a Tesla factory ) in 1984. GM had closed the plant for a myriad of reasons.
Using the *exact* same workers, the plant was able to achieve 90% of production rate of Toyota plants in Japan by using the Toyota management and production process.
This showed Japan that making automobiles in the US was viable.
“Labor unions systematically gutted their employers as well”
Sheer invention.
“union demands played a huge role in the implosion of the U.S. auto industry”
The US auto industry didn’t implode, but their lunch was definitely eaten by the Japanese, and Japanese auto workers are paid better than US auto workers, as are Germans. Something for which you have no explanation and no spin.
Nothing in your comment is true. Besides, US auto makers are primarily financial concerns and only make vehicles as a side line.
That’s what their balance sheets have said in plain black and white for at least 30 years. GM risked bankruptcy in 2008 because of their financial dealings, even though they were making serious money on vehicle sales.
Outside and Unamused, read my GDF reply. I said, “pillaged by bad management and strangled by labor demands simultaneously.” So I place the blame on both sides. I have also worked in union shops and found them to be unbearable breeding grounds of laziness and inefficiency. Anyway, Detroit fell to a double edged sword between bad management and union crap.
As for post-GFC wage differences, a 3/29/2011 L.A. Times article states, “Detroit automakers and nonunion Toyota’s U.S. plants are about the same at $55 an hour, according to the Center for Automotive Research. But the rest pay less; nonunion Honda pays about $50 an hour. Nissan, Hyundai and Kia are at about $45.” That doesn’t include massive legacy costs and other benefits which were substantially larger for UAW workers pre-GFC. And you simply can’t argue that Toyota/Honda workers were getting paid more that UAW workers in the 70s/80s/90s when the seeds of Detroit’s downfall were being planted, grown, and harvested.
What y’all are missing out of the auto mfr discussion is that the Japanese were wise enough to understand and implement Dr Demings policies and procedures as fast as they could, and THAT led to the vast increase in quality.
Deming presented his work to Detroit first, and they just laughed him off.
All the retired union folks I have known have been solid worker bees, no matter if construction trades, auto mfr, cab drivers, etc.
YES, they did want at least some semblance of fair pay.
Yes. Heavily unionized industries ossify because of inflexible work rules and above market pay and inevitably are disrupted by competitors overseas and otherwise.
Happy-how then do we realistically analyze ‘above market’ CEO/upper management pay? Japanese model, perhaps?
may we all find a better day.
Convert the unused office space to residential apartments and use it to house all the migrants coming over the border from Texas. Kill three birds with one stone.
Why do you want to encourage even more illegal immigration?
Who is going to pay for it?
How much will it cost?
Just wondering.
Debt based economy needs more future debt holders.
“Why do you want to encourage even more illegal immigration?”
Indigneous Americans tried to turn away illegal European immigrants and were massacred for it. Lucky for them they weren’t all enslaved.
I bet you have a remarkable family history.
It is interesting that SalesForce whose product ties “remote” customers and their vendors and sales people together, has its non remote office spaces vacant and for lease.
I worked with SalesForce for a number of years, and it is a great tool but to worry about “office space “is sort of counter to their basis for being.
Give all office Space to the Homeless a Mixed Bag of Fentanyl Crystal Meth Users and just general Deadbeat’s who like it that way and don’t want a job but would rather ride the Gov Titty on SSI wrongfully obtained .
My Guess is that since the :> ” Government :>The Fed ” has sponsored Inflation for personal gain is that the first Political Candidate promising
to reform the Fed & Government Who has no say in such shall Now will get considerable backing Humm . Place the Fed Chair on the Ballot lets vote on it and end all this .
I expect better. Wolf does an amazing job, the articles are timely, filled with facts. I also enjoy the comments section, and I seek out varying opinion and ideas. I’m not censoring anyone, but some of these comments are inane. Let’s do some research and come to real solutions. Every major city will be/is confronting the same situation as “Main Street USA” from the 50’s did. How do we revitalize, and remain vibrant? Many of these buildings cannot be converted to residential. And why would people live there. if everything else is shuttered? What happens as our society transforms, in the opposite direction, without the need for these huge towers? Do we dismantle and have the cities as they were in the 1800’s?
I’m not looking for snarky answers, although there are some pity comments here, but there is such a wealth of intelligence in the Wolfs followers, I expect more, and yearn to hear the solutions. I set the challenge to all, how do we move forward?
Two words: vacancy tax.
Constitutional Maximum Net Wealth……4 words.
$10-15M is plenty of incentive and then “pursuit of happiness” cash.
IRS full branch of Military to deal with “cheats”….in a military way.
Most major cities came into being as a support service for waterborne trade…
And grew as a result of the move from rural to urban to support the industries that came into existence because of the ability to receive raw materials via water…
Govt services centralized in cities because that’s where the population lived…
Detroit is a good example of industries decentralizing from the city and having access to rail, jet aircraft, interstate highways and cheap land…
Most are marketing past glory that will never come back…
When the price gets right, I know a buyer for all of that office space – Starfleet
two beers has it right, up the carrying costs until it becomes productive, or it goes away.
I once suggested to promote infill development that the city raise property taxes on vacant property to push development instead of land banking. What a scared look from the mayor!
Uh, no way. The big old money likes to keep carrying costs cheap.
But the entire rationale of offices is under huge duress- and quite simply how much needs to be done in a box when the computers are everywhere….and high speed is rapidly moving everywhere.
Now, except for the ridiculous school problem, why should suburbs maintain their value- just look at those dead and dying malls….
So much is still to come in this change from instant communications, and yet everyone wonders what happened to the sears catalog. Car dealers huge inventories? Why? And capital is no longer free so back comes that 5% cost of debt again. A lot of cash burn zombies are finding out the hard way that money ain’t free.
Someday this war’s gonna end…
Off the top of my head and without opening any of my valuation software, first guess this building will not sell to an investor until the price drops at least 30% more. An owner user may pay more, assuming they are in a hurry. Buyers who have the luxury of time on their side are going to see massive price reductions before the San Fran market stabilizes.
Seems like there’s at least two different problems that need fixing given a typical unloved office tower. The building as financial asset. And the building as a physical building.
The financial has to take precedence if debt is collaterized by the asset. Any lesser-than-designed use rental wouldn’t pay the same and would probably be a last resort. Assuming that’s handled somehow, the building is rentally challenged but charged off or whatever, and no near term demand for office space anticipated, and has at least fifteen years of structural service life, gut it to concrete floorpans and structural steel, take out half the windows and make it a vertical commercial greenhouse. Or individual gardening spaces like apartment dwellers in Germany have. No services, no utilities, sign a release and tough it out. Just an idea, many obvious regulatory hurdles. But if people didn’t already grow their own there wouldn’t have been a run on Ball jars and lids last year. It’s precarious to rely on the Central Valley farmers for so much of our fruits and vegetables at all, unless you trust the Bureau of Reclamation to let them have water, the nation as a whole has ag yield issues every year now. We need the productive capacity of corporate farming, but the botanical diversity of small family farms and gardens is important too I think.you can laugh now.
rick m.-human resource demand is the plant that has become root-bound and outgrown its flowerpot…
may we all find a better day.
1) In June AAPL dropped to $130. What will happen to the Bay area if AAPL drop and stay in the $100 area.
2) Houston expanded in the late 1970’s during the oil boom. After the boom came the bust. Those properties are “glut” for 50 years.
3) The same, might be repeated in SF. No use for SF commercial RE.
4) Once the vacancy rate exceed a certain threshold it’s hard to revive it.
5) Beautiful cities can become ugly.
Maybe, they should convert the empty office towers to condos? Don’t people claim that there is a housing shortage in SF area? How about dowtown oakland? or Berkley? or Hayward? or Richmond? Me thinks every one wants a home in Pacific heights.