I rent at a WeWork style building, and have been at this coworking space since 2018.
My rent has consistently been around $700/month. This year, they got a new sales person, a new community manager, and finally started fixing things like the broken coffee machine (which was only broken because the previous community manager didn't want to clean it/stock it), removing expired products from the vending machine, and finally changing out the water filters on the drinking fountains...and the tried to raise my rent to $1400/month, with "No room for negotiation."
Interestingly enough, the minute I started moving things out of my office, we could negotiate a smaller amount of money for rent, but, I'd rather take that $700 and just get an extra bedroom in my apartment: things can be closer and I can do more.
When I moved in to this building, there was a waiting list of people to get in -- now, it's close to 85% vacant...with more and more folks leaving every day.
I'm associated with a non-profit that does robotics. We are trying to find space to grow the program. A local mall that has lots of dead storefronts is close by. We tried to talk to them about a lower lease rate and they were not interested in talking.
I asked isn't it better to get some money coming in and they said that they were able to write the space of against taxable income in the rest of the space. REIT's are weird.
Did this at the end of last year, after my landlord said he was raising the rent 12% because his costs were higher. He owns the building outright and services like cleaning are paid by tenants. When he saw I started moving furniture out he came back to me and said we could discuss the rent.
I gave my 30 day notice and was gone by New Years Eve.
I believe commercial real estate is a ticking time bomb in the financial system. So many small and regional banks have so much loans tied away in CRE, the future of which is completely uncertain.
They highlight how the rolling nature of long-term commercial leases means that banks can kind of kick this can down the road, but only so much, and high interest rates makes this incredibly difficult. With this one it really does feel like we've jumped out of the airplane without a parachute and a lot of us are just going "Hey, nice breeze".
I'm not the most optimistic sort, so I'd love to hear any thoughts on how this doesn't end in complete catastrophe. It just seems like something policy makers and market participants don't want to talk about too loudly because they're worried about spooking the market.
This isn't the first commercial RE bubble the US has had to cope with. We had a similar catastrophic one near the end of the 80s that bled into the 90s. People have mostly forgotten about it. Vacancies in some cities rose from 10% to 40% largely due to overbuilding. Recovery took about a decade.
We who? The greedy and the irresponsible who are hogging real estate to profit from the productive sectors of the economy? Good riddance, then. A "complete catastrophe" in real estate is great for every person and business who is actually productive and beneficial. There needs to be balance. If 100% of a nation's surplus productivity is swallowed into real estate profits, then you'll have a scam economy where all money and all effort goes into real estate instead of useful work.
It won't necessarily be cheap or free to convert, but I think it's a slow long-term haircut more than a time bomb. Land is still at very high levels of demand in most urban and suburban cities, people will find non-commercial uses for places that never get used as office again.
One thing I keep wondering about is retail as a use for this office space.
If you visit most parts of Asia you'll find that the North American focus on having retail only on the ground floor is a self-imposed and arbitrary limitation. In other parts of the world there's nothing at all strange about having a restaurant on the 8th floor of a building, or a clothing store, or a hair salon, etc etc.
Personally I find that retail businesses in Asia are far more interesting as a result - retail rents are comparatively cheap, encouraging an explosion of interesting niche retail businesses (a vinyl store selling only 70s vinyl? Sure!) that still pencil out financially.
Retail in US urban cores on the other hand has been stagnant, with only major chains being able to afford the skyrocketing rents.
This feels like an opportunity? Imagine the kinds of interesting businesses that can be created if we took off the totally arbitrary cap on retail space.
I'm surprised there hasn't been a boom in specialized companies offering conversions. Yes, it's not easy, there are regulations/laws/etc. Having a company know exactly what needs to be done, how to do it, and where to source the stuff and labor to do it economically seems like a winning idea.
Tons of unused commercial real estate coupled with tons of people who cant afford housing... I wouldn't be mad if govt used my tax dollars to incentivize conversion of giant downtown office complexes into mixed use buildings.
These are offices for 10 to 20 people (1200 to 2000 sq/ft) if your company isn't flush with cash an office is becoming a luxury rather than a necessity. Especially in a major city where a small office can be 100k a year.
The trend is going to continue over the coming years, especially with bigger offices that are paying millions each year.
Even in really big companies that focus around retail or healthcare, it is really practical to shut down offices. Our medical care facilities are no longer being built out with offices in the backrooms for IT/Finance/Etc... staff. We can rent smaller spaces or do more with existing spaces by converting it into more medical facility space and run all the business and software operations via WFH. We operate in 20 states and are racing with competitors to who does this the fastest to cut costs and charge less to providers for a competitive edge
That’s fascinating. I’d be really curious to learn how they are evolving the back office with that shift. Over the pandemic that’s when I saw the biggest change in tech stack/process in healthcare.
We'll have to see. I do see people thinking about lease renewals that would once have been automatic. It's not that people don't meet in person but you don't necessarily need fully-provisioned office space in an expensive location to do that.
My wife runs a small business and I've been seriously considering buying a 1br apartment nearby to serve as our 'home office'. Mortgage would be ~1200 a month and there are plenty of them 5 minutes bike from our house to choose from.
Getting our place + 1 bedroom in the same area would cost way more because a lack of 3+ bedroom builds here.
Readit News
My rent has consistently been around $700/month. This year, they got a new sales person, a new community manager, and finally started fixing things like the broken coffee machine (which was only broken because the previous community manager didn't want to clean it/stock it), removing expired products from the vending machine, and finally changing out the water filters on the drinking fountains...and the tried to raise my rent to $1400/month, with "No room for negotiation."
Interestingly enough, the minute I started moving things out of my office, we could negotiate a smaller amount of money for rent, but, I'd rather take that $700 and just get an extra bedroom in my apartment: things can be closer and I can do more.
When I moved in to this building, there was a waiting list of people to get in -- now, it's close to 85% vacant...with more and more folks leaving every day.
I asked isn't it better to get some money coming in and they said that they were able to write the space of against taxable income in the rest of the space. REIT's are weird.
I gave my 30 day notice and was gone by New Years Eve.
Taxes, insurance, repairs, maintenance all have gone way up. Plus costs due to crime/vandalism.
And there's a chance you voted for the policies that led to this outcome.
They highlight how the rolling nature of long-term commercial leases means that banks can kind of kick this can down the road, but only so much, and high interest rates makes this incredibly difficult. With this one it really does feel like we've jumped out of the airplane without a parachute and a lot of us are just going "Hey, nice breeze".
I'm not the most optimistic sort, so I'd love to hear any thoughts on how this doesn't end in complete catastrophe. It just seems like something policy makers and market participants don't want to talk about too loudly because they're worried about spooking the market.
We who? The greedy and the irresponsible who are hogging real estate to profit from the productive sectors of the economy? Good riddance, then. A "complete catastrophe" in real estate is great for every person and business who is actually productive and beneficial. There needs to be balance. If 100% of a nation's surplus productivity is swallowed into real estate profits, then you'll have a scam economy where all money and all effort goes into real estate instead of useful work.
If you visit most parts of Asia you'll find that the North American focus on having retail only on the ground floor is a self-imposed and arbitrary limitation. In other parts of the world there's nothing at all strange about having a restaurant on the 8th floor of a building, or a clothing store, or a hair salon, etc etc.
Personally I find that retail businesses in Asia are far more interesting as a result - retail rents are comparatively cheap, encouraging an explosion of interesting niche retail businesses (a vinyl store selling only 70s vinyl? Sure!) that still pencil out financially.
Retail in US urban cores on the other hand has been stagnant, with only major chains being able to afford the skyrocketing rents.
This feels like an opportunity? Imagine the kinds of interesting businesses that can be created if we took off the totally arbitrary cap on retail space.
Dead Comment
The trend is going to continue over the coming years, especially with bigger offices that are paying millions each year.
Getting our place + 1 bedroom in the same area would cost way more because a lack of 3+ bedroom builds here.
I was lazy to find a original source of this, I'm assuming CP24 did nothing but repost this news article from some other news org (AP most likely).