I have read and seen many stating that its not easy to convert them to residential. But, in thoughts about technology advances and inovative investors finding interesting opportunities..I hoped it would inspire possibilities. The windows conversions always come up in the conversation...but its weird that people can spend 8-12 hours daily working in a building...yet the windows aren't correct for sleeping there? (maybe lobby to change this window rule?) Commercial buildings all have "means of egress stairwells" The additional plumbing also comes up in each conversation...but when we did residential renovations of historic properties in Wash, DC we developed crews that specialized in a custom process of plumbing pipes or running central duct work. We bought a modified concrete saw and cut holes in the corners from floors 12..down to floor 1 and ran large connected drain pipes which accommodated large numbers of additional toilets/showers/kitchen sinks. It all seems like it could be put into a construction process and run on a assembly style economics of scale if you had very good construction people and innovative thought.
There’s a reason it’s not happening in NYC more. The land is so expensive you know there’s a lot of smart well capitalized people trying to figure it out.
"Many of these commercial buildings could easily be converted to residential condos/Apartments/Co-ops/or some similar conversion." Not the case at all. I'm not even in that biz but know differently. Zoning and other regulations for one thing. Another more importantly is say you have very large building of whatever sort (factories kinda fit the bill mostly) a city block long and wide. Elevators and utility spaces are needed when you slice the parcel but so are windows so unless you put in lots of atriums and sky-lights etc you have people living inside "bunker" apartments. But did Silicon Valley Bank, Bear Sterns, Countrywide, Washington Mutual further back go unpunished? Maybe some of the C-Suite left with golden parachutes but most common stock folks likely got burned, maybe even bondholders not sure of that.
%% Good points; + LEH ,Bear Stearns , CIT....... ruined the ''to big to fail theory'' While Bear did get a few more bucks for low priced stock buy@ last minute; reason JPM got such a cheap price for Bear ''you don't pay up for a house on fire'' Plenty of employees lost jobs also. I dont know CA real estate but another big problem there was noted , 4 years average for a goofy gov building permit; good CA business, moving vans, to end on a positive note
%% YES; people in RE pay up so much for lake view, mountain view. Doesn't really matter for a hotel, even though most have windows
(Axios) 1 big thing: Inside the office market standoff Illustration: Aïda Amer/Axios How much is an office building in a big city worth these days? No one really knows, Axios' Kate Marino writes. The big picture: Investors have been poised to pounce on depressed office properties for a while now, but there hasn't been much opportunity for actual deal-making. Yes, but: That'll probably start to change this year. "This is really evolving. I would say that activity is picking up," says Cathy Marcus, co-CEO at PGIM Real Estate. Why it matters: Where these values shake out will provide some clarity for a banking system that's still a little jittery from last year's mini-crisis. Banks hold about 38% of the trillions in outstanding U.S. commercial real estate debt, per the Mortgage Bankers Association. Zoom out: The plunge in office values is one of the most well-telegraphed downturns in recent memory, thanks to the rise of both interest rates and remote work. Wall Street loves a good opportunity — and plenty of firms have been raising funds to scoop up office assets on the cheap. But it's got to be really, really cheap. Often this means buying a building's debt at a big discount to face value as a means to eventually take control. But it's taking a while for banks to decide how to handle situations in which the building is worth less than the loan — some banks want to delay realizing losses for as long as they can, says one real estate investor. According to Scott Rechler, CEO of real estate investing firm RXR: "We are starting to see some movement — not a lot yet — in deals where lenders are willing to start trading at prices that better reflect the substantial discounts that you need, to attract capital to invest in office." He says that his firm made offers on about $1 billion worth of office loans back in January, but "we haven't gotten a lot of feedback yet." Where it stands: It'll take some time "for the standoff between buyers and sellers on where values are, to work its way through the system," says Marcus. Even appraisals are all over the map. "We've seen multiple appraisals for the same building be 25% off of each other," says Rechler. Similarly, in a recent auction where a lender was trying to sell a bond backing an office building, "the [bids] were all over the place between the first round and the second round," Marcus says. Between the lines: So far, sale data show that buildings in cities' central business districts have shed about 40% of their value on average versus the peak in April 2022, according to MSCI Real Assets. But each building is different, and the quality spectrum is incredibly wide. Some of these buildings no longer need to exist; while the most modern, amenity-packed buildings may only see a small dip in value. What to watch: There's about $265 billionof U.S. office loans maturing throughout 2024 and 2025, according to data firm Trepp. That'll force more sales and restructurings. And a few more big deals will catalyze more big deals. "Once investors and lenders have better visibility of where values ultimately land and what structures are being used, I think you'll start seeing an uptick in trades," Rechler says. "It's going to be a process through this year and into '25." 2. Charted: M&A cliff Data: MSCI Real Assets; Chart: Axios Visuals 3. Meanwhile, in the 'burbs… Data: MSCI Real Assets; Note: July 2022 = 100; Chart: Axios Visuals Step outside of the major U.S. cities, and the standoff isn't nearly as pronounced. State of play: Suburban offices have lost about 17% of their value since the peak, MSCI data show. That's not what anyone wants for their portfolio, but it's not nearly as bad as cities' central business districts (CBDs). The "good" news for regional and local banks: They have much lower exposure to CBD office loans than to suburban ones, according to MSCI. Behind the scenes: For these smaller, lower-price point buildings (think under $100 million) all-cash buyers started appearing around the third quarter of last year, says Marcus. Since there was very little debt available for office buildings, all-cash buyers were suddenly at an advantage. And they appeared to be non-traditional real estate buyers taking advantage of the leg down in values. "Over the past two to three quarters, when we have sold assets ... the common denominator of the list of bidders is that we've never heard of any of them. That was one of the most striking things," Marcus says. Zoom out: Big-name investors defaulting on once-coveted NYC buildings may get the most headlines — but Marcus has also seen plenty of building owners willing to put up more money to get a loan extension, and avoid default. "Not all investors have the same motivation. Families, who've held an asset for generations, and intend to hold it for more generations, are motivated by very different things than a five-year return," she says.
That last graph comparing Suburban to CBD is interesting. Why did the CBD value rise from 2021Q1 to 2022Q1? That's strange since that was the heart of the WFH era. You'd think the value would go down with downtowns abandoned. SF downtown has been empty for a while now.
Yea...the data doesnt add up. And the data is self reported...lol above quote from the article: "But it's taking a while for banks to decide how to handle situations in which the building is worth less than the loan — some banks want to delay realizing losses for as long as they can, says one real estate investor." We know that the WeWork collapse was an early indicator...and that happened years ago. So, the reason the banks have delayed is probably because they wanted to wait until the election year and put Biden into a situation where he would bail them out without hesitation to keep his re-election without a huge public financial distraction (Black Mail). So, im looking for a few more dominos (regional commercial lenders) to fall...and then a quick- quiet across the board bailout. The buildings begin to get sold quickly for updated market values and Black Rock buys a portfolio of them for pennies on the dollar. Its basically a transfer of losses from the banking sector to the US tax payer. Then, Black Rock hires many of higher executives from the failed lenders and has them analyze, value and manage the internal commercial portfolio as a reward.
Human nature is to put off the 'unpleasant' especially if it affects one standing, salary and/or bonus. Maybe they want to put pressure on the admin, maybe they just don't want to look bad currently. Kick the can down the road and hope things magically improve.