years ago when those webOS tablets had a firesale, i so much wanted to experience that UI but sadly i was living on the other side of the world. Should buy this office space instead. lol
SF feels like it is in a similar place to NYC in the 80s. Not perfectly analogous but rampant crime and quality of life issues will eventually force in some hard changes in political landscape which will in time correct the problem. SF geographically is gorgeous and has many advantages. I believe long term it will turn around but what that timeline will be is unclear. Still if I had a bunch of cash sitting around once the real estate there hits bottom it would be tempting.
Very different cities but there is a similar something's gotta give feeling based on the time I spent in Manhattan in the mid-80s.
Of course, things don't have to get better. Look at Detroit. (And, yes, there's been significant improvements around the river but the city as a whole is still pretty bad.) As you say, San Francisco's geographic assets are something you can't take away and very few other cities can match--but they're not enough by themselves.
It’s a fair point, and SF’s over reliance on the tech sector might have some concerning overlap with Detroit relationship with the auto industry. Nothing is guaranteed but still I am optimistic it is a city people will want to live in long term.
What's changed is people can work remotely and don't need to commute, so there's no primary purpose to reside or travel into a city anymore. And, besides, the main problem with SF is that housing there is too damn expensive because of all of the starry-eyed people who yearn to live there.
You're confusing crime and crime reporting. SF stopped charging people with crimes, police stopped arresting people committing crimes, because they know the leftist DA will just release them in an hour.
People won't be building those in the suburbs, can you imagine the NIMBY fights? It will take a little bit of time to convert them, but aren't dense cities going to come out in an interesting way? SF has so much to offer geographically.
>They're converting a ton of office space into housing.
From that article if I read correctly, they're trying to see if it's possible to convert a lot of existing office space into housing. Not yet at the actually doing it phase.
Yes, and in this case there are property owners who stand to lose hundreds of millions. They need to get permits to convert, but they can apply political pressure. I think things are different in that there are some powerful forces aligned to make this work, rather than just government ineptitude. Andy Jassy, as example, who owns part of the Mariners and a new NHL team. He's going to be motivated to protect that wealth by protecting downtown Seattle.
That is a highly inaccurate description of what happened. When the bus rapid transit lane was approve inspection showed that the infrastructure underneath was in dire need of maintenance, so the project attended that first in order to avoid simply digging up the newly built lane in the short term as old infrastructure failed. San Francisco has many problems and has made many mistakes recently, but this is an example of taking the time and money to get things right.
NYC has some useful history here. The entire downtown area was expected to become a ghost town after 9/11 because companies fled from there and it was entirely an office district.
Office to residential conversions and new residential towers have completely transformed the area, arguably making it much better than what it was before.
And the largest office to residential conversion in America was just green lighted there.
That is terribly political and ignorant. San Francisco has a great deal of commercial space that has been converted to either pure residential or live/work. One potentially interesting recent example is the tower on Van Ness which was empty and abandoned for many years. That enabled it to be sold at an extremely low price which still did not make the renovations pencil out for anything except high end luxury apartments. Commercial to residential conversions tend to be expensive and complex and political convenience is not much help for that.
Here is the crime stats for SF, more property crime in SF and less violent crime in SF compared to there cities, and it seemed to peak in 2020 decreasing since then:
> Do the stats tell the full story? If you stop prosecuting crime, and cops then stop arresting criminals, the stats go down and the crime goes up.
Do you have any stats to share?
I think another telling part in that article I linked to is that survey respondents in SF in July 2022 said the biggest issue for them, by almost a factor of 2, is homelessness and not crime. That stat appears to have a long-term upward trend:
The homelessness issue is mostly people with severe substance abuse problems, and concurrently brain-damage/mental-illness, roaming the streets, making people feel uneasy.
Violent crime is a useful metric because it’s generally reported and followed. Property crime is what’s more likely to languish, leading to underreporting.
So ppl who study crime incidence use violent crime as the like-to-like bellwether.
The whole reporting rate thing is mostly irrelevant IMO. It's the relative rate of property crime vs violent crime that matters. Violent crime is not generally directed at a broad of a cross section of the population like property crime is. Violent crime is dominated by people settling disputes that can't be settled in court. To your average techie who'd never think about rounding up a couple buddies and home invading the dude that sold them cut drugs SF's relatively high property crime rate makes it "feel rough" even if the violent crime rate isn't that remarkable.
Um, stats would reflect all of that. There would be clear data showing reported crimes that don’t lead to arrests or prosecution. Do you have this data, or are you just “common sensing” your way into scaring people out of meaningful and necessary criminal justice reforms?
Do you live in SF or is this just armchair criticism?
The general lawlessness is reflected by evidence on the ground. The police in SF have stopped arresting people because the DA doesn’t prosecute. I’d say this is an open secret, but it’s not secret. It’s just common knowledge in SF.
People have stopped bothering with the police because they don’t do anything. Total collapse of social order reflects in the stats as a drop in crime.
Remember that viral video of the cops rolling up on a burglary in progress? (it was at a dispensary if that matters) The burglar ran out literally in front of the cops and they did nothing. That’s the attitude of the police in SF. It’s actually been that way for a while and was quaint before it got bad. Beer in the park? Technically illegal but cops aren’t going to do anything so feel free.
I’ve had a friend tell me “it’s basically impossible to get a moving violation in San Francisco unless you do something blatantly antisocial“. Again this was actually a benefit before things got bad. A little flex feels nice.
But it cuts both ways.
I called and reported a homeless person stealing a nice road bike. It was locked to itself in front of a convenience store. He picked it up on a shopping cart and hustled away.
Called the police. While watching him do it. Description , location. They refused to do anything. They hassled me for wasting their time.
I watched on more than one occasion the weird blatant shoplifting. People just openly load up a bag and walk out. I was In getting a covid shot and a dude rode his bike into the pharmacy. He scooped some stuff off a shelf into a bag and rode out. Staff studiously ignored him.
I’ve walked into stores where literally everything is under glass, locked to the shelf or empty box. because otherwise people just walk out with it because the police don’t do anything. I wanted to buy something but couldn’t because the staff were busy watching a strung-out dude who was clearly aiming to steal something. I went to check out what they were so attentive about. There was nothing left, just a few notebooks.
Something like 17 stores have left Union square. In part because of the general lawlessness.
I get what the police are doing though. If you don’t prosecute we don’t arrest. And they ARE trying to maintain order. They were out in union square in force to try to keep shoppers and stores safe in December.
So yeah, data. Go visit San Francisco if you think this is all made up. Go buy some heroin openly on the street. Go steal some stuff. It’ll really open your eyes.
But even with all that it feels pretty safe compared to other dangerous places. Aside from the uptick in armed robberies in public places.
In conclusion. There’s stats and then there’s eyes on the ground. Go check it for yourself. I highly recommend it to anyone hoping to extend “necessary criminal justice reforms” (which I actually agree with). The SF model is not the right way to do it. I have some ideas but this is not the place.
Some people have had trouble getting police reports filed, but what usually works is starting from the closest precinct office. Police reports are often required for any kind of insurance coverage. I have gotten police reports filed for a range of crimes in recent years, so the general statement that police do not take reports is clearly wrong. Recent crime problems have generated a large number of insurance claims that demonstrate this. San Francisco clearly has serious problems to address, but hysterical and reactionary lies are probably not going to help with that no matter how deep the related emotional trauma may be.
I don't have a good source for this but my understanding is that converting offices to residential is quite expensive, sometimes not far off from the cost of building from scratch.
Also if you're the building owner it might be worth more as vacant office space than spending the money to covert it.
I do this for a living and no, most office towers from the last 50 years are not ripe for mixed use living. It can be done, but the unit economics are sobering.
Historic buildings lay out well, but it's still very expensive. We are converting a historic building in downtown St Louis right now opening in June, and it is very expensive, historic tax credits mandatory to make the numbers work. Shameless plug: www.victorstl.com
Very expensive to convert the space, different utility demands (many more bathrooms), mechanical ventilation needs are very different, office towers have very high opex, requires a team to run them, and typically have exorbitant RE taxes.
All that for the privilege of a sub-par living experience, i.e. rents will be low relative to market. severely limited daylight, no balcony or fresh air (windows aren't operable).
Many office towers and their associated leases were vanity projects for corporations wanting high profile space in a high profile areas to attract employees and prestige, but business culture has, in large part, moved on.
My small business moved from the "elite" downtown high rise to a boring little office park closer to our team's homes, and nearly every aspect is significantly comparatively better. Shorter commute, no high-rise elevator wait, no walk to the garage (and another elevator and wait to congestion to exit at quittin' time), no panhandling when you want to step outside for fresh air. I do miss the high rise view, but otherwise my office and business functions exactly the same, with the added perk of being able to make it to my kids' activities whenever I want.
Elite is no longer "main and main hi-rise" but working wherever you want whenever you want. Elite is Zooming in from an Aspen CO ski lodge. Has been for some time, but the daily expectation for in-person meetings has been cut. Now, revisit the high rise calculus again...
Yeah, our Boston office in the Seaport is great for the (mostly younger) employees who live in the city and can walk or take public transit. And, for our customers coming in for a day or two meeting--which is the main reason we have an office there. For everyone else, our office in the suburbs is much handier. Not that I or a lot of people regularly go into an office any longer, but I'm a pretty easy 30 minute drive to our suburban office or a 2 hour trip into the city (whether I take the train/transit or just drive in).
>Yeah, our Boston office in the Seaport is great for the (mostly younger) employees who live in the city and can walk or take public transit. And, for our customers coming in for a day or two meeting--which is the main reason we have an office there. For everyone else, our office in the suburbs is much handier
It seems to me that Sun got this right two decades ago, when it used its Java Card technology to set up mini offices around the Bay area, at any of which employees could log in and get their personal desktop. <https://www.alamy.com/telecommute14-062-suzukijpg-david-whit...> I wonder if Oracle continued this?
It's largely unnecessary today. "Everyone" has a laptop and, for many of us, 90%+ of what we do day to day is in a browser. The only limits to hoteling is people who really want to have a personal space, people whose job requires specific hardware, people who prefer specific keyboard/monitor/etc. configurations, or people who just prefer to be in a fixed team environment.
Urban offices mostly suck if you don't live in the city. But it doesn't make a lot of sense to go into a suburban office if the people you work with aren't there.
I understand why it is like that, I just want to know if customers are interested in this kind of floor plan.
For the record, I'm in the EU and customers demand natural light (and ventilation) for every room, including bathrooms. Major PITA if I may say so.
Most US building codes require that bedrooms have windows for safety so that they can be used for fire rescue. A building permit for bedrooms without windows would usually require a code variance with additional fire protection.
Obviously a little different if you're in a high rise, but what's the point of being in a tall building without windows? Why pay the premium to be in a highrise with a view that looks like a basement?
Personally, bathroom I wouldn't care. A lot of bathrooms, especially on the ground floor, have pretty minimal natural light anyway. But even given some good natural light in the living room, I'd have trouble with no window for the bedroom especially in an apartment that isn't exactly economy.
Yes there is demand, and it's something we paid special attention to. With this specific building, we have 11 foot ceilings, oversized historic windows into the living space much larger than typical multifamily, and then barn door openings to maximize light penetration into the space. Also, we enlarged the center courtyard to improve light, we have a huge rooftop amenity package including a rooftop dog park and pickle ball court, indoor secure parking; basically we are going overboard on every other aspect of urban living.
It's funny, people may insist on windows in the bedroom, but then put up black out curtains...
Regarding code items, we have operable windows and mechanical makeup air. Also at 8 stories we are considered high-rise by St. Louis city code (its a tall 8 stories) so we have to have complete sprinkler coverage, automated fire control and notifier systems, etc.
Pretty much, it's bleak. As a housing developer, part of the equation is to forget the existing high-rise altogether and buy something easier to demolish, like an old parking garage or lot. Why start $20mm-$50mm in the hole?
Who said it was? Do it anyways. The cost of having an empty building in a big city is high. Getting some more people in there is good for the city, so the city should help. Having the downtown area decay is bad bad bad. But I am sure the owners are exploring every option they can. But to me the answer is simple: figure out a way to make it happen.
I agree, but it’s always a question of money. With the cost of transformation it’s possible the value of building will be zero or even negative.
In this case the owner of the building default and the building stay there and decay until the city take on the burden of demolition or transformation with dwindling tax revenue...
Start to look like Detroit scenario.
It doesn’t look that bad form the outside, I wonder what would it take to collapse like this.
e.g. Plumbing throughout the floor, single-occupancy bathrooms, windows in the center, HVAC and utilities that can be metered and operate independently from other "units". This kind of building is a lot tougher than say, a pre-war office building like you might see in NYC. Those ones tend to have more "rooms" and sometimes center shafts, whereas these newer ones are a bunch of stacked up wide open floors, with elevators, mech, and bathrooms in the center.
[Given enough political motivation and building/zoning permits] Can't these be taken down and rebuild into residential? Given a long enough projected decline in needed office space there must be a ROI to rebuild at some point.
Tearing down a building in a downtown area is expensive and if demand for residential units also drops (ie: why would you want to live in an empty office building wasteland). So might be better to invest in buildings in further out areas that have not been built up as offices yet. Removing the daily need for commuting to work can change a lot of the dynamics around where people want to live even if they stay in the same metro areas.
It probably isn't much more expensive to just build a new building on an empty lot or other easy to demolish land if you can. You need to spend a lot of money to buy the existing building/land, basically gut everything inside until it's just a concrete shell and then rebuild everything into a residential design (electricity, plumbing, insulation, elevators, garbage disposals, amenities, windows, etc.). Then you probably still get apartments that are worse in design than a purpose built building so won't be worth as much.
As has been discussed here previously at length [see also https://www.nytimes.com/interactive/2023/03/11/upshot/office...] newer office buildings are difficult to convert to housing because of their layout (and 350 California looks modern). Older high rise offices are still expensive to convert and are pretty much limited to luxury apartments as a result but are better from a floor layout perspective.
(It's also an open question whether housing demand in the downtown area will stay so high if a lot fewer people are going into offices every day.)
The issue of converting offices to housing is water supply and drainage. Electricity is well supplied in modern offices. The reason luxury apartments make sense is because either the apartments are real big so there's less plumbing needed, or they're real expensive, which pays for the necessary plumbing. But there's another way around that - low-income SRO housing with the shared bathroom and kitchens where the existing ones are.
There are a ton of issues. For example, plumbing is very expensive. And in office towers, plumbing is typically run only to service bathrooms near the core of the building. Not bathrooms and kitchens spread all over the floor plan.
And not like you'd have to come in via the street like the poors. You'll have a helipad at the top, because what kind of billionaire would you be otherwise, coming in via street level? The other billionaires would sneer!
If I had finally made a billion dollars, getting on a rented helicopter with a rented pilot seems like the last thing I'd want to do.
Unless I personally found the best helicopter pilot ever, and found the most trustworthy set of helicopter mechanics to double check each other's work, you couldn't get me on that thing.
Billionaires typically keep pilots on staff and pay them full-time. These pilots only work for the wealthy or maybe corporate clients and have a nice ratio. Maintenance crews I‘m speculating but in these sorts of situations there are usually a select few companies who are known in that world.
Pilots yes, but when you travel nationwide or international, your local helicopter can't make it. So other than your main office location and home, you're probably just chartering a pilot and helicopter. Statistically I'm sure it's ok, but my gut says I wouldn't do it. I also don't let my friends drive if we're going anywhere either.
If I’m a billionaire, what’s an extra $600-1200k for 2-4 helicopter pilots to be rotationally on call at all times of day for immediate response?
I mean, there are netjets for helicopters if I want to save money. But we’re talking about buying a building for $250M and refurbishing, why skimp on a million per year for pilots?
The rental pilots are the exact thing I'm worried about. Your life is in their hands to an extreme level in a helicopter, as well as the mechanic.
The biggest psychopath I ever met with a decent drug habit (opiates) got fired from 3 companies over the years I knew of, although hesitantly because he's a likable guy (as long as the psycho doesn't set his target on you).
He's now a pilot, instructing other pilots in training for money, until he lands a corporate gig or with an airline.
You do not want that guy in charge of your life. And while these people exist everywhere, I don't think you're ever more at risk of being hurt by one than in a helicopter in one. It requires a lot of the person, and you just don't know if the person in the seat is trustworthy. If I made billions, I wouldn't risk it.
The parent wasn't suggesting a rental pilot, but a salaried, on call pilot. As in, "You. I have fully vetted you. I have spoken with you. I will pay you hundreds of thousands of dollars to live near the airport just to fly me where/when I want you to. I have two others just like you, so that all of you can still have lives as I rotate between you. Because the 1.2 million it costs me per year as a multi-billionaire is not even perceptible to me, being like a normal person paying 100 bucks a year, and the convenience to me is huge".
Yes, that’s exactly what I intended. Hiring 3-4 pilots who would work 40 hours per week just sitting around waiting for me. Being tested to make sure their skills are high.
Although I suppose if I was paying $1.2M in rental pilots they would be absolutely amazing and not the junkie that GP described.
I still think like a poor, working class person rather than like a billionaire where $1M/year is literally the equivalent of a few hundred dollars for me.
I read a book by Douglas Coupland (I think it was All Families are Psychotic but not sure) where a super rich person goes to a restaurant and orders every dish on the menu. He then tries them and eats one and throws the rest away. His guest was so perplexed and he explained that what’s $1000-2000 for a meal. It doesn’t matter.
What’s inconceivable to me is common to some. And there’s probably someone out there that feels the same about me. In that there are countries with $1k GDP and people making $2/day. So I make 1000x just like billionaires make 1000x my own.
The asking rent chart shows its been flat for the last 2+ years with only a bump before the pandemic.
Is this a case also of landlords not being realistic? I do think plenty of startups would love an 'office' but the costs are quite high while remote work has much lower overheads and keeps more staff happy.
We have stopped investing in startups that have offices for no good reason. It is often a sign that they don’t have ways to measure their employee progress and productivity, and that they are wasteful with money. Scalability of startups that cling to physical office culture is also poor, as they lack experience tapping into the global market of talent, artificially constraining themselves to locals or those employees willing to relocate.
Offices are a big corp’s game, not fledgling startups.
Not the OP but something like a hardware / chemistry lab or the need to comply with government-classified secret protection would be a good reason. Basically, stuff that you can't legally and/or reasonably do from home, or from other countries.
Additionally, in some jurisdictions regulations require that certain kinds of documents - mostly HR and finance - are to be kept in offices as well.
Not the GP but our example is we have a lab (chemistry lab with fume hood etc). But nobody has to go there every day; it’s used 2-3 days a week.
The facility has some cubicles and conference rooms as well. I go in when someone’s in the lab and work in one of the cubes (sometimes I assist in the lab since I’m qualified to do so). But most of the work can be done remotely (including data analysis, so why drive in? We have a remote culture that works for us so going in isn’t that different than going to a field site.
If you need manufacturing facilities, a workshop, or a lab, having a central office still makes a lot of sense. You can't ship every engineer tooling and equipment that costs 5x their annual salary, and they probably can't bolt it down or power it up in their home office.
I do prefer working remotely when possible, and can do so ~30% of the time, but when I'm needing to cause motion in a $500k CNC or $50k robot I really ought to be on-site, physically watching the equipment and physically checking wires. But if I'm just copying data from a PDF to Excel, just writing emails or sending Teams messages, or just programming a PLC or HMI (or, like most startup devs, programming a cloud-based webserver), I don't need to be physically present until the final commissioning. Send engineers home with a laptop and maybe a test bench or dev kit, don't expect them to have a full manufacturing office.
But hardware is hard and hardware startups are relatively rare.
If you're doing any work on classified (secret) materials then those have to be kept inside a secured facility. HN comments tend to ignore such issues but in the real world this is a huge industry.
Reading “How Google Works” which came out before the pandemic and it emphasizes the true reason for radical innovation in early days of Google was putting truly intelligent people together in a closed space. Is there an example of a fully remote company doing generationally transformative innovation in the past few years? And no, VPN and git companies don’t count IMO.
My take is for “regular” tech work remote is perfectly fine but if you’re trying to do something magical it’s not.
Perhaps, but those sort of case studies don't really establish causality and tend to reflect confirmation biases from the authors and interview subjects rather than providing really rigorous evidence. There were plenty of other startups which also put truly intelligent people together in a closed space yet still failed to deliver radical innovation. Was the office space really the key factor in Google's success or just an irrelevant detail?
Remote work became mainstream only 3 years ago. It's early for this kind of considerations. Let's see in 5 years how many remote first unicorn there are going to be.
Everybody is hoping they can cash out at pre-pandemic prices before it all comes crashing down. The real estate valuations are mostly wishful thinking at this point. Only question is how long the bluff plays out.
Which specific "US accounting rules" are you referring to? I'm not aware of anything in GAAP to justify your claim.
There may be covenants in certain mortgage agreements related to lease rates and occupancy levels, but those are terms negotiated individually with lenders rather than being dictated by accounting rules.
During the GFC, most US CRE defaults were from maturity default. I'd like to see a heat map of where and how much CRE loans are maturing in the next 6, 12, 18, 24, etc. months out. Or I'd just like to know where to even find the CRE loan data in the first place (county clerk's records?). Would make some nice data is beautiful charts.
A big chunk of CRE paper is on amazingly short terms. I grew up in an era where 7-10 year paper was common on CRE, but these days 2-3 year is apparently the norm. If so, the liquidity and in some cases solvency drying out in CRE lending deals will get spicy.
Disclosure: I live in SF and co-founded www.daybreakhealth.com which is fully remote. I am, 100%, part of why this tower, and others like it, are empty.
> "[...] Mayor Breed, who in an interview earlier this year said that “for this city to be thriving, we need people back in the office.”"
This is such a frustrating statement. If I were going to make this point I would say "for this city to be thriving in its current incarnation, we need people back in the office." Sadly, the mayor, as espoused above, and at least one city supervisor (Matt Dorsey¹), simply do not seem open to the rebirth necessary to make this city thrive again.
In 2020, in preparation for the debates with my co-founders on whether we should establish a fully-remote or fully-in-office culture I spent a lot of time trying to understand what remote work would mean for the Silicon Valley Business Cluster² and San Francisco in particular. I built a working theory for how Silicon Valley functions as a business cluster, San Francisco's role within that cluster, and San Francisco's city finances. Based on that working theory I built a cone-of-possibility broken out into four main scenarios that looked something like this:
* Theory 1 - Remote Work is a Pandemic Only adventure. Workers will exit the major cities, first in fear, then in pursuit of better personal finances. The pandemic will end, and the functions that drew workers into the city in the first place will reassert themselves. Workers will flock back to business clusters, the cities within them, and the offices in which they used to work.
* Theory 2 - Remote Work isn't sustainable for workers in most industries. Workers will exit the major cities, first in fear, then begin to hate their new normals. They will return to the city, and to the office, possibly before the pandemic ends.
* Theory 3 - Remote Work in Software is here to stay. Business Clusters that relied less heavily on Software workers, such as LA's film cluster, or the Boston / Cambridge BioPharma cluster would see a return to the office. Yes, they would have a lower over all demand for office space, but we'd be looking at a mid single digits³ reduction. Meanwhile San Francisco's office buildings would become a ghost town. This reduction in worker need for office space in SF would drive a cascade collapse in its office districts. First the streets are empty of pedestrians, which collapses all the local retail, which draws in more of the unhoused, which trash the place due to lack of supporting infrastructure, which drives up the cost of keeping the streets from looking like the Tenderloin. All the while, commercial leases lapse or go up for sublet in alarming volumes. These forces of reduced software workers, reduced retail spend, and reduced office rents combined to create a financial collapse in SF's city budget, anywhere from 10 to 20% of city revenues. In the worst case, with vacancy reaching into the 70 or 80% range, SF's budget craters by as much as 30% forcing a material reduction in city services which exacerbates the unhoused problem, creating a vicious cycle.⁴
* Theory 4 - Remote Work is here to stay for all knowledge work. In this scenario, all of the financial woes that play out for SF in Theory 3, play out for any city that has a major knowledge worker dependency. The breadth of the commercial real estate collapse begins to threaten the solvency of many banks. The workers, faced with the isolation of in-home work begin to branch out socially in their evenings and weekends. We see a resurgence in hobbies that bring people together.
By my understanding we're currently somewhere between Theory 3 and Theory 4. I think my theories were a bit aggressive on the potential collapse scenarios, but I'm seeing enough of what I predicted to feel comfortable in my reasoning. With that in mind, let's talk about how this ends: The lack of demand for office buildings in many cities results in the collapse of the system used to f...
It does seem to vary. The few times I've commuted into Boston over the past six months or so both traffic and transit usage seemed to be pretty much back to pre-pandemic levels as was pedestrian activity within the city. SF seems to be at least something of an outlier presumably because tech is something of a bubble.
In general, I'd observe that there's been much more of a reset to pre-pandemic norms than many anticipated. But SF could well end up being something of an anomaly--which would be especially bad news for SF given it may not be a broad-based crisis that the government at the national (or maybe even state) level is going to be especially concerned about.
> In general, I'd observe that there's been much more of a reset to pre-pandemic norms than many anticipated.
I haven't traveled well enough recently to agree or disagree, but this matches my reading, so I'll take your argument.
> But SF could well end up being something of an anomaly--which would be especially bad news for SF given it may not be a broad-based crisis that the government at the national (or maybe even state) level is going to be especially concerned about.
Yeah... That's why I think we're somewhere between Theories 3 and 4. I was really hoping that the city supervisors would see that and start shifting SF's office core to be a more desirable and exciting place by reducing the barriers to entry for new brick and mortar businesses. Think more streets shut to cars, more bike only roads, massively more efficient and cheaper stall and cart permitting along with expanded areas of operation. Roll this together and you could essentially crawl the existing temporary street markets around the Ferry Building into the urban core. This would also provide an avenue for businesses to start and grow to fill the empty retail in the buildings around them, much the same that food trucks have become a stepping stone to brick and mortar restaurants.
>I haven't traveled well enough recently to agree or disagree, but this matches my reading, so I'll take your argument.
Yeah, it's not just return to office. I was at KubeCon in Amsterdam last week and it was the largest KubeCon Europe ever with 10K in-persona attendees. Add the 2K who wanted to go and couldn't get in and it was almost 2x the attendance of KubeCon in Valencia a year ago. (And that's in an environment where a lot of tech companies have cut back on travel spend.) So, nope, nope, conferences aren't all going virtual.
And, although I don't have numbers, I'm pretty sure that a lot of the food and grocery delivery and other services that really soared during the pandemic have probably largely returned to earlier levels.
That seems unlikely, since annual averages are about 50% of pre-2020 office occupancy.
Public Transportation data also shows volume at roughly half of pre-pandemic normal.
However, commuter rail has recovered less than other modes, so if some of those people are now driving to their office instead, then they will be making traffic worse than it would have been at an equivalent pre-pandemic office occupancy volume.
>However, commuter rail has recovered less than other modes, so if some of those people are now driving to their office instead, then they will be making traffic worse
There's probably some of that. At one point I took commuter rail after traffic seemed as bad as ever and it was pretty empty. But last time I took commuter rail in during December, it was back to standing room only again from about Waltham. (That said, I think the schedule is still reduced relative to pre-pandemic which both skews the perception of how many people are taking the train and makes the train a less attractive option.)
I'm honestly not sure though how to square the number of cars apparently on the road at rush hour with reduced office occupancy. Some of it is probably day sensitivity (more people commuting mid-week than Monday/Friday) given that occupancy--depending on how it's measured--than actual office vacancy which is high but at 18% not that high.
I don't think you were too aggressive with theories 3/4 at all. The impacts from the pandemic, the Federal Reserve's reckless monetary policy, Congress' inability to figure out how to deal with the US debt, and Wall Steet's continual pursuit for profits are all pointing to an economic disaster. We're just continually spiraling into the calamity to come and everyone is in a petty blame game and culture war.
But I don't understand why people make such a fuss about some cities losing prominence and eventually crumbling from a previous period of wealth. This happens as history and technology progress.
I don't see how wealth is lost when it is just being redistributed. The workers didn't disappeared, they are just living elsewhere, bringing business opportunities and improving across many different places. Perhaps it will be healthier for the economy as a whole than having only a handful of cities as beacons of investment.
> I don't see how wealth is lost when it is just being redistributed. The workers didn't disappeared, they are just living elsewhere, bringing business opportunities and improving across many different places.
If I'm recalling the theory of it correctly, the whole reason Business Clusters exist (and form) is because there is, essentially, value in being together. Or at least, there's economic value in reducing the logistics required to move goods from one part of the value chain to another. For this reason I don't suspect we'll see the dispersal of manufacturing business clusters.
A huge part of my digging was trying to understand whether this applied to Silicon Valley or not. I decided that it did, but not because of the software, instead it was because of the VC + Startup relationship. VC's want to meet the people they're giving millions of dollars to and startup founders want to meet the people they're giving control (or massive influence) of their company to. It remains to be seen whether Zoom satisfies this need or not.
> Perhaps it will be healthier for the economy as a whole than having only a handful of cities as beacons of investment.
It might. Technology has changed dramatically since we last had material distribution into the suburb and rural areas of the nation. Maybe that will overcome the benefits of centralization.
I understand centralization in the sense that you so aptly put in bringing benefits in a very similar vein of economies of scale.
A bunch of businesses in the same city benefit from shared infrastructure (in a broader sense) and a large pool of labor.
But when we specifically talk about knowledge work, where the output is not a physical good (and even when the output is a physical good but that requires a lot of knowledge work before it can be produced) does the centralization even make sense? Technology vastly expanded the possibilities in terms of infrastructure and pool of labor. The limits now may be more in terms of the cultural shift and government regulations.
Traditionally VCs centered around Sand Hill Road wanted all of their portfolio companies within easy driving distance so that they could attend at least two in-person meetings per day. Obviously that requirement has started to break down.
Proximity to universities has also been a key factor. Silicon Valley has two world-class research universities plus numerous second and third tier schools nearby to act as sources for new technologies for commercialization.
In the early days proximity to Moffett Field and NASA Ames also helped to launch the Silicon Valley innovation engine. There was a lot of cross pollination of people and ideas with military and aerospace.
It's because politician's focus is to keep themselves employed and re elected, with entirely short term focus. They have special interests from the wealthy who try to influence policy, and usually wealthy people are in a system of making income off of others (i.e ownership).
To your point, it must just be a modern phenomena of the 24/7 news cycle and internet to get loud voices out there faster. Because if you look at the rust belt and places like Ohio that were thriving industrial cities you can clearly see that places come and go. Detroit is another good example of a new less glamorous normal. There are certain benefits of density w.r.t to economics and such but a river runs its course, if you try to mess with it one way it will eventually change in another.
Don't want to see them die at the expense of people that don't want to live there?
Remember, what is being discussed here is the fact that with remote work, commercial real state is low in demand. So we are effectively talking that workers prefer not to live there, given a choice, and the companies are fine in employing them remote.
The place didn't die. It's still there. But many people prefer to live elsewhere. You can remain there if tou like it so much, no one is stopping you.
I think the driver of Theories 3+4 will be that with high interest rates we are heading into a recession. A major driver of this recession will be a massive collapse in commercial real estate and CMBS. As the recession really gets underway then the back-to-office movement will flip on its head and companies will start to really get aggressive about cuttings costs and shuttering offices in order to survive, which will only accelerate the commercial real estate collapse even more.
The headcount reduction in tech so far has been literally nothing. Mostly that was just readjusting for the post-pandemic hiring explosion in tech.
It'll still be 6-12 months though (at least) before higher interest rates really start to bite. There's $162B in commercial real estate securities maturing in 2023 which is going to be the first real substantial detonation in the economy.
That should set us up for having a really horrible economy in 2024, we'll probably be diving into the recession or hitting the bottoms around Nov 2024.
if it's empty and no one wants to lease space and the city isn't going to let you change the purpose of the building then why are there any bids at all?
Speculate. Let's say market recovers somewhat in next n years. And the price goes back to even half of the original 300M and you got asset for 60M. That would be 90M profit or 150%, in however many years.
If you are strong believer in commercial real estate, it might not be bad bet. And then take other investments. Is there more sensible or less risky place?
The building has 27,651 Sq meters. It would cost (with discount) $60m and it would cost (for commercial renovation, according to the article) $50 if we assume the conversion to residential is going to be the same.
An average 2 Bedroom is 150 Sq meters. If we assume an 80% usage capacity (some space has to go for the gym, I guess), then we get 147 apartments. Or $750K per apartment. Obviously, there will be other costs (taxes, finder fees, city, whatever) so let's say $850K per apartment to be safe.
This is an insane price for an apartment; however, this is a competitive price for SF. The people who did a 80% discount on this, seems to have reasonable math pricing in that most of the "value" of the building was derived from the scarcity of commercial building and demand. The new "value" might have been priced based on the residential market.
Conversion to residential is probably quite a bit more. The cost of the modern office building conversion described in the New York Times article mentioned on this thread wasn't given, but the resulting condos were selling for $3-$4 million.
The bigger problem is likely water - both use and removal.
Most offices will have a couple bathrooms per floor and a kitchen. Those are used frequently 9-5 but rarely on nights and weekends and there's no heavy usage like showers or clothes washing.
If you build 100+ apartments, you need to either build 100+ bathrooms and kitchens (expensive!) or do it dorm style with common spaces plus private bedrooms. That brings it down to a smaller number but still probably 5:1 for 20+. That's just on the consumption side.
And the entire infrastructure - both inflows and outflows - are probably not sized to handle that change in usage.
It's definitely not impossible but the conversion costs are massive.
Not just water, also concerns over things like power and fire; anywhere people sleep has extra rules.
Weight requirements also become non-trivial; offices are often comparatively sparse -- cube, monitors, chair -- compared to homes, which have way more stuff. A kitchen in every apartment, oven, fridge, bed, dressers, tv, couches, etc.
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[ 2.8 ms ] story [ 216 ms ] threadIs it cheap? Or was it vastly overpriced? Bit of both?
Or 100 companies with 600k each could buy it
Of course, things don't have to get better. Look at Detroit. (And, yes, there's been significant improvements around the river but the city as a whole is still pretty bad.) As you say, San Francisco's geographic assets are something you can't take away and very few other cities can match--but they're not enough by themselves.
It is safer than:
- Baltimore, MD
- New Orleans, LA
- Washington, DC
- Chicago, IL
- Dallas, TX
- Philadelphia, PA
- Houston, TX
and it goes on because 29 other major cities are more dangerous than SF.
So where is the outrage about those cities? Seems more like poverty shaming and anti-liberal bias against SF.
https://www.macrotrends.net/cities/us/ca/san-francisco/crime...
What's changed is people can work remotely and don't need to commute, so there's no primary purpose to reside or travel into a city anymore. And, besides, the main problem with SF is that housing there is too damn expensive because of all of the starry-eyed people who yearn to live there.
I see a lot of new apartments (I shudder to mention Adam Neuman's new venture Flow as an example: https://en.wikipedia.org/wiki/Flow_(real_estate_company)) that are combinations of work and life and after-work life.
People won't be building those in the suburbs, can you imagine the NIMBY fights? It will take a little bit of time to convert them, but aren't dense cities going to come out in an interesting way? SF has so much to offer geographically.
https://www.marketplace.org/2022/10/04/chicago-iconic-office...
San Francisco hates housing though, so it doesn't seem like anyone is actually considering this there.
From that article if I read correctly, they're trying to see if it's possible to convert a lot of existing office space into housing. Not yet at the actually doing it phase.
https://www.costar.com/article/666325850/over-12-billion-in-...
and we'll see what gets a greenlight; could be one or two pet projects, and after those crash and burn nothing else happens.
It's very much a "let's never change anything" place.
Office to residential conversions and new residential towers have completely transformed the area, arguably making it much better than what it was before.
And the largest office to residential conversion in America was just green lighted there.
https://nypost.com/2023/04/24/longtime-nyc-home-of-the-daily...
Here is the crime stats for SF, more property crime in SF and less violent crime in SF compared to there cities, and it seemed to peak in 2020 decreasing since then:
https://www.sfchronicle.com/projects/2022/fixing-san-francis...
Do you have any stats to share?
I think another telling part in that article I linked to is that survey respondents in SF in July 2022 said the biggest issue for them, by almost a factor of 2, is homelessness and not crime. That stat appears to have a long-term upward trend:
https://sfgov.org/scorecards/safety-net/homeless-population#....
So ppl who study crime incidence use violent crime as the like-to-like bellwether.
The general lawlessness is reflected by evidence on the ground. The police in SF have stopped arresting people because the DA doesn’t prosecute. I’d say this is an open secret, but it’s not secret. It’s just common knowledge in SF. People have stopped bothering with the police because they don’t do anything. Total collapse of social order reflects in the stats as a drop in crime.
Remember that viral video of the cops rolling up on a burglary in progress? (it was at a dispensary if that matters) The burglar ran out literally in front of the cops and they did nothing. That’s the attitude of the police in SF. It’s actually been that way for a while and was quaint before it got bad. Beer in the park? Technically illegal but cops aren’t going to do anything so feel free.
I’ve had a friend tell me “it’s basically impossible to get a moving violation in San Francisco unless you do something blatantly antisocial“. Again this was actually a benefit before things got bad. A little flex feels nice.
But it cuts both ways. I called and reported a homeless person stealing a nice road bike. It was locked to itself in front of a convenience store. He picked it up on a shopping cart and hustled away.
Called the police. While watching him do it. Description , location. They refused to do anything. They hassled me for wasting their time.
I watched on more than one occasion the weird blatant shoplifting. People just openly load up a bag and walk out. I was In getting a covid shot and a dude rode his bike into the pharmacy. He scooped some stuff off a shelf into a bag and rode out. Staff studiously ignored him.
I’ve walked into stores where literally everything is under glass, locked to the shelf or empty box. because otherwise people just walk out with it because the police don’t do anything. I wanted to buy something but couldn’t because the staff were busy watching a strung-out dude who was clearly aiming to steal something. I went to check out what they were so attentive about. There was nothing left, just a few notebooks.
Something like 17 stores have left Union square. In part because of the general lawlessness.
I get what the police are doing though. If you don’t prosecute we don’t arrest. And they ARE trying to maintain order. They were out in union square in force to try to keep shoppers and stores safe in December.
So yeah, data. Go visit San Francisco if you think this is all made up. Go buy some heroin openly on the street. Go steal some stuff. It’ll really open your eyes.
But even with all that it feels pretty safe compared to other dangerous places. Aside from the uptick in armed robberies in public places.
In conclusion. There’s stats and then there’s eyes on the ground. Go check it for yourself. I highly recommend it to anyone hoping to extend “necessary criminal justice reforms” (which I actually agree with). The SF model is not the right way to do it. I have some ideas but this is not the place.
Crime stats only measure reported crime.
Yeah, when I see facts that cause me cognitive dissonance, I also pull reasons to disregard them out of thin air as well.
So many don't bother. I certainly didn't report my 2 SF car break-ins.
Sounds like you're engaging in bad faith. I think you should consider mindfulness and re-examining your learned biases.
Also if you're the building owner it might be worth more as vacant office space than spending the money to covert it.
Historic buildings lay out well, but it's still very expensive. We are converting a historic building in downtown St Louis right now opening in June, and it is very expensive, historic tax credits mandatory to make the numbers work. Shameless plug: www.victorstl.com
Very expensive to convert the space, different utility demands (many more bathrooms), mechanical ventilation needs are very different, office towers have very high opex, requires a team to run them, and typically have exorbitant RE taxes.
All that for the privilege of a sub-par living experience, i.e. rents will be low relative to market. severely limited daylight, no balcony or fresh air (windows aren't operable).
Many office towers and their associated leases were vanity projects for corporations wanting high profile space in a high profile areas to attract employees and prestige, but business culture has, in large part, moved on.
My small business moved from the "elite" downtown high rise to a boring little office park closer to our team's homes, and nearly every aspect is significantly comparatively better. Shorter commute, no high-rise elevator wait, no walk to the garage (and another elevator and wait to congestion to exit at quittin' time), no panhandling when you want to step outside for fresh air. I do miss the high rise view, but otherwise my office and business functions exactly the same, with the added perk of being able to make it to my kids' activities whenever I want.
Elite is no longer "main and main hi-rise" but working wherever you want whenever you want. Elite is Zooming in from an Aspen CO ski lodge. Has been for some time, but the daily expectation for in-person meetings has been cut. Now, revisit the high rise calculus again...
It seems to me that Sun got this right two decades ago, when it used its Java Card technology to set up mini offices around the Bay area, at any of which employees could log in and get their personal desktop. <https://www.alamy.com/telecommute14-062-suzukijpg-david-whit...> I wonder if Oracle continued this?
Urban offices mostly suck if you don't live in the city. But it doesn't make a lot of sense to go into a suburban office if the people you work with aren't there.
https://victorstl.com/apartments/?spaces_sort=bd_asc&detail=...
I understand why it is like that, I just want to know if customers are interested in this kind of floor plan. For the record, I'm in the EU and customers demand natural light (and ventilation) for every room, including bathrooms. Major PITA if I may say so.
Obviously a little different if you're in a high rise, but what's the point of being in a tall building without windows? Why pay the premium to be in a highrise with a view that looks like a basement?
It's funny, people may insist on windows in the bedroom, but then put up black out curtains...
Regarding code items, we have operable windows and mechanical makeup air. Also at 8 stories we are considered high-rise by St. Louis city code (its a tall 8 stories) so we have to have complete sprinkler coverage, automated fire control and notifier systems, etc.
- Lower existing office rents until you get tenants.
- Tear down and build housing.
- Leave empty for decades.
It doesn’t look that bad form the outside, I wonder what would it take to collapse like this.
(It's also an open question whether housing demand in the downtown area will stay so high if a lot fewer people are going into offices every day.)
If it were economical, building owners would already be doing this.
People have rented industrial areas to use as commercial and residential habitation, but fire/code inspectors usual find out and shut it down.
This seems like a fun opportunity for a billionaire to buy as a personal residence, Stark Tower style.
The top few floors can be a penthouse and helipad.
It looks like the most expensive personal residence for sale is $250M [0] so this would be the most expensive to date. And would require renovations.
But I can’t imagine any company wanting an office tower any longer.
[0] https://robbreport.com/shelter/homes-for-sale/gallery/most-e...
https://en.wikipedia.org/wiki/Antilia_(building)
Seems amazing. But I am not sure if I was ultra rich I would want to live right downtown.
Why not? You use it when you want to be in the city for a few nights, and then fly off to one of your other houses when you want a change of scenery!
I mean, there are netjets for helicopters if I want to save money. But we’re talking about buying a building for $250M and refurbishing, why skimp on a million per year for pilots?
The biggest psychopath I ever met with a decent drug habit (opiates) got fired from 3 companies over the years I knew of, although hesitantly because he's a likable guy (as long as the psycho doesn't set his target on you).
He's now a pilot, instructing other pilots in training for money, until he lands a corporate gig or with an airline.
You do not want that guy in charge of your life. And while these people exist everywhere, I don't think you're ever more at risk of being hurt by one than in a helicopter in one. It requires a lot of the person, and you just don't know if the person in the seat is trustworthy. If I made billions, I wouldn't risk it.
Although I suppose if I was paying $1.2M in rental pilots they would be absolutely amazing and not the junkie that GP described.
I still think like a poor, working class person rather than like a billionaire where $1M/year is literally the equivalent of a few hundred dollars for me.
I read a book by Douglas Coupland (I think it was All Families are Psychotic but not sure) where a super rich person goes to a restaurant and orders every dish on the menu. He then tries them and eats one and throws the rest away. His guest was so perplexed and he explained that what’s $1000-2000 for a meal. It doesn’t matter.
What’s inconceivable to me is common to some. And there’s probably someone out there that feels the same about me. In that there are countries with $1k GDP and people making $2/day. So I make 1000x just like billionaires make 1000x my own.
Good riddance to all those who think it's a good idea to build office buildings instead of residential units.
Is this a case also of landlords not being realistic? I do think plenty of startups would love an 'office' but the costs are quite high while remote work has much lower overheads and keeps more staff happy.
Offices are a big corp’s game, not fledgling startups.
Additionally, in some jurisdictions regulations require that certain kinds of documents - mostly HR and finance - are to be kept in offices as well.
The facility has some cubicles and conference rooms as well. I go in when someone’s in the lab and work in one of the cubes (sometimes I assist in the lab since I’m qualified to do so). But most of the work can be done remotely (including data analysis, so why drive in? We have a remote culture that works for us so going in isn’t that different than going to a field site.
I do prefer working remotely when possible, and can do so ~30% of the time, but when I'm needing to cause motion in a $500k CNC or $50k robot I really ought to be on-site, physically watching the equipment and physically checking wires. But if I'm just copying data from a PDF to Excel, just writing emails or sending Teams messages, or just programming a PLC or HMI (or, like most startup devs, programming a cloud-based webserver), I don't need to be physically present until the final commissioning. Send engineers home with a laptop and maybe a test bench or dev kit, don't expect them to have a full manufacturing office.
But hardware is hard and hardware startups are relatively rare.
My take is for “regular” tech work remote is perfectly fine but if you’re trying to do something magical it’s not.
If the property is unrented, the landlord can use the proposed rental price in calculating the value of the property.
If the landlord accepted the lower rent, they would have to use that lower price in calculating the value of the property.
That could cause all sorts of problems with any loans that the landlord has on the property that are secured by the value of the property.
There may be covenants in certain mortgage agreements related to lease rates and occupancy levels, but those are terms negotiated individually with lenders rather than being dictated by accounting rules.
That has to be more important in the long run at least?
Most loans right now still haven't hit their maturity dates and are still on old, low interest rates.
Shit is gonna get absolutely wild as loans hit their maturity dates in the current interest rate environment:
https://cred-iq.com/blog/index.php/2023/04/20/mounting-matur...
A big chunk of CRE paper is on amazingly short terms. I grew up in an era where 7-10 year paper was common on CRE, but these days 2-3 year is apparently the norm. If so, the liquidity and in some cases solvency drying out in CRE lending deals will get spicy.
> "[...] Mayor Breed, who in an interview earlier this year said that “for this city to be thriving, we need people back in the office.”"
This is such a frustrating statement. If I were going to make this point I would say "for this city to be thriving in its current incarnation, we need people back in the office." Sadly, the mayor, as espoused above, and at least one city supervisor (Matt Dorsey¹), simply do not seem open to the rebirth necessary to make this city thrive again.
In 2020, in preparation for the debates with my co-founders on whether we should establish a fully-remote or fully-in-office culture I spent a lot of time trying to understand what remote work would mean for the Silicon Valley Business Cluster² and San Francisco in particular. I built a working theory for how Silicon Valley functions as a business cluster, San Francisco's role within that cluster, and San Francisco's city finances. Based on that working theory I built a cone-of-possibility broken out into four main scenarios that looked something like this:
* Theory 1 - Remote Work is a Pandemic Only adventure. Workers will exit the major cities, first in fear, then in pursuit of better personal finances. The pandemic will end, and the functions that drew workers into the city in the first place will reassert themselves. Workers will flock back to business clusters, the cities within them, and the offices in which they used to work.
* Theory 2 - Remote Work isn't sustainable for workers in most industries. Workers will exit the major cities, first in fear, then begin to hate their new normals. They will return to the city, and to the office, possibly before the pandemic ends.
* Theory 3 - Remote Work in Software is here to stay. Business Clusters that relied less heavily on Software workers, such as LA's film cluster, or the Boston / Cambridge BioPharma cluster would see a return to the office. Yes, they would have a lower over all demand for office space, but we'd be looking at a mid single digits³ reduction. Meanwhile San Francisco's office buildings would become a ghost town. This reduction in worker need for office space in SF would drive a cascade collapse in its office districts. First the streets are empty of pedestrians, which collapses all the local retail, which draws in more of the unhoused, which trash the place due to lack of supporting infrastructure, which drives up the cost of keeping the streets from looking like the Tenderloin. All the while, commercial leases lapse or go up for sublet in alarming volumes. These forces of reduced software workers, reduced retail spend, and reduced office rents combined to create a financial collapse in SF's city budget, anywhere from 10 to 20% of city revenues. In the worst case, with vacancy reaching into the 70 or 80% range, SF's budget craters by as much as 30% forcing a material reduction in city services which exacerbates the unhoused problem, creating a vicious cycle.⁴
* Theory 4 - Remote Work is here to stay for all knowledge work. In this scenario, all of the financial woes that play out for SF in Theory 3, play out for any city that has a major knowledge worker dependency. The breadth of the commercial real estate collapse begins to threaten the solvency of many banks. The workers, faced with the isolation of in-home work begin to branch out socially in their evenings and weekends. We see a resurgence in hobbies that bring people together.
By my understanding we're currently somewhere between Theory 3 and Theory 4. I think my theories were a bit aggressive on the potential collapse scenarios, but I'm seeing enough of what I predicted to feel comfortable in my reasoning. With that in mind, let's talk about how this ends: The lack of demand for office buildings in many cities results in the collapse of the system used to f...
In general, I'd observe that there's been much more of a reset to pre-pandemic norms than many anticipated. But SF could well end up being something of an anomaly--which would be especially bad news for SF given it may not be a broad-based crisis that the government at the national (or maybe even state) level is going to be especially concerned about.
I haven't traveled well enough recently to agree or disagree, but this matches my reading, so I'll take your argument.
> But SF could well end up being something of an anomaly--which would be especially bad news for SF given it may not be a broad-based crisis that the government at the national (or maybe even state) level is going to be especially concerned about.
Yeah... That's why I think we're somewhere between Theories 3 and 4. I was really hoping that the city supervisors would see that and start shifting SF's office core to be a more desirable and exciting place by reducing the barriers to entry for new brick and mortar businesses. Think more streets shut to cars, more bike only roads, massively more efficient and cheaper stall and cart permitting along with expanded areas of operation. Roll this together and you could essentially crawl the existing temporary street markets around the Ferry Building into the urban core. This would also provide an avenue for businesses to start and grow to fill the empty retail in the buildings around them, much the same that food trucks have become a stepping stone to brick and mortar restaurants.
Yeah, it's not just return to office. I was at KubeCon in Amsterdam last week and it was the largest KubeCon Europe ever with 10K in-persona attendees. Add the 2K who wanted to go and couldn't get in and it was almost 2x the attendance of KubeCon in Valencia a year ago. (And that's in an environment where a lot of tech companies have cut back on travel spend.) So, nope, nope, conferences aren't all going virtual.
And, although I don't have numbers, I'm pretty sure that a lot of the food and grocery delivery and other services that really soared during the pandemic have probably largely returned to earlier levels.
However, commuter rail has recovered less than other modes, so if some of those people are now driving to their office instead, then they will be making traffic worse than it would have been at an equivalent pre-pandemic office occupancy volume.
https://www.kastle.com/safety-wellness/getting-america-back-...
https://www.mbta.com/performance-metrics/ridership-the-t
There's probably some of that. At one point I took commuter rail after traffic seemed as bad as ever and it was pretty empty. But last time I took commuter rail in during December, it was back to standing room only again from about Waltham. (That said, I think the schedule is still reduced relative to pre-pandemic which both skews the perception of how many people are taking the train and makes the train a less attractive option.)
I'm honestly not sure though how to square the number of cars apparently on the road at rush hour with reduced office occupancy. Some of it is probably day sensitivity (more people commuting mid-week than Monday/Friday) given that occupancy--depending on how it's measured--than actual office vacancy which is high but at 18% not that high.
But I don't understand why people make such a fuss about some cities losing prominence and eventually crumbling from a previous period of wealth. This happens as history and technology progress.
I don't see how wealth is lost when it is just being redistributed. The workers didn't disappeared, they are just living elsewhere, bringing business opportunities and improving across many different places. Perhaps it will be healthier for the economy as a whole than having only a handful of cities as beacons of investment.
If I'm recalling the theory of it correctly, the whole reason Business Clusters exist (and form) is because there is, essentially, value in being together. Or at least, there's economic value in reducing the logistics required to move goods from one part of the value chain to another. For this reason I don't suspect we'll see the dispersal of manufacturing business clusters.
A huge part of my digging was trying to understand whether this applied to Silicon Valley or not. I decided that it did, but not because of the software, instead it was because of the VC + Startup relationship. VC's want to meet the people they're giving millions of dollars to and startup founders want to meet the people they're giving control (or massive influence) of their company to. It remains to be seen whether Zoom satisfies this need or not.
> Perhaps it will be healthier for the economy as a whole than having only a handful of cities as beacons of investment.
It might. Technology has changed dramatically since we last had material distribution into the suburb and rural areas of the nation. Maybe that will overcome the benefits of centralization.
A bunch of businesses in the same city benefit from shared infrastructure (in a broader sense) and a large pool of labor.
But when we specifically talk about knowledge work, where the output is not a physical good (and even when the output is a physical good but that requires a lot of knowledge work before it can be produced) does the centralization even make sense? Technology vastly expanded the possibilities in terms of infrastructure and pool of labor. The limits now may be more in terms of the cultural shift and government regulations.
Proximity to universities has also been a key factor. Silicon Valley has two world-class research universities plus numerous second and third tier schools nearby to act as sources for new technologies for commercialization.
In the early days proximity to Moffett Field and NASA Ames also helped to launch the Silicon Valley innovation engine. There was a lot of cross pollination of people and ideas with military and aerospace.
To your point, it must just be a modern phenomena of the 24/7 news cycle and internet to get loud voices out there faster. Because if you look at the rust belt and places like Ohio that were thriving industrial cities you can clearly see that places come and go. Detroit is another good example of a new less glamorous normal. There are certain benefits of density w.r.t to economics and such but a river runs its course, if you try to mess with it one way it will eventually change in another.
Remember, what is being discussed here is the fact that with remote work, commercial real state is low in demand. So we are effectively talking that workers prefer not to live there, given a choice, and the companies are fine in employing them remote.
The place didn't die. It's still there. But many people prefer to live elsewhere. You can remain there if tou like it so much, no one is stopping you.
The headcount reduction in tech so far has been literally nothing. Mostly that was just readjusting for the post-pandemic hiring explosion in tech.
It'll still be 6-12 months though (at least) before higher interest rates really start to bite. There's $162B in commercial real estate securities maturing in 2023 which is going to be the first real substantial detonation in the economy.
That should set us up for having a really horrible economy in 2024, we'll probably be diving into the recession or hitting the bottoms around Nov 2024.
It's that ominous.
If you are strong believer in commercial real estate, it might not be bad bet. And then take other investments. Is there more sensible or less risky place?
The building has 27,651 Sq meters. It would cost (with discount) $60m and it would cost (for commercial renovation, according to the article) $50 if we assume the conversion to residential is going to be the same.
An average 2 Bedroom is 150 Sq meters. If we assume an 80% usage capacity (some space has to go for the gym, I guess), then we get 147 apartments. Or $750K per apartment. Obviously, there will be other costs (taxes, finder fees, city, whatever) so let's say $850K per apartment to be safe.
This is an insane price for an apartment; however, this is a competitive price for SF. The people who did a 80% discount on this, seems to have reasonable math pricing in that most of the "value" of the building was derived from the scarcity of commercial building and demand. The new "value" might have been priced based on the residential market.
Most offices will have a couple bathrooms per floor and a kitchen. Those are used frequently 9-5 but rarely on nights and weekends and there's no heavy usage like showers or clothes washing.
If you build 100+ apartments, you need to either build 100+ bathrooms and kitchens (expensive!) or do it dorm style with common spaces plus private bedrooms. That brings it down to a smaller number but still probably 5:1 for 20+. That's just on the consumption side.
And the entire infrastructure - both inflows and outflows - are probably not sized to handle that change in usage.
It's definitely not impossible but the conversion costs are massive.
Weight requirements also become non-trivial; offices are often comparatively sparse -- cube, monitors, chair -- compared to homes, which have way more stuff. A kitchen in every apartment, oven, fridge, bed, dressers, tv, couches, etc.
Electrical demand may or may not be higher, too.