What Will Happen to Empty Office Space? \ stacker news ~econ

3339 sats \ 36 comments \ @kr 6 Feb econ

Commercial real estate vacancies in large cities across North America are hovering around 20% right now, and it’s clear that the “return to offices” trend hasn’t materialized.

In the more extreme case of downtown San Francisco, 31% of all commercial office space is vacant.

A few questions for stackers:

Will this commercial office space eventually get rented out at a lower price?
Will this space get converted into some new use case if remote work continues to be a popular option for employees?
What new use cases should cities explore for re-purposing extra office space?
Does commercial real estate vacancy pose a significant threat to the strength of the US economy?

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2429 sats \ 1 reply \ @OriginalSize 6 Feb

Looking on the flip side 80% of office space is occupied, 69% in the worst case. The biggest issue isn't the vacancy rate, that's always been part of commercial real estate. It's debt which is only going to be made manageable through inflation. Set aside those two issues and I think commercial real estate will be ok. Even with our tech advancements there's nothing like being in the presence of other humans.

0 sats \ 0 replies \ @kr OP 6 Feb

good points

1321 sats \ 5 replies \ @Undisciplined 6 Feb

It's a very interesting phenomenon, although I think the San Francisco issue may be exceptional because of the shoplifting (and general crime) leniency. Other liberal cities have that problem, but I don't think it's as interesting as the general trend of empty office space and other commercial real estate.

I'm thinking about what happened with movie theaters. About a decade ago, people thought theaters were dead. Then they changed and recovered. We used to be crammed together in uncomfortable theater seats. The model was clearly to fill the floor space with people and price to where anyone could go regularly. Now, theaters have very few seats, but they're huge and comfortable and the experience is almost unaffordable for most people.

We may see a smaller number of high-end, spacious, beautiful shops replace the lower floors of office buildings. The higher floors could be turned into executive suite style offices, rather than cubicles, for white collar workers. There are lots of professionals working remotely who are finding that they don't really like working from home and may be interested in going to a nice office nearby.

Longer term, I think a lot of commercial real estate will be turned into residential. That will increase local demand for some of the remaining commercial real estate.

Also related to this topic, is the likelihood of autonomous vehicles freeing up enormous amounts of urban real estate that is currently dedicated to parking space. That could dwarf even the effect of all this empty commercial real estate.

650 sats \ 2 replies \ @RoundaboutStacker 6 Feb

To carry the idea of the movie theatre forward. This would mean no more cube farms that everyone hated except for the control freak bosses who believed in complete oversight. Instead, large open layouts with desk spaces that people actually want to work at. Since office space is cheaper now, the cost to the company stays the same, yet the employees are happier, and, perhaps even want to come to the office.

391 sats \ 0 replies \ @0313029d5d 7 Feb

Open office layouts are a scam. Everyone I've talked to prefers the quiet and the privacy of having a cube.

It's just a way to pack more people into the same space so the company doesn't need to pay for bigger office space.

The best office environment I've worked in were in bays/quadricles, where a single team sat in a single giant cube, so you can easily communicate while still being closed off from drive-by's. Was really fun because each team decorated their bay in fun themes :)

0 sats \ 0 replies \ @Undisciplined 7 Feb

I'm glad someone liked my connection to movie theaters.

Of course, it might just be bigger more spacious offices for the control freak bosses or some other amenities that take up lots of space: fitness centers and on-site daycare come to mind. Either way, workplaces could be moving away from the soul-crushing vibe they've been known for.

258 sats \ 1 reply \ @kr OP 6 Feb

Also related to this topic, is the likelihood of autonomous vehicles freeing up enormous amounts of urban real estate that is currently dedicated to parking space. That could dwarf even the effect of all this empty commercial real estate

yes, this is going to be a huge trend, probably even more so in suburban places where big box retailers have thousands of parking spots.

what do you think parking lots will be repurposed for?

0 sats \ 0 replies \ @Undisciplined 6 Feb

In suburban areas, my guess is that most of that space will become residential. That should offset some of the issues we have with (sub)urban sprawl.

1752 sats \ 0 replies \ @justanumber 6 Feb

I was watching an investor recently who believes the commercial real estate market is going to be going down big-time. I too wonder what will happen to empty property.

1618 sats \ 2 replies \ @030e0dca83 6 Feb

It'll be beauty data centers or warehouses

0 sats \ 1 reply \ @kr OP 6 Feb

is there a benefit to having data centers located in cities?

706 sats \ 0 replies \ @030e0dca83 6 Feb

Ping. Empty spaces should be filled and we can fill it with computers. Big cities isn't convenient to live, better live next to nude nature and spread people all over the globe

871 sats \ 0 replies \ @jeff 7 Feb

What new use cases should cities explore for re-purposing extra office space?

In my area, I've seen mall owners put pressure on the town to let them get more creative.

The mall kindof has the city by the balls. Cause if the mall doesn't have tenants, it can't pay taxes.

I've seen developers doing materially more seasonal / pop-up stuff.

Examples:

Rent the parking-lot to a circus act.
Rent part of the mall to a real-estate developer building homes.
One-off events for random scenarios.

The take-away is that, I think cities want the tax revenue, so they have to lighten up on zoning considerations.

470 sats \ 1 reply \ @gmd 6 Feb

No clue but I'm terrified of the economic fallout...

99 sats \ 0 replies \ @brandonsbytes 6 Feb

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798 sats \ 0 replies \ @Entrep 7 Feb

In the coming future, our homes become offices so I only see this commercial empty office spaces increasing by percentage

798 sats \ 1 reply \ @davidw 6 Feb

In more traditional cities with footfall outside, eventually I see:

residences & homes (due to political pressure around affordability)
more temporary rentals (for people to switch city each week)
indoor vertical farming
delivery / deposit boxes / charging docks
return of small-scale local pop-up shops, workshops & craftsmanship

In purpose-built malls & car park buildings outside of town:

vacant
destroyed
robotic manufacturing
rack space

0 sats \ 0 replies \ @kr OP 6 Feb

indoor vertical farming

this is a great one, and there are real benefits for people to have their food in their local region instead of shipped in from the other side of the world

694 sats \ 0 replies \ @kurszusz 7 Feb

Maybe it is the beginning of another big crash in real estate (maybe bigger than in 2007)?

563 sats \ 2 replies \ @dgy 6 Feb

Does commercial real estate vacancy pose a significant threat to the strength of the US economy?

Banks that created a lot of loans for these buildings will certainly suffer and will require another bailout. Further pensions fund and the insurance industry are invested in real estate, too. The value that is currently in the books will have to be corrected and will wipe out a lot of capital. The whole world will be affected once again.

1 sat \ 1 reply \ @kr OP 6 Feb

do you expect this outcome to be more or less systemic than the 2008 financial crisis?

0 sats \ 0 replies \ @dgy 7 Feb

I guess they will try to curtail it as long as possible but a black swan will eventually slip through somewhere. At a the later stage it will also affect residential real state prices near commercial hubs as with remote work commuter distance will not be that important anymore. This effect however may be locally balanced out with migration.

64 sats \ 1 reply \ @kr OP 6 Feb

part of me wonders if downtown offices can be repurposed as last mile delivery centers for amazon or other shipping platforms… but i suspect warehouses need bigger doors and spaces than most offices have

863 sats \ 0 replies \ @fm 6 Feb

we have some sort of problem here with what they call gost supermarkets and gosth restaurants

small business that operate under close doors and only use Uber Eats kind of apps to deliever..

https://ajuntament.barcelona.cat/ecologiaurbana/en/noticia/the-city-calls-time-on-ghost-kitchens-and-supermarkets_1243909

38 sats \ 2 replies \ @hodlpleb 6 Feb

Wild guess...

Eventually see a lot of defaults on those buildings
Then they get re-purchased at low prices
Probably drives down real estate prices overall

Then maybe they get rehabbed into low-income housing? (I don't see why rational suburbanites would want to move into the cities en-mass, combined with population decline over the next several decades)

11 sats \ 1 reply \ @kr OP 6 Feb

Probably drives down real estate prices overall

i think this is probably correct, but is there a possible outcome where commercial property drops and residential property goes up?

since most commercial space isn’t designed for residents, i wonder how large of an investment would be needed to actually convert these units into a new use case… might not be worth the cost unless losses on commercial get really extreme.

706 sats \ 0 replies \ @justanumber 6 Feb

I agree, repurposing/retrofitting will cost a fortune. It's a major pain.

55 sats \ 3 replies \ @fm 6 Feb

easy, you place the migrants there, pass the bill to taxpayer win... i mean, you dont win if you are a taxpayer but their agenda does

21 sats \ 2 replies \ @kr OP 6 Feb

one problem with housing anyone there is that offices are not built with the required floor plans that would make them conducive to housing… they’d actually need further investments to repurpose for housing

379 sats \ 0 replies \ @fm 6 Feb

there is that offices are not built with the required floor plans that would make them conducive to housing… they’d actually need further investments to repurpose for housin

Well, i meant it as a joke.. But once again.. If they have to make you pay for it.. They will repurpose and bill taxpayer.. And sell it as a huge employment drop..

21 sats \ 0 replies \ @brandonsbytes 6 Feb

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0 sats \ 0 replies \ @Roll 7 Feb

Will this commercial office space eventually get rented out at a lower price? -No, too many business went to Working from home....

Will this space get converted into some new use case if remote work continues to be a popular option for employees? -In my case, no, as it s a bulding that has been created for offices

What new use cases should cities explore for re-purposing extra office space? -Space for kids, -a gym space, -games: locker room, -co-working place -organize celebration, forum...

Does commercial real estate vacancy pose a significant threat to the strength of the US economy? -No as it is part of the Capitalism life and death of a business running by USA. Moreover the US economy is more based on Energy, transportation, and telecommunications

0 sats \ 0 replies \ @GlobalThreat 7 Feb

i looked into renting an office space for a 24-hour lounge/coworking place it was still rediculously expensive.

0 sats \ 0 replies \ @0313029d5d 7 Feb

Rich bitcoiners buying cheap real-estate to set up the next Bitcoin Park ;)

0 sats \ 0 replies \ @03479d0ee6 6 Feb

Here in my country (EU) I've seen some become co-working spaces, I wouldn't be suprised if some would be repurposed to student dorms, rents are very high for students, some probably for state administration services.

0 sats \ 0 replies \ @ch0k1 6 Feb

I watched a documentary where companies start converting them to residential suites in order to get even and avoid bankruptcy.