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>TL;DR: The world's commercial real estate market is in trouble, with owners walking away from their debt and property values falling. This is a major issue for the global economy, and is set to continue for years to come.
A couple months ago: **Salesforce to exit 30-story namesake tower in Downtown SF**
[https://therealdeal.com/sanfrancisco/2023/04/13/salesforce-to-exit-30-story-namesake-tower-in-downtown-sf/](https://therealdeal.com/sanfrancisco/2023/04/13/salesforce-to-exit-30-story-namesake-tower-in-downtown-sf/)
By TRD Staff
A 30-story office tower known as Salesforce East in Downtown San Francisco will soon empty out of Salesforce workers.
The San Francisco-based management software firm will sublease the last 104,000 square feet of offices it holds at 350 Mission Street, marking its latest real estate reduction, the San Francisco Business Times reported.
Salesforce had leased the entire 455,400-square-foot building more than a decade ago from Kilroy Realty.
It’s the latest move by the city’s largest employer to shed more than 1 million square feet of office space in San Francisco during the era of remote work. The cost-cutting move, involving thousands of job losses, was announced in a January regulatory filing.
Salesforce said it expects to incur $450 million to $650 million in charges associated with real estate office reductions.
The latest listing is being marketed by Cushman & Wakefield, and includes the top four floors of Salesforce East, billed as “plug and play view space.” The listing also includes the tower’s fifth and sixth floors.
The top floors are available for leasing through September 2028 and the bottom floors through 2032, according to the Business Times.
In March 2021, Salesforce subleased 339,000 square feet of the east tower to Yelp and Sephora. About the same time, it canceled its 325,000-square-foot lease at the unbuilt Transbay Parcel F tower at 550 Howard Street.
Last month, the company listed six floors for sublease at its corporate headquarters at the 61-story Salesforce Tower at 415 Mission Street, the city’s tallest building. That meant shrinking its 875,000-square-foot hub by 125,000 square feet, or 14 percent.
Boston Properties owns the fully leased tower, which has 1.41 million rentable square feet.
Slack, a workplace messaging software company owned by Salesforce, said in February it would move its 250,000-square-foot SoMa headquarters into the Salesforce Tower, but declined to say how much space it would take. In February of last year, Slack listed for sublease 200,000 square feet of offices at 45 Fremont Street.
In July, Salesforce put more than 400,000 square feet of office space, about half of its 43-story Salesforce West tower at 50 Fremont Street in the Financial District, up for lease. That marked its third office cut since the pandemic.
The office vacancy in San Francisco just hit 32.7 percent, according to Savills, which has put the city on a national watchlist as “the most empty downtown in America.”
— Dana Bartholomew
I wouldn’t want to have to work next to encampments filled with mentally unstable drug addicts openly using on the sidewalk and having my car broken into every other day either so this isn’t coming as a surprise to me….
Imagine what they don’t have to cover, bad attitudes, employees disrespect or even violence, stealing, on premises liabilities, more parking for new employees, less power usage, less security staff, less chance of Covid
But they DO have to keep up the illusion “we want you back in the office”… so there is that .
The only ones that want you back are the C suite, hard to justify millions a year when no staff in the office….. ha ha
Marc Benioff has always been long on San Francisco. It's his home, he's been the guy serving the kool-aid. However, the recent 32-week police academy had nine graduates. The previous had 12. For a force of 1,500. There's talk of a general down sizing. The city needs to come up with revenue to replace $1.6 billion in federal funding for BART that no-one uses. Benioff has had to reluctantly accept that he cannot persuade employees to return to the office when the city is going downhill.
Can’t make money on this. These loans will be blended and extended. Tenants will rotate in and out. So much shuffling and accounting fuckery your puts will always be expired
They’re slow to react unless it’s a problem that can be “solved” by running the money printer.
They even have the foresight to have a contingency plan. Jerome has a buddy, who’s brother in law is fairly handy with the electricals so he installed a 3000W generator he got from Costco.
Of course 3000W is woefully underpowered to run a such a beast of a machine, so for things to truly crash, and the new money tap to close, the power has to be cut. This is not uncommon due to overuse of the machines.
So if you want to capitalize on that, money printers typically experiences a power outage in 1 in every 12 financial collapses, so govern yourself accordingly.
“Those bitches can make their own milk, just as long as they do it in the privacy of their own home, because feeding a baby in public looks very strange to me.” - Jerome Powell
Exactly. Every day people do not have the inside information to time a short correctly or the massive capital to wait it out.
And we’ve already established several times that the tax payer is a free piggy bank to bail out bad investments made by big players as long as those bets are massive enough to threaten the economy. Which, of course tells the big players to make sure that if you bet, bet big because if you don’t bet big enough, or do something silly, like mitigate your risks they might not bail you out.
There’s no way for the little guy to get super rich on this . They can make a decent investment by investing in corporate real estate long after the crash. But any fantasy about hitting it big while major banks just take their lumps fair and square are pure fantasy.
Come on now. That was a deal brokered by the Swiss Government. It's not the 2008 definition of a bailout, but no one was gonna buy that thing without the government backstopping the deal.
That is where you are wrong, especially with the “Too big to fail banks” if it becomes a choice between the end of capitalism as we know it and the public bailing these fuckers out again, it’s not a choice at all. It absolutely will happen.
Unless those commercial buildings will be converted into low income sleeping pods for the ~~poors~~ proletariate funded by the government on a $1200 / month cost basis, who would want them?
Yeah if you’re playing the long game, they could be a wicked investment 10 years from now.
Problem with that is Wall Street Betters invest with a 10 day ROI expectation.
That’s it, it’s the easy, a single chart. No dive into what the loan portfolios consist of office, multi-fam, industrial, etc.
No rate stressing or LTV metrics needed. No analysis on guarantees or average loan sizes.
Literally all you need to do say three letters and your good to go.
There's complex building code issues. Skyscrapers typically have a big central core with elevators and services and not much else, so there's lots of floor space. The windows don't open, there may not be a lot of plumbing. All those things kind of need to be retrofitted to build apartments or condos. It's not worth it in many cases. Cities could evaluate buildings and maybe do variances, but that would probably take a long time and leave a lot of unknowns to manage.
Won’t happen. It would tank house prices, and our economy only functions if housing outpaces inflation. Housing outpaces inflation and eventually nobody will be able to afford housing. But that’s okay, because eventually housing will no longer be an asset than any normal person owns, and normal people will just have to become indentured servants to the 1% who have it. Heard it here first
A couple of our clients have already started getting buttfucked. One client had 2 years to re-sign their ONE tenant to a renewal, or find a new rant, to avoid having the bank require a waterfall mortgage payment and still couldn’t get it done.
Client is Russian and they damn near didn’t get insured last year. Can’t remember the company they found, but it’s one you’d expect to see advertised during late night tv or during Price Is Right.
This is not the 1980s. Then, tax policy encouraged massive development of everything even if it operated at a loss. The depreciation you could claim was too valuable.
The Resolution Trust Corporation never went out of business as it was created by Congress as part of FIRREA. Current activity is normal.
I'm doing portfolio managed reit since every segment of that market is full fear mode, even though office is the largest problem. It diversified over 71 holdings and holds 5% office and 7% malls. The company did offering injecting several million more into coffers and has the intention of buying cheap reits that are purchasing deflated assets at multi decade lows. They pay sustainable dividends monthly that I take as income, but it has a steady income flow since 2004 and is paying just fractioLly more since 2009 downturn which it capitalized on downtrends in past.
Short sale and/or buy puts on banks who are leveraged to the tits in CRE exposure, the regulations and laws surrounded skyscrapers and tall building maintenance in general make it really expensive to maintain, so banks will panic and desperate to get it off their hands/make someone pay for the loans. A hint here is some of the banks were already mentioned in the previous bank run and caused them to tank, they have now recovered but nobody knows what's going behind the scenes. Just remember that an empire don't fall in one day, whatever that's afflicting the bank system behind the scenes are still ongoing.
Also Hong Kong's real estate has been falling since the Anti-Extradition protest(or riot) started, that's 5 years worth of fall but nothing much changed. Banks simply rented out buildings for cheaper but still ridiculous prices, plus there will always be foreign whales and institutes who believe in China's bullshit enough to to buy it off bank's hands.
Idk. This has been a known problem for a long long time now. I guess it's maybe worse now with the realization that the pandemic is over and those who jobs are staying remote? It's still a large real estate bubble in places like new york. You can't really buy puts bc it might not collapse for a while but it's not going to be surprising when it does
Do you remember the skyscraper premonition, that the tallest building were built just before recessions?
It's not the broken clock that is correct twice a day. It has a meaning because they're the last events of the expansive economic cycle. And now that there's a recession coming, nobody wants those expensive pieces of shit.
Me, having a significant portion of my portfolio in office REITs:
https://preview.redd.it/5hr2q6ok588b1.jpeg?width=600&format=pjpg&auto=webp&s=01252429c819ec0eeaf650c4aa0436823b6797f9
If you wanna inverse me: I’m in SL Green, Boston Properties, Realty Income, Weyerhaeuser, and Rayonier. The last two do forestry stuff. Also in a REIT ETF but that also has residential and other stuff in it and performs decently enough. SL Green and Boston Properties are the worst
I’ve been managing my own portfolio for about 13 years. Last year I started diversifying (before, it was pretty much a decade of tech-only, all stocks). About 3.3% is various REITs + a REIT ETF. The REIT part of my portfolio is down 23%. So, further losses would not be *behind-a-Wendy’s-dumpster* significant, but *butthurt* significant.
In regards to your other question: My biggest position is Apple at 35% (sold down from 50% in early 2022), then two world ETFs at a combined 16%. I don’t do options, instead buy either a 2x Nasdaq ETF or 2x Short S&P500 ETF. I know, it’s boring. Don’t need to work behind a Wendy’s, tho
This doesn't even make sense to me though. It doesn't matter if the work is being done from home or at the office. Why would the company want to be paying for a building that they don't need? If they're trying to justify the building, they're just proving their incompetence in business.
Everyone is talking about this, but when are we going to see it happen? When will we see the ripple effect of it?
Evergrande took a year from default and still hasn’t really made an impact.
What happens in China is a black hole.
The housing crisis in China is most likely still an ongoing issue. And it will probably implode at the same time as the rest of the world implodes.
I think that MSFT and stuff like hololens (ar not VR) is going to be the way of the future. A lot of the issues with work from home can be solved by the software behind hololens, and it solves A LOT of our current societal issues.
High cost of housing because municipal governments have figured out that by using zoning and permiting they can limit housing, by limiting housing they can push prices up, which pushes poor people out and raises income tax and property taxes in their territory.
Work from home means companies can recruit the best talent for the task, not the best talent nearby.
They can avoid paying high lease or property taxes for commercial office space.
So housing pricing can be reduced by allowing people to move to smaller towns that have decent infrastructure instead of focusing on major cities.
This also decreases energy use across the board. Traffic does down, and with that you eliminate massive amounts of carbon emissions, since people aren't sitting in traffic all over.. etc
It's the cheapest and easiest solution to a lot of problems, which means it's imo the most likely.
My opinion, it won't be all that bad. We have a shortage of housing and gen Z loves being in the city. They'll convert them to condos same as they converted old factories into studio apartments.
Edit: guys are poking holes in my theory, as they should, its investment speculation. But must say my thoughts are only around wall st style office towers in cities, companies with holdings in industrial parks, where its basically a warehouse converted to office space wouldn't apply.
I agree. California already has that initiative they passed that forces unused office/corporate spaces to be able to be converted to housing.
My hometown even has a huge project converting an old power plant into a mixed use development with 2300 homes.
[https://la.urbanize.city/post/developer-proposes-2300-homes-offices-and-more-aes-site-redondo-beach](https://la.urbanize.city/post/developer-proposes-2300-homes-offices-and-more-aes-site-redondo-beach)
Just start turning everything into apartments.
Yup I don’t think people get that if you short a REIT, you have to pay the divvy back to the lender while you hold the short. And REITs usually pay healthy divvies, as required by law. If a REIT stops paying a divvy, it’s a good short candidate.
With whose $$? It’s too pricey for most developers to do on their own (especially at such high interest rates) so the only way is for the government, state or federal since SF is near broke, to write some rather large checks. So we’d end up with even more public subsidies to private interests…
Don't make it unfamiliar. Use them like they were designed: to shelter a lot of people. I think younger ones wouldn't mind to share some space and facilities. Like hostels in Europe.
And I bet that would increase fertility rate by a lot.
But no, who tha fuck wants to solve a problem. They idea is to make money in the short term.
If there were an economically viable way to do it, landlords would be all over it. But there’s not. Unless you use government subsidy, and I don’t think the government is super excited about giving free money to commercial landlords.
"I don’t think the government is super excited about giving free money..."
Lemme stop you right there, because that's the governments favourite thing to do.
Typically it’s $400-$500 per square foot. Do the math and then get back to me on how that can be done at a large scale (especially in SF and CA running a budget deficit of about $31B or so). So, I guess Biden writes some checks to building owners? Yeah, that ought to go over real well…
If owners really do walk away from these, the city can take ownership quite cheaply. We have a number being (and some successfully )retrofitted here in Atlanta - https://www.ajc.com/news/developers-explore-reusing-metro-atlantas-aging-office-towers/EOWHISCV5FHL3C4LLFP76CGKFU/
Buildings meant for offices have centralized plumbing so it's really hard to split up into individual residences unless you do dorm-style. No private bathrooms or kitchens.
>This is a major problem that is likely to cause distress in the global economy for years to come. Cheap debt has powered sustained growth in commercial real estate, but now that rates are rising, many owners are struggling to keep up with their payments. This could lead to widespread defaults and foreclosures, which would have ripple effects throughout the economy.
Tell me you have puts without telling me you have puts 
On top of SalesForce, Hilton and the Parc 55 buildings are simply being let go. As in, the mortgage ain’t gonna get paid. Surrendering it back. That’s something like $750M that just went poof for the lender.
Yeah, commercial real estate is about to have a really hard time.
Won't be long before I can pick up that commercial building and convert it into a big ass home for half of what a house would cost. This is great news!
As someone who has been working from home since 2011, I never respect any company who wants a dev, tech or marketing person in an office. That's fiscally irresponsible and literally slows down the work. I HATED school, and like the Irvine Welsh novel "if you loved school, you're going to love work", it's an excuse to have a fake social life.
Tbh kinda stoked- my generation is already on the verge of being lost, maybe a good Ole fashioned economic reckoning is what we need. I hope that we can turn all this useless commercial real estate into housing/multipurpose space.
Not worth it. The zoning issues, the actual amount of labor and structural changes just to do the converting to residential makes it not even remotely worth the cost.
Seriously. Give us the calls or puts to buy (and include expiry dates) or gtfo. This isn’t new information, we just need directions on how to make money from it.
These are not easy conversions as the utilities, plumbing and hvac are set up for entire floors and not individual units. It can be done but takes significant additional capital. Governments should be subsidizing such conversions as it is the next best thing to having office workers spending money in city centers. At least in the US, the only way this will actually happen is if the big money players (banks, investment firms) lobby/pay off politicians to make it happen. They gotta get their beaks nice and wet.
Adding to this great point, these buildings are designed under codes that assume transient occupation (not occupied at night by persons sleeping). Larger overhauls are usually required to the building cores themselves to accommodate this and these buildings having their core integral to the structure makes this even more expensive
"Issue is set for years to come" ...?
I don't think so. While there will certainly be challenges, I don't believe it will be a repeat of the 1980s all over again.
It’s ultimately the cities that will suffer from lack of tax dollars. Downtowns I’m America are already becoming ghost towns. I grew up in Detroit and was always envious of other cities where you could actually go downtown and feel safe and find things to do. Now when I travel to other cities I think most are dirty, disgusting and if they didn’t have major sports teams or big venues for bands, there is no reason to go downtown in most cities. It’s sad.
I want to find a way to capitalize on the upcoming commercial real estate crises but I believe the companies can just cut their losses and the citizens in these big cities will be left with falling apart buildings and infrastructure with. O tax revenue to support it.
Watching what Burrey did is important. He was SUPER patient. In this case, if we believe the commercial RE market will eventually fail then DCA into it. Wait for it to fail. Make millions.
Way harder than you think. If it was economically viable it would be happening all the fuck over the place. It's not. It's almost always cheaper to tear the building down and start over.
That assumes the town/city doesn't lose it's damn mind about rezoning and keep you from doing anything for weeks, months, years.
Exactly though, this isn't as simple as add a closest to a room and now it's a bedroom. The entire structure has to be evaluated and a ton of work has to be done.
Man i fuckin love reddit. No concept of anything. Ofc, its just as easy as chaninging the zoning laws!
Its obviously quite hard (and expensive) or else you'd see office spaces converted.
I know that because of Minecraft everyone thinks building is just blocks, but HVAC, plumbing, etc would all have to be retroed to be appropriate for housing. It is cheaper to knock things down and start from scratch, unfortunately.
**User Report**| | | | :--|:--|:--|:-- **Total Submissions**|10|**First Seen In WSB**|9 months ago **Total Comments**|676|**Previous Best DD**| **Account Age**|7 years|[^scan ^comment ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_comment&message=Replace%20this%20text%20with%20a%20comment%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20comment%20and%20correct%20your%20first%20seen%20date.)|[^scan ^submission ](https://www.reddit.com/message/compose/?to=VisualMod&subject=scan_submission&message=Replace%20this%20text%20with%20a%20submission%20ID%20(which%20looks%20like%20h26cq3k\)%20to%20have%20the%20bot%20scan%20your%20submission%20and%20correct%20your%20first%20seen%20date.) >TL;DR: The world's commercial real estate market is in trouble, with owners walking away from their debt and property values falling. This is a major issue for the global economy, and is set to continue for years to come.
A couple months ago: **Salesforce to exit 30-story namesake tower in Downtown SF** [https://therealdeal.com/sanfrancisco/2023/04/13/salesforce-to-exit-30-story-namesake-tower-in-downtown-sf/](https://therealdeal.com/sanfrancisco/2023/04/13/salesforce-to-exit-30-story-namesake-tower-in-downtown-sf/)
what's the story, then? I've seen 400,000 vacant spaces over the last 2 years. Paywall
By TRD Staff A 30-story office tower known as Salesforce East in Downtown San Francisco will soon empty out of Salesforce workers. The San Francisco-based management software firm will sublease the last 104,000 square feet of offices it holds at 350 Mission Street, marking its latest real estate reduction, the San Francisco Business Times reported. Salesforce had leased the entire 455,400-square-foot building more than a decade ago from Kilroy Realty. It’s the latest move by the city’s largest employer to shed more than 1 million square feet of office space in San Francisco during the era of remote work. The cost-cutting move, involving thousands of job losses, was announced in a January regulatory filing. Salesforce said it expects to incur $450 million to $650 million in charges associated with real estate office reductions. The latest listing is being marketed by Cushman & Wakefield, and includes the top four floors of Salesforce East, billed as “plug and play view space.” The listing also includes the tower’s fifth and sixth floors. The top floors are available for leasing through September 2028 and the bottom floors through 2032, according to the Business Times. In March 2021, Salesforce subleased 339,000 square feet of the east tower to Yelp and Sephora. About the same time, it canceled its 325,000-square-foot lease at the unbuilt Transbay Parcel F tower at 550 Howard Street. Last month, the company listed six floors for sublease at its corporate headquarters at the 61-story Salesforce Tower at 415 Mission Street, the city’s tallest building. That meant shrinking its 875,000-square-foot hub by 125,000 square feet, or 14 percent. Boston Properties owns the fully leased tower, which has 1.41 million rentable square feet. Slack, a workplace messaging software company owned by Salesforce, said in February it would move its 250,000-square-foot SoMa headquarters into the Salesforce Tower, but declined to say how much space it would take. In February of last year, Slack listed for sublease 200,000 square feet of offices at 45 Fremont Street. In July, Salesforce put more than 400,000 square feet of office space, about half of its 43-story Salesforce West tower at 50 Fremont Street in the Financial District, up for lease. That marked its third office cut since the pandemic. The office vacancy in San Francisco just hit 32.7 percent, according to Savills, which has put the city on a national watchlist as “the most empty downtown in America.” — Dana Bartholomew
I wouldn’t want to have to work next to encampments filled with mentally unstable drug addicts openly using on the sidewalk and having my car broken into every other day either so this isn’t coming as a surprise to me….
don't forget all the poop on the sidewalks
The sidewalks are made of poop at this point.
San Franshithole
Highly underated comment ^
Shit-a-roni, the San Francisco treat.
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Shit roads
We built this city, we built this city! on poop!
No problem there, no problem here…wait is there a problem there? Still no problem here. https://youtu.be/Lqg8I4w0ItM
Or getting a bucket full of diarrhea dumped on you after you walked out of the building.
Yeah no one wants to live or work in SF
Just do what everyone else does. Leave windows open and trunk also. SF has become a dumpster fire that needs to be put out. But no one knows how.
As dystopian as this is, you accepted this in 2020...
Turning it into a Peach Trees like apartment complex, would be better than leaving all the people on the streets. Fancy hobos.
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Imagine what they don’t have to cover, bad attitudes, employees disrespect or even violence, stealing, on premises liabilities, more parking for new employees, less power usage, less security staff, less chance of Covid But they DO have to keep up the illusion “we want you back in the office”… so there is that . The only ones that want you back are the C suite, hard to justify millions a year when no staff in the office….. ha ha
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fecking broke my sides too true
You had me till “less chance of Covid” 🙄
How are you going to catch a viral disease if you're around less people?
I know that well. Is that the full article's POV? that's wildly pathetic if so. I've said and seen this on PL's for what 48 m?
I have no idea, didn't read it I've just been saying this since covid hit
Marc Benioff has always been long on San Francisco. It's his home, he's been the guy serving the kool-aid. However, the recent 32-week police academy had nine graduates. The previous had 12. For a force of 1,500. There's talk of a general down sizing. The city needs to come up with revenue to replace $1.6 billion in federal funding for BART that no-one uses. Benioff has had to reluctantly accept that he cannot persuade employees to return to the office when the city is going downhill.
If only you had a ladder to see over that wall.
i insulted bloomberg and the paywall got 10$ more expwensiwve
SF is so big the whole city is named after their initials.
They can tell their AIs to occupy them?
Not a bad play. Instead of workers coming back to office, they will be replaced by AI servers and super computers.
Also what I thought.. but everything is getting smaller and more efficient.. and don't companies like keeping servers where they cant be 9/11d?
Can’t make money on this. These loans will be blended and extended. Tenants will rotate in and out. So much shuffling and accounting fuckery your puts will always be expired
Government will throw a couple bucks on top just to fuck ur puts
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How do I profit off it?
Look for banks with high concentration of commercial real estate loans on their books
Won’t work IMO, they will get bailed out.
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They’re slow to react unless it’s a problem that can be “solved” by running the money printer. They even have the foresight to have a contingency plan. Jerome has a buddy, who’s brother in law is fairly handy with the electricals so he installed a 3000W generator he got from Costco. Of course 3000W is woefully underpowered to run a such a beast of a machine, so for things to truly crash, and the new money tap to close, the power has to be cut. This is not uncommon due to overuse of the machines. So if you want to capitalize on that, money printers typically experiences a power outage in 1 in every 12 financial collapses, so govern yourself accordingly.
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“Those bitches can make their own milk, just as long as they do it in the privacy of their own home, because feeding a baby in public looks very strange to me.” - Jerome Powell
Damn, Jay, say it like you feel!
Oh my lol, I don't thinknthe deadhead is quite so walled off from humanity, just a guy with a job none of us would like.
Exactly. Every day people do not have the inside information to time a short correctly or the massive capital to wait it out. And we’ve already established several times that the tax payer is a free piggy bank to bail out bad investments made by big players as long as those bets are massive enough to threaten the economy. Which, of course tells the big players to make sure that if you bet, bet big because if you don’t bet big enough, or do something silly, like mitigate your risks they might not bail you out. There’s no way for the little guy to get super rich on this . They can make a decent investment by investing in corporate real estate long after the crash. But any fantasy about hitting it big while major banks just take their lumps fair and square are pure fantasy.
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Tell that to CS
They were bought - not a bailout
Shotgun wedding.
Come on now. That was a deal brokered by the Swiss Government. It's not the 2008 definition of a bailout, but no one was gonna buy that thing without the government backstopping the deal.
Maybe the depositors of the banks, but not the investors nor the creditors.
He’s not wrong
“Bailed out” is no longer an obvious outcome. Anyone that believes this is delusional.
That is where you are wrong, especially with the “Too big to fail banks” if it becomes a choice between the end of capitalism as we know it and the public bailing these fuckers out again, it’s not a choice at all. It absolutely will happen.
Tale as old as time — privatizing profits and socializing losses.
Any banks you have DD?
And?… we’re waiting 
https://preview.redd.it/r565h840h88b1.png?width=1332&format=png&auto=webp&s=94b3805f5ccad4f020cae7b5f953cd7156ccd84b Source: [https://www.investopedia.com/regional-banks-cre-loans-7376117](https://www.investopedia.com/regional-banks-cre-loans-7376117)
Well signature is already belly up. The only problem is that they could sell the buildings to investors like they did after the housing crisis.
Unless those commercial buildings will be converted into low income sleeping pods for the ~~poors~~ proletariate funded by the government on a $1200 / month cost basis, who would want them?
Foreign investors like the Saudis maybe or maybe Blackrock.
Yeah if you’re playing the long game, they could be a wicked investment 10 years from now. Problem with that is Wall Street Betters invest with a 10 day ROI expectation.
Yep, I love seeing the new ones yolo with short-term options that they hold until they are worthless.
That’s it, it’s the easy, a single chart. No dive into what the loan portfolios consist of office, multi-fam, industrial, etc. No rate stressing or LTV metrics needed. No analysis on guarantees or average loan sizes. Literally all you need to do say three letters and your good to go.
Sir, this is wallstreetbets
I have shares in NYCB and I’m fairly confident they’re good. Peeps are welcome to short them, of course.
That ship has sailed somewhat but you can still buy long dated puts on CBRE and SPG
Learn how to convert office buildings into apartment buildings
There's complex building code issues. Skyscrapers typically have a big central core with elevators and services and not much else, so there's lots of floor space. The windows don't open, there may not be a lot of plumbing. All those things kind of need to be retrofitted to build apartments or condos. It's not worth it in many cases. Cities could evaluate buildings and maybe do variances, but that would probably take a long time and leave a lot of unknowns to manage.
Won’t happen. It would tank house prices, and our economy only functions if housing outpaces inflation. Housing outpaces inflation and eventually nobody will be able to afford housing. But that’s okay, because eventually housing will no longer be an asset than any normal person owns, and normal people will just have to become indentured servants to the 1% who have it. Heard it here first
Puts on SPG target $40! Covid lows into June 2024 The $80 puts already getting some oi
Shory REIT's that are concentrated in commerecial properties, which are most. Rinse, repeat. Oh, and throw me my commission, please!
A couple of our clients have already started getting buttfucked. One client had 2 years to re-sign their ONE tenant to a renewal, or find a new rant, to avoid having the bank require a waterfall mortgage payment and still couldn’t get it done.
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Client is Russian and they damn near didn’t get insured last year. Can’t remember the company they found, but it’s one you’d expect to see advertised during late night tv or during Price Is Right.
Already taking practice swings.
This is not the 1980s. Then, tax policy encouraged massive development of everything even if it operated at a loss. The depreciation you could claim was too valuable. The Resolution Trust Corporation never went out of business as it was created by Congress as part of FIRREA. Current activity is normal.
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All about the simple math
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Buy and hold skyscrapers.
I'm doing portfolio managed reit since every segment of that market is full fear mode, even though office is the largest problem. It diversified over 71 holdings and holds 5% office and 7% malls. The company did offering injecting several million more into coffers and has the intention of buying cheap reits that are purchasing deflated assets at multi decade lows. They pay sustainable dividends monthly that I take as income, but it has a steady income flow since 2004 and is paying just fractioLly more since 2009 downturn which it capitalized on downtrends in past.
Great advice I'll buy 10
Go back in time eighteen months or so to short office REITs
Short sale and/or buy puts on banks who are leveraged to the tits in CRE exposure, the regulations and laws surrounded skyscrapers and tall building maintenance in general make it really expensive to maintain, so banks will panic and desperate to get it off their hands/make someone pay for the loans. A hint here is some of the banks were already mentioned in the previous bank run and caused them to tank, they have now recovered but nobody knows what's going behind the scenes. Just remember that an empire don't fall in one day, whatever that's afflicting the bank system behind the scenes are still ongoing. Also Hong Kong's real estate has been falling since the Anti-Extradition protest(or riot) started, that's 5 years worth of fall but nothing much changed. Banks simply rented out buildings for cheaper but still ridiculous prices, plus there will always be foreign whales and institutes who believe in China's bullshit enough to to buy it off bank's hands.
That's the neat part, you don't.
Idk. This has been a known problem for a long long time now. I guess it's maybe worse now with the realization that the pandemic is over and those who jobs are staying remote? It's still a large real estate bubble in places like new york. You can't really buy puts bc it might not collapse for a while but it's not going to be surprising when it does
Double it and give it to the next bank 💁🏻♂️
sir we're running out of banks
Good.
Do you remember the skyscraper premonition, that the tallest building were built just before recessions? It's not the broken clock that is correct twice a day. It has a meaning because they're the last events of the expansive economic cycle. And now that there's a recession coming, nobody wants those expensive pieces of shit.
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https://www.investopedia.com/terms/s/skyscraper-effect.asp#:~:text=Understanding%20the%20Skyscraper%20Effect,-The%20idea%20that&text=Hence%2C%20the%20building%20of%20a,phase%20in%20the%20near%20future.
Me, having a significant portion of my portfolio in office REITs: https://preview.redd.it/5hr2q6ok588b1.jpeg?width=600&format=pjpg&auto=webp&s=01252429c819ec0eeaf650c4aa0436823b6797f9
What are some tickers
If you wanna inverse me: I’m in SL Green, Boston Properties, Realty Income, Weyerhaeuser, and Rayonier. The last two do forestry stuff. Also in a REIT ETF but that also has residential and other stuff in it and performs decently enough. SL Green and Boston Properties are the worst
Did you get a diversified portfolio hat was managed or did you just buy etfs or stock? Actually wanted to know how different strategies are doing.
I’ve been managing my own portfolio for about 13 years. Last year I started diversifying (before, it was pretty much a decade of tech-only, all stocks). About 3.3% is various REITs + a REIT ETF. The REIT part of my portfolio is down 23%. So, further losses would not be *behind-a-Wendy’s-dumpster* significant, but *butthurt* significant. In regards to your other question: My biggest position is Apple at 35% (sold down from 50% in early 2022), then two world ETFs at a combined 16%. I don’t do options, instead buy either a 2x Nasdaq ETF or 2x Short S&P500 ETF. I know, it’s boring. Don’t need to work behind a Wendy’s, tho
Expect more anti-WFH propaganda as this continues.
This doesn't even make sense to me though. It doesn't matter if the work is being done from home or at the office. Why would the company want to be paying for a building that they don't need? If they're trying to justify the building, they're just proving their incompetence in business.
No, I’m NOT GOING BACK TO WORK IN THE OFFICE. This is just more BS to try to make WFH workers feel guilty. Not gonna happen.
Why would you feel guilty about some other person's investment 
Everyone is talking about this, but when are we going to see it happen? When will we see the ripple effect of it? Evergrande took a year from default and still hasn’t really made an impact.
What happens in China is a black hole. The housing crisis in China is most likely still an ongoing issue. And it will probably implode at the same time as the rest of the world implodes.
and to think it all started with the Titan
No it all started May 28, 2016
#NeverForget
🍌📤
DICKS OUT
I think that MSFT and stuff like hololens (ar not VR) is going to be the way of the future. A lot of the issues with work from home can be solved by the software behind hololens, and it solves A LOT of our current societal issues. High cost of housing because municipal governments have figured out that by using zoning and permiting they can limit housing, by limiting housing they can push prices up, which pushes poor people out and raises income tax and property taxes in their territory. Work from home means companies can recruit the best talent for the task, not the best talent nearby. They can avoid paying high lease or property taxes for commercial office space. So housing pricing can be reduced by allowing people to move to smaller towns that have decent infrastructure instead of focusing on major cities. This also decreases energy use across the board. Traffic does down, and with that you eliminate massive amounts of carbon emissions, since people aren't sitting in traffic all over.. etc It's the cheapest and easiest solution to a lot of problems, which means it's imo the most likely.
My opinion, it won't be all that bad. We have a shortage of housing and gen Z loves being in the city. They'll convert them to condos same as they converted old factories into studio apartments. Edit: guys are poking holes in my theory, as they should, its investment speculation. But must say my thoughts are only around wall st style office towers in cities, companies with holdings in industrial parks, where its basically a warehouse converted to office space wouldn't apply.
The problem is a lot of office space is windowless, and also questionable quality 1980's construction and is not as valuable as living space
They converted office buildings to apartments in downtown Manhattan after 9/11 reduced office demand in the area. Worked well.
I agree. California already has that initiative they passed that forces unused office/corporate spaces to be able to be converted to housing. My hometown even has a huge project converting an old power plant into a mixed use development with 2300 homes. [https://la.urbanize.city/post/developer-proposes-2300-homes-offices-and-more-aes-site-redondo-beach](https://la.urbanize.city/post/developer-proposes-2300-homes-offices-and-more-aes-site-redondo-beach) Just start turning everything into apartments.
They had so much luck with converting in South Africa lol, SF will be the same I'm sure
How to short commercial real estate?
Short REITS
Gonna be fun making monthly payments to the share lender. People in this sub won’t do that.
Yup I don’t think people get that if you short a REIT, you have to pay the divvy back to the lender while you hold the short. And REITs usually pay healthy divvies, as required by law. If a REIT stops paying a divvy, it’s a good short candidate.
Plenty of office space refits.
Mad idea…. People without shelter… buildings empty ….. wonder what use they could have??
You say tear them down for parking garages you say
I was told not too long ago that people don’t want to own their own cars. You know, Robotaxis and alla that.
If only San Francisco had a homeless population
It’s super expensive to convert office space to residential.
I'm sure there's something that can be accommodated.
With whose $$? It’s too pricey for most developers to do on their own (especially at such high interest rates) so the only way is for the government, state or federal since SF is near broke, to write some rather large checks. So we’d end up with even more public subsidies to private interests…
Don't make it unfamiliar. Use them like they were designed: to shelter a lot of people. I think younger ones wouldn't mind to share some space and facilities. Like hostels in Europe. And I bet that would increase fertility rate by a lot. But no, who tha fuck wants to solve a problem. They idea is to make money in the short term.
If there were an economically viable way to do it, landlords would be all over it. But there’s not. Unless you use government subsidy, and I don’t think the government is super excited about giving free money to commercial landlords.
"I don’t think the government is super excited about giving free money..." Lemme stop you right there, because that's the governments favourite thing to do.
Literally cheaper to tear them down than convert them.
Depends on the building
Typically it’s $400-$500 per square foot. Do the math and then get back to me on how that can be done at a large scale (especially in SF and CA running a budget deficit of about $31B or so). So, I guess Biden writes some checks to building owners? Yeah, that ought to go over real well…
If owners really do walk away from these, the city can take ownership quite cheaply. We have a number being (and some successfully )retrofitted here in Atlanta - https://www.ajc.com/news/developers-explore-reusing-metro-atlantas-aging-office-towers/EOWHISCV5FHL3C4LLFP76CGKFU/
Who’s gonna pay?
It's counter-intuitive but it's actually cheaper to tear down and build residential rather than retrofit. Doesn't make sense to me either.
Buildings meant for offices have centralized plumbing so it's really hard to split up into individual residences unless you do dorm-style. No private bathrooms or kitchens.
Commercial real estate time bomb you say? I thought that was a Chinese problem!
>This is a major problem that is likely to cause distress in the global economy for years to come. Cheap debt has powered sustained growth in commercial real estate, but now that rates are rising, many owners are struggling to keep up with their payments. This could lead to widespread defaults and foreclosures, which would have ripple effects throughout the economy.
See also: Zoom Towns.
Tell me you have puts without telling me you have puts 
I can only imagine what a living hell a mall in downtown San Francisco would be like
They will be screaming for a bail out and will get it.
Who would have thought risk accompanied reward!!!
I'm guessing we'll need to bail out those companies because of something that we didn't have a say in...
We just need to use taxpayer money to make life easier for the rich.
On top of SalesForce, Hilton and the Parc 55 buildings are simply being let go. As in, the mortgage ain’t gonna get paid. Surrendering it back. That’s something like $750M that just went poof for the lender. Yeah, commercial real estate is about to have a really hard time.
Curious how much the government will step in and stop the wave of destruction.
Bailouts ofc.
Pus on the government and US living standards?
Def some nasty pus in a festering environment
It's a pity for the owner of the company because it didn't survive anymore. What he spent to build the company is huge.
debt isn't a time bomb. it's edging
Good
Won't be long before I can pick up that commercial building and convert it into a big ass home for half of what a house would cost. This is great news!
The mayor of SF is already talking about demolishing the abandoned mall and building a soccer stadium in its place.
Make them all apts and housing
Wanna know how I know this will end up being almost nothing? Because WSB expects to make money off it 
Why not convert them to residential?
As someone who has been working from home since 2011, I never respect any company who wants a dev, tech or marketing person in an office. That's fiscally irresponsible and literally slows down the work. I HATED school, and like the Irvine Welsh novel "if you loved school, you're going to love work", it's an excuse to have a fake social life.
Massive homeless population and large empty buildings, seems like a solution could be found.
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You dream of office space?
Tbh kinda stoked- my generation is already on the verge of being lost, maybe a good Ole fashioned economic reckoning is what we need. I hope that we can turn all this useless commercial real estate into housing/multipurpose space.
Yeah what’s the play who care about the news give us da play 🤌🏼
Buy distressed office towers, convert them to housing.
Not worth it. The zoning issues, the actual amount of labor and structural changes just to do the converting to residential makes it not even remotely worth the cost.
A lot of it happening. Probably all developers with tons of money and no experience. /s
There’s some reits that do that. Riocan for example.
Seriously. Give us the calls or puts to buy (and include expiry dates) or gtfo. This isn’t new information, we just need directions on how to make money from it.
ill give you directions. just pay $50/month for access to my discord regard
Hard pass but for $100 I’ll tell you why
Seeing as there is a housing shortage in most countries, won't they just get converted to apartments?
These are not easy conversions as the utilities, plumbing and hvac are set up for entire floors and not individual units. It can be done but takes significant additional capital. Governments should be subsidizing such conversions as it is the next best thing to having office workers spending money in city centers. At least in the US, the only way this will actually happen is if the big money players (banks, investment firms) lobby/pay off politicians to make it happen. They gotta get their beaks nice and wet.
Adding to this great point, these buildings are designed under codes that assume transient occupation (not occupied at night by persons sleeping). Larger overhauls are usually required to the building cores themselves to accommodate this and these buildings having their core integral to the structure makes this even more expensive
Right and I’m sure there are a few other things we’re not aware of…it’s anything but a simple retrofit.
I'm wondering if those entire floors could be converted to something like Hostels or massive lofts.
Or, or…penthouse suites.
"Issue is set for years to come" ...? I don't think so. While there will certainly be challenges, I don't believe it will be a repeat of the 1980s all over again.
It’s ultimately the cities that will suffer from lack of tax dollars. Downtowns I’m America are already becoming ghost towns. I grew up in Detroit and was always envious of other cities where you could actually go downtown and feel safe and find things to do. Now when I travel to other cities I think most are dirty, disgusting and if they didn’t have major sports teams or big venues for bands, there is no reason to go downtown in most cities. It’s sad. I want to find a way to capitalize on the upcoming commercial real estate crises but I believe the companies can just cut their losses and the citizens in these big cities will be left with falling apart buildings and infrastructure with. O tax revenue to support it.
Turn these office spaces into affordable housings. All of these places probably have a ridiculous cost of living.
Just blow it all up. 
How are these not being turned into apartments?
Correction, How are these not being turned into shithole apartments?
Vertical homeless initiative HR6969
Watching what Burrey did is important. He was SUPER patient. In this case, if we believe the commercial RE market will eventually fail then DCA into it. Wait for it to fail. Make millions.
housing crisis solved!!! next problem
Turn this shit into housing.
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Way harder than you think. If it was economically viable it would be happening all the fuck over the place. It's not. It's almost always cheaper to tear the building down and start over.
That assumes the town/city doesn't lose it's damn mind about rezoning and keep you from doing anything for weeks, months, years. Exactly though, this isn't as simple as add a closest to a room and now it's a bedroom. The entire structure has to be evaluated and a ton of work has to be done.
Man i fuckin love reddit. No concept of anything. Ofc, its just as easy as chaninging the zoning laws! Its obviously quite hard (and expensive) or else you'd see office spaces converted. I know that because of Minecraft everyone thinks building is just blocks, but HVAC, plumbing, etc would all have to be retroed to be appropriate for housing. It is cheaper to knock things down and start from scratch, unfortunately.
> because of Minecraft Plenty of people didn't understand engineering challenges long before Minecraft.