Everyone I know in a white color job is working from home full time. Why are building prices to buy or rent still so high? Please explain for me!
Tri state area for reference.
[{"id": "im2fdk9", "text": "People who work from home want a bigger space and can use the money they used to spend on commuting, office clothes, and buying lunch for rent.\n\nPeople who spend all day at the office dont need office apace at home.", "replies": [], "depth": 1}, {"id": "im2hxf7", "text": "If we are talking about renting office space, that's been my question here in San Diego too.  I thought prices would come down due to the pandemic killing small businesses but that never happened.  Prices dropped about 5 percent for a short while but then exploded again.  Recently inflation is surely part of it but that doesn't explain it all.  Rumor mill is foreign investors are buying up offices and industrial space and then jacking the rents.  One person that was looking at the same place I was looking at told me that an investor bought the building she was currently in and doubled the rents so she was looking for a new place with more reasonable rent.   So I did move into a new place finally and I visit the gas station across the street for snacks sometimes and the worker over there told me an unknown wealthy investor was buying up all the gas stations in our area and had bought that one too, he was giving me a list of the stations that have been bought but he himself has never met the new owner, despite working for them and did not know his name either.  So there seems to be some truth to the rumor.  \n\nIt makes me wonder why now vs before the pandemic when the economy was better?  Although maybe foreign investors are deciding other places are less safe and are moving there money here, IDK..", "replies": [{"id": "im2j9d2", "text": "Idk about foreign investors being the problem. \nAccording to the NAR, foreign buyers represented 2.6% of the $2.3 trillion in residential sales. They represented 3.1% of the $156 billion in commercial sales. \n\nA lot of the negative press about foreign investors \u201cbuying up America\u201d is baseless media talk.   \n\nSources:\n\nhttps://www.nar.realtor/blogs/economists-outlook/foreign-investor-acquisitions-of-u-s-commercial-real-estate-increased-49-in-2021\n\nhttps://www.nar.realtor/research-and-statistics/research-reports/international-transactions-in-u-s-residential-real-estate", "replies": [{"id": "im2k65r", "text": "&gt; They represented 3.1% of the $156 billion in commercial sales.\n\nYOu could be right but I think we'll need to see the 2022 numbers before we know for sure.", "replies": [], "depth": 3}, {"id": "im2u7q3", "text": "These numbers are not accurate due to the way they define foreign buyers. Foreign buyers as defined by them captures foreign individuals and foreign corporations, but does not account for corporations incorporated in the US, which are wholly or partially foreign owned.", "replies": [{"id": "im3acvx", "text": "Also doesn\u2019t count private equity funds with foreign LP capital\u2026", "replies": [], "depth": 4}], "depth": 3}, {"id": "im322p2", "text": "That\u2019s a residential stat not commercial", "replies": [], "depth": 3}], "depth": 2}, {"id": "im2lm5j", "text": "I've been looking into the gas station business... but from what I've come across, most of these gas station buyers are multi store operators. They have 5, 10, 30+ units and demand for gas stations has grown like crazy with gas margins increasing ...", "replies": [{"id": "im2mkgz", "text": "Might be a challenge to find employees, most of the store parts of them are 24 hours in my area.", "replies": [{"id": "im2s446", "text": "Yeah any minimum wage(or close to it) job, it's hard to get employees. So now alot of the gas stations aren't minimum wage anymore, minimum in cali is $14... I know many are starting at $16 and going all the way to $19... to retain them. Which was never the case back 5+ years ago.... but gas margins on a gal of gas used to be .10 in early 2000s and now they range from .4-$1...", "replies": [{"id": "im3pz51", "text": "Interesting, so wages/inflation is part of the gas price hike too, good to know.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}, {"id": "im2modj", "text": "Wtf do gas stations have to do with anything lol", "replies": [{"id": "im3qa94", "text": "Jeez, chill pill dude.", "replies": [], "depth": 3}], "depth": 2}, {"id": "im2p4zn", "text": "Thanks for commenting. Yes very strange times all around. I don\u2019t follow why landlords won\u2019t decrease the rent. There are so many vacancies that you figure someone would rather have a tenant in than empty but I guess I\u2019m just old school in my business dealings.", "replies": [{"id": "im2r0dm", "text": "....because office leases are often 5 to 10 years.\n\n....because office landlords offer concessions like free rent and TI allowances rather than cut rent.\n\n..... because inflation pushes up the relative value of real property due to the cost-push principle of replacement of all of the factors of production: land, labor, capital, materials. Though construction inflation may exceed real property inflation if demand is weak -- or not.", "replies": [{"id": "im2rdlo", "text": "\u2026. thank you", "replies": [], "depth": 4}], "depth": 3}, {"id": "im4didl", "text": "Curious what data you are looking at.  Chicago, Houston and Dallas all have over 25% vacancy.  A lot of this will be converted to apartments or torn down. Especially the class b and c .  Bisnow has some good articles about the adaptive reuse projects happening in Chicago.", "replies": [], "depth": 3}], "depth": 2}, {"id": "im2rsmf", "text": "The pandemic didn\u2019t kill small businesses, the govt did", "replies": [{"id": "im3q0f6", "text": "Well Ok yes there is that.  ;-P", "replies": [], "depth": 3}], "depth": 2}, {"id": "im2sno6", "text": "&gt; n. Recently inflation is surely part of it but that doesn't explain it all. Rumor mill is foreign investors are buying up offices and industrial space and then jacking the rents. One person that was looking at the same place I was looking at told me that an investor bought the building she was currently in and doubled the rents so she was looking for a new place with more reasonable rent. So I did move into a new place finally and I visit the gas station across the street for snacks\n\nWho are renting the buildings?  Most of my clients are reporting 30% vacancy for office space.", "replies": [{"id": "im3pub6", "text": "San Diego is not having a problem it seems at least not on the north end.  All the other offices here are rented, like 10 other renters.  The ones I see with a bit of a problem are the high end retail, seems like more than normal spaces open there.  My area has a mail boxes place, several computer repair places, several tax preparers, several welfare/self help orgs, a solar company, and a few i am not sure of.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "im2r4sc", "text": "Do you mean white collar job ?", "replies": [{"id": "im2r8i6", "text": "Yes! Good find on the typo!!", "replies": [{"id": "im36lt6", "text": "Sketch", "replies": [], "depth": 3}], "depth": 2}, {"id": "im45q6u", "text": "Bon Apple Tea!", "replies": [], "depth": 2}], "depth": 1}, {"id": "im2rdb2", "text": "Market takes a LONG time to recalibrate", "replies": [], "depth": 1}, {"id": "im2sivp", "text": "I'm assuming you're talking about the office market. The office market still hasn't really felt the pain yet. Vacancy has crept up slightly above where we were earlier during COVID, but still hasn't touched where we were in the early 2010s. New supply for build to spec office buildings have also completely halted so it's not like there's a glut of new supply coming on the market (get ready housing market).\n\nLandlords with high quality office space and amenities, especially ones outside of major metros, are actually doing quite well post COVID. Especially ones offering more flexible lease terms and concessions.\n\nI would imaging major cities will see a major adjustment once longer term leases expire and companies downsize and go completely remote. You'll see many of the blue cities go through major office transformations as those cities have the highest levels of remote/hybrid work arrangements.", "replies": [{"id": "im2syu3", "text": "Good points. Thanks for taking the time to comment.", "replies": [{"id": "im4ivv1", "text": "Also contracts. Most businesses rent out commercial spaces for years to lock in a lower cost. If ppl aren't there they still gotta pay for it.", "replies": [], "depth": 3}], "depth": 2}, {"id": "im467yb", "text": "It is also a big hassle and expensive to relocate and downsize. It also usually takes a c-suite executive to make the decision, and many of those are \"get back in the office\" types.  It is a massive administrative burden in a time of labor shortages and construction costs have been absurd.\n\nAlso on the other side office landlords are feeling the squeeze so giving you tons of capex to fit out is tough.", "replies": [], "depth": 2}], "depth": 1}, {"id": "im2t5q4", "text": "Construction costs went up so landlords are paying more to build out space, and they\u2019re passing that through as higher rent.  For now", "replies": [{"id": "im6c1p2", "text": "Yep. They dont want to spend $10M on a new office building and rent at a rate that makes it only worth $8M.", "replies": [], "depth": 2}], "depth": 1}, {"id": "im2uqui", "text": "if you're talking about commercial real estate, I think the market is still down. Many vacant properties available for sale.", "replies": [], "depth": 1}, {"id": "im30ufp", "text": "Couple of thoughts: A) Flight to quality- top class office buildings with less SF and higher PSF can cost similar to a B building. B) Financing- current financing on office spaces may preclude (or make it difficult) to lower rates. This is where we may see \"stuff go through the system\" over the next several years", "replies": [], "depth": 1}, {"id": "im31z9p", "text": "Yes my guess is whatever agreement the landlord reached with their lenders or investors to buy the building (probably arranged pre-pandemic) could prevent them from lowering rent because they have to pay off the debt or their lenders. \n\nA lot of CRE folks are still counting on everyone going back to the office \u2026 I know it\u2019s crazy but they are holding out.\n\nBecause a lot of companies arrange office leases for long-term many landlords won\u2019t feel the pain until their tenants leases are up. Currently some landlords are insulated from the pain is my hunch because they arranged leases years ago in some buildings and they\u2019re living off that. \u2026 it\u2019s in the vacant spaces where landlords are feeling the pain and that will become more apparent as leases expire and tenants want to give back space.\n\nAlso it depends what market you\u2019re in \u2014 some are worse off than others, have more vacant space.", "replies": [{"id": "im6t5c6", "text": "Yep. Everyone says full time of hybrid, but in reality this thing is like a slow moving wave that is very far from the coast. It will take a while to see this okay out\u2026like 5-10 years.", "replies": [], "depth": 2}], "depth": 1}, {"id": "im350h9", "text": "What company?  If won\u2019t say this is a fake post. Companies are requiring people to come back.", "replies": [{"id": "im6d7lz", "text": "The Clinton Foundation \ud83d\ude09", "replies": [], "depth": 2}], "depth": 1}, {"id": "im3g1ar", "text": "All the people who have pushed for WFH as an entitlement will be fired in the next recession. Productive companies have already begun to phase it out. Not all jobs should be remote, in fact only a tiny percentage can justify it.", "replies": [{"id": "im6c7lr", "text": "I do think the expensive WFH employees will be laid off during the next recession off and replaced eventually with lower cost remote people.", "replies": [], "depth": 2}, {"id": "im6t9wr", "text": "Don\u2019t think that\u2019s the case. You are making a pretty big assumption. It will work in some industries and die in others.", "replies": [], "depth": 2}], "depth": 1}, {"id": "im3uuyh", "text": "The most important factor in the high prices is the land prices and the high prices of construction materials and labor.", "replies": [], "depth": 1}, {"id": "im4zvfb", "text": "Is this in Danville?  Maybe a local evil scientist created a HighRentPrice-inator.  \n\nSorry Wasn\u2019t a serious answer and didn\u2019t help the conversation, I\u2019ll see myself out.", "replies": [], "depth": 1}, {"id": "im5ketd", "text": "A lot of offices are hybrid and not all white collar workers can work remotely.", "replies": [], "depth": 1}, {"id": "im5tmiq", "text": "The firm I work for owns 5M+ sq ft of office space across the Sunbelt and collectively we've seen collective occupancy rates above 80% - very little distress. Pandemic and hybrid tenants have restructured. Some may have a different opinion, but I see a gradual shift of more people back to the office than pure remote employment in \"White Collar\" positions - it's industry specific. In sum, the office market isn't catering due to remote workers.\n\nRetail remains soft and malls are problematic. Hotels have rebounded, but should the economy take a dip, hotels may be an opportunity for repositioning.", "replies": [], "depth": 1}, {"id": "im6btmn", "text": "The value of an office building is tied to the rent. Owners would rather the building sit vacant for a year under the hopes that rents will come back up, instead of locking in a lower valuation for 3-5 years.\n\nAka they are hoping this is a temporary drop in office rent.", "replies": [{"id": "im6v1z7", "text": "No one purposely keeps a building vacant for that reason..", "replies": [{"id": "im9c0zb", "text": "I\u2019m just repeating what a few commercial brokers told me. But maybe they were lying and  you\u2019re right. So\u2026what IS the reason office spaces are vacant?", "replies": [], "depth": 3}, {"id": "imgzci2", "text": "Oh many absolutely do", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}]