Rolling US Economy Into The Shitbin Thread

Definitely worried for NYC

But also wondering what happens to the economy and financial system when all the CMBS underlying all those properties go bad. And why there isn't greater concern about that now.

lol was this revive inspired by my stock market thread post?

i thought silby was just going to go brrrrr.

NYC already suffering obviously and unpleasantly from rent blight in commercial storefronts, at least in my recollection of my last walk in lower Manhattan a couple years ago, so I can well imagine upsides to the oncoming shock.

Depending on specific property types (construction stuff) -- it could be not that cost-intensive to convert these office buildings into housing. Easiest would be SRO type with the individual offices becoming bedrooms and probably adding additional bathrooms which would be shared among tenants. Open areas could be additional eating and living spaces, or childcare facilities.

I’ve read that with big towers where all the systems are in the shaft it’s not really plausible to build enough bathrooms to make those floors into housing.

sadly that makes sense

xp -- depends on the size of the tower? And how many people you can have share a bathroom. Probably additional lines would need to be run ... or pipes removed and replaced with wider ones. One of the positive things about downtown type office towers, is that they tend to be closer to infrastructure like large water & sewer lines that are necessary to run showers, laundry, kitchens, etc.

Also the environmental benefits of dense housing close to public transit ... a lot of these office buildings have nice windows, so you can meet the light requirements for housing (i forget whether Title 24 is just California or is based on a national/International code) ... these buildings also tend to have really good climate control systems as well. Also elevators ... so this could work well for meeting ADA requirements.

i feel like the american economy is very much in the wile e coyote running on air phase
why i am looking to buy an apartment at this time is anyone's guess. i think i am a rube.

Don't know if this is a broader economic indicator or just a shitty business going under, but I'm seeing rumors that the entire Fry's chain and online store is shutting down at midnight tonight

xp whether or not some commercial buildings can be converted I somehow doubt it's going to save the commercial property market. In no way crying any tears for any owners or banks, just worried about the shocks that may result from defaults.

Last time I was in my local Fry's, about a year ago, its immanent demise was so obvious they could have blared it from loudspeakers. Shelves were poorly stocked, the staff was bored and few, customers also few. It was desolate.

xp -- yeah, I doubt very many biz and government people are going to make an effort to convert these dumb office buildings into affordable housing or homeless shelters or anything useful like that.

News came out today about this 12-theater movieplex closing in downtown Evanston, near Northwestern and just north of Chicago. It was built 23 years ago with shops and restaurants around it (including a 3-floor Borders, closed forever ago). An estimated 1.5 million people visited that area each year because of the multiplex; the whole area was built around it.

Anyway, it felt like a sign of what's to come, with core tenants not renewing leases. Every time a bar or restaurant or store announces their closing, I assume it's because their lease is up and there's no point in renewing, unless they luck into having a benevolent landlord.

Can someone explain to me why we are not in the midst of or very soon headed for a commercial property-induced financial collapse? Is it just that the fed already has everything risky on its own balance sheet?

― longtime caller, first time listener (man alive), Tuesday, February 23, 2021 9:42 PM (yesterday) bookmarkflaglink

why do you think this is going to happen? i think the panic on this was mostly ginned up from lobbyists for the hotel industry being good at their jobs. i guess it depends on if people resume shopping and staying at hotels after the pandemic in, which in the US is only a couple months away at this point so we’ll find out soon

one thing I've taken away from the last four years is no one knows what the fuck is going to happen

people with money will be fine until the stock market bubble pops, which has probably been delayed thanks to the stimulus? at least that's a prevailing theory

*FEDERAL RESERVE SYSTEM DOWN, INVESTIGATION ONGOING: CNBC

— Emma Kinery (@EmmaKinery) February 24, 2021

people with money will be fine until the stock market bubble pops

and will subsequently go on being fine after the stock market bubble pops

Can someone explain to me why we are not in the midst of or very soon headed for a commercial property-induced financial collapse? Is it just that the fed already has everything risky on its own balance sheet?

― longtime caller, first time listener (man alive), Tuesday, February 23, 2021 9:42 PM (yesterday) bookmarkflaglink

why do you think this is going to happen? i think the panic on this was mostly ginned up from lobbyists for the hotel industry being good at their jobs. i guess it depends on if people resume shopping and staying at hotels after the pandemic in, which in the US is only a couple months away at this point so we’ll find out soon

― flopson, Wednesday, February 24, 2021 7:35 AM (eight hours ago) bookmarkflaglink

A few different reasons:

(1) acceleration of the already existing decline in retail. Sustained losses over the course of 1-2 years of restrictions and reduced activity in many places, plus the fact that this will push more people to buy online permanently and people who already buy online to buy more online permanently

(2) A lot of restaurants and retail that closed won't come back at all, and what does will take time.

(3) Business travel is likely to be reduced for the long term, and there are a lot of food/drink and hotel businesses that depend heavily on business travel

(4) same with tourism, albeit I think less so. More likely that companies continue to have fewer in person meetings that require 50 people to fly to and stay in the same location. Less likely that Americans permanently no longer want to take vacations.

(5) Major city office use is going to be reduced. It will take time, but leases will increasingly be not renewed or walked away from.

I don't think any of the things above are going to be total/complete, but you don't need that. A 10-20% reduction in any of those still has a massive impact on the commercial real estate market.

Also the environmental benefits of dense housing close to public transit ... a lot of these office buildings have nice windows, so you can meet the light requirements for housing (i forget whether Title 24 is just California or is based on a national/International code) ... these buildings also tend to have really good climate control systems as well. Also elevators ... so this could work well for meeting ADA requirements.

https://therealdeal.com/national/2020/12/08/cmbs-market-faces-staggering-losses-even-with-vaccine-hopes/

Also just saw articles about Simon Property turning malls over to Deutsche Bank.

As noted above, don't give much of a shit about this in itself but wondering if there are wider financial shocks that can result. Maybe it's all been contained in advance this time, idk.

In 2019 (pre-pandemic), there was a barely noticed but worrisome statistic that was floated: defaults on car loans, especially among younger people:
Nearly $66 billion of the $1.33 trillion in outstanding loans were over 90 days delinquent in the fourth quarter of 2019, up from $57 billion for the same period last year...

American would almost rather give up food than their cars. The world won't fall apart because of missed car payments, but it's a canary in the coalmine that preceded Covid-19.

I’ve attended some programs about this very issue and ironically it is easier logistically and technically to convert older (60s-70s) office buildings to residential because of their smaller floor plate.

I imagine this is the case in Maryland, though in California and other places where we have earthquakes, any conversion from office to residential is going to require seismic upgrades to current code... and the height of the building definitely affects the requirements and the costs thereof.

Keep in mind also that what may stymie conversion is building codes in the US have higher safety standards for residential uses than office uses.
― Mosholu Porkway (Boring, Maryland), Wednesday, February 24, 2021 1:14 PM (one hour ago)

This is a significant amount of what I deal with professionally ... occupant load factors for office are actually higher (as a rule) than residential, (if you have mixed occupancy, like, say an exercise facility in the complex, it gets more complicated), so a lot of things would actually not matter as much. Like, if you have a floor of an office building with fire exiting designed for the number of people that work in those offices, it will be adequate for the number of people who would live on that floor if converted to housing. ... (though this is assuming that the fire exiting is up to current code and is not grandfathered at a lower standard due to age of the building)

re the earthquakes -- newer buildings might be cheaper to convert as they are more likely to meet current building code re structural reinforcement etc.

In 2019 (pre-pandemic), there was a barely noticed but worrisome statistic that was floated: defaults on car loans, especially among younger people:
Nearly $66 billion of the $1.33 trillion in outstanding loans were over 90 days delinquent in the fourth quarter of 2019, up from $57 billion for the same period last year...

American would almost rather give up food than their cars. The world won't fall apart because of missed car payments, but it's a canary in the coalmine that preceded Covid-19.

― Andy the Grasshopper, Wednesday, February 24, 2021 4:27 PM (one hour ago) bookmarkflaglink

I remember this being a thing -- did it ever go away? I'd expect it to even be higher now in light of the economy.

is this related to the increase of gig economy jobs that involve driving things or people?

A few different reasons:

(1) acceleration of the already existing decline in retail. Sustained losses over the course of 1-2 years of restrictions and reduced activity in many places, plus the fact that this will push more people to buy online permanently and people who already buy online to buy more online permanently

(2) A lot of restaurants and retail that closed won't come back at all, and what does will take time.

(3) Business travel is likely to be reduced for the long term, and there are a lot of food/drink and hotel businesses that depend heavily on business travel

(4) same with tourism, albeit I think less so. More likely that companies continue to have fewer in person meetings that require 50 people to fly to and stay in the same location. Less likely that Americans permanently no longer want to take vacations.

(5) Major city office use is going to be reduced. It will take time, but leases will increasingly be not renewed or walked away from.

I don't think any of the things above are going to be total/complete, but you don't need that. A 10-20% reduction in any of those still has a massive impact on the commercial real estate market.

― longtime caller, first time listener (man alive), Wednesday, February 24, 2021 4:02 PM (yesterday) bookmarkflaglink

these just sound like your usual changes in the composition of the economy to me though. less brick and mortar retail more online. less work from office more work from home, so restaurants and coffee shops in residential areas will expand and restaurants near big office buildings will close. domestic tourism is gonna pop off when the pandemic ends in the US this spring, it’ll take longer for international tourism to resume. there’s a huge amount of pent up demand in household savings from foregone vacations by people who didn’t lose their jobs. idk i just don’t see the economy and financial system as so fragile that some relative price changes will create a crisis. if it was there would have been a huge crash in march 2020. financial regulation was p effective and large financial institutions arent making huge one-sided leveraged bets. which major banks or bank like financial institutions are going to go bankrupt if the economy is booming but like corporate serving hotels and offices recover but have a higher vacancy rate than would have been expected based on pre-pandemic levels?

i mostly agree with flopson, commercial real estate is a large and varied sector. Like maybe the demand for office space and businesses that serve concentrated 9-5 office workers -- I definitely feel like that will shift, but those spaces will likely be repurposed for other uses. It might take a while. However, I cynically suspect that the government will likely bail out the large well-connected owners of these buildings, in a similar fashion to the way they are bailing out residential landlords.

must feel good to have locked in a wework lease before this

The number of people I know who are in the process of buying houses right now is wild, much higher than its ever been. One could say that's because of the age range of my friend group, but I also think it's about the fact that so many of these people have been working from home and saving up piles of money throughout this whole disaster.

Yeah it’s really not been a normal recession

Mortgage interest rates have been insanely low too

I kind of can’t get over my bank account lately tbh. First time I feel like I’ve overbudgeted instead of underbudgeted. I guess we were spending more than I realized on commuting, eating out, and weekend family stuff.

Travel also obv.

how much you got in dere?

So much money spent eating out, buying coffee, commuting, etc.

I feel like I see 10000000000 posts about how "the 1% are making out like bandits while regular people are crushed by the pandemic recession" and I think there needs to be a lot more honesty about how a lot of "regular people" e.g. people in the upper third of the income distribution, people who own houses, etc., whose economic situation is fine and even improved. People like the people on this thread, including me.

lol fuck you. i honestly don't have anything else to say to that kind of self-satisfied garbage. just .. go fuck yourself hon. go fuck yourself and maybe maybe you'll think twice before you congratulate yourself for being well-off, try to lump everyone else who posts in this thread into your bubble and call it "honesty". you fucking turd.

My weekly panic attack really has me feeling #blessed.

xp

sorry for the animosity. you seem like a nice poster and i don't mean to be overly rude.

the reason you see 10000000 posts about regular people being crushed is because that's what's happening, slowly but inexorably - maybe at a less alarming rate than what dramatic tweets might suggest but it is demonstrably what is happening. your post is very "rich people matter too" and i find it wildly offensive! i'm happy that you are doing fine. i'm sure there are others on this thread who are also doing fine. i am doing ok, relatively speaking. but to say that "regular people" (in the upper third of the income distribution!) need more .. what? talk about them? i don't even know. again, "rich people matter too." come on, it's absurd.

i read it more like "it's not just the 1% who are making out like bandits ... maybe it's the 15% ... And the 33% are doing pretty good all considering?" still though ... definitely uh, awkward, to read for those of us who are not in the 33% or have close friends and/or family who are very much nowhere near the 33% ... or just, y'know, really seeing the inequitable nature of American society at one of its ugliest points?

sorry map i really really didn't mean it to come out like that, what i meant to say is better expressed by what sarahell said

Yeah I don't think that was really the point at all, it was more an observation that wealth inequality is manifesting itself in a particular way in this crisis, like clearly the .0001% are getting further from the 1% and the 1% are getting further from the 5%, but the 20% or whatever % of people are in work from home professional jobs also got further away from everyone else.

whatever % of people are in work from home professional jobs also got further away from everyone else.

... there is a wide variety of income levels there though ... like, there are "work from home professional jobs" that pay $20/hr and there are those that pay $400k a year.

sorry map i really really didn't mean it to come out like that, what i meant to say is better expressed by what sarahell said

― Guayaquil (eephus!), Friday, February 26, 2021 3:27 AM (twelve hours ago) bookmarkflaglink

i appreciate that, i went a little off the rails there - sorry about that. i see what you were trying to say. sarahell put it well too.

I am still pissed off about the obvious inequity between the "free money" forgiven PPP loans vs. the taxable unemployment benefits.

Wait, are the forgiven loans really not taxable? I find that hard to believe -- it's almost always taxable when you get a loan forgiven.