30% of U.S. office buildings, valued at $1.1T, are obsolete

[jtown,man]

This is brought to you by the whiners who refuse to go back to the office and Covid fanatics who are scared of their shadow.


Who else to blame?

[Crawford]

You obviously don't have kids, or interests outside of the office.

WFH and hybrid work are the best thing for families since forever. It doesn't work for all industries, but it's generally huge for efficiency and workforce retention. We have a superstar colleague who we retained soley due to family-friendly policies that allow some degree of remote work (she has young twins).

Go ahead and start your own company, with no worker-friendly options, and see how your recruitment fares. You'll have practically no women, for starters.

[edale]

I've noticed there's a weird, somewhat smug attitude among some Rust Belters about office conversions. As if the rest of the country is just waking up to what they've been smartly doing for years. Yes, there have been a lot of office to residential conversions in cities like Detroit, Cleveland, and Cincinnati. But as Steely notes, this is hardly unique to those cities. They might have gotten into the game a hair earlier just due to the fact that their downtowns declined more and earlier than cities in other parts of the country, but just about every American city with historic skyscrapers has gotten into the residential conversion game, and not just since the pandemic.

Los Angeles passed its adaptive reuse ordinance in 1999 which led to the residential boom of the Historic Core. 12,000 units have been created in the Historic Core alone through that ordinance. Was Cleveland doing much residential conversion prior to 2000? I don't know the answer for sure, but I don't really think so. At least not on a level that would be significant. This idea that the Rust Belt could teach a thing or two to the rest of the country about residential conversions seems odd to me. What is there to teach? Unless the lesson is to totally blow up your economy so that skyscrapers are completely devalued and able to be sold to developers for peanuts. Cleveland's second tallest building (maybe third behind Terminal Tower, not sure), the 45 story, 600+ foot BP tower just sold for $54 million despite having an assessed value of $137 million. Even with massive devaluation occurring in coastal cities, huge skyscrapers aren't going to be selling for $54 million.

[Crawford]

Office conversions aren't really a municipal bragging point. It means the office space is dead in the water. A downtown with mass conversions is one where owners have no hope of recovery.

I'm not against office conversions, but when every other building is being converted, that's actually a really bad sign. Historic conversions can be pretty cool, but when 70's-era stuff is being mass-converted, that's generally not good.

[jmecklenborg]

Originally Posted by jtown,man

This is brought to you by the whiners who refuse to go back to the office and Covid fanatics who are scared of their shadow.


Who else to blame?

People "working from home" are mostly laying on the couch watching youtube podcasts about depressing subjects and occasionally checking their laptops to see if they need to respond to something.

A walk around most CBD's is depressing. There are hundreds of people living in buildings where people used to work, but they don't seem to ever go outside other than to maybe walk their dog. Many of the buildings have parking garages, meaning they're able to slither in and out of the CBD without showing their faces on the sidewalks.

[iheartthed]

Originally Posted by jtown,man

This is brought to you by the whiners who refuse to go back to the office and Covid fanatics who are scared of their shadow.


Who else to blame?

CEOs that realized their businesses can run just fine without everyone being in the same building 8 hours per day, 5 days per week. CFOs that don't want to pay for office space if the company does need it. Managers that don't want to commute to an office anymore than anyone else. Cloud computing services.

[Steely Dan]

Originally Posted by Crawford

Go ahead and start your own company, with no worker-friendly options, and see how your recruitment fares. You'll have practically no women, for starters.

I work for an architecture firm that is 100% in office down in the loop every workday.

I don't mind because:

A. Architecture/design is such an inherently collaborative process that it absolutely works better for us to physically be in the same space together every day. That's just my opinion, obviously, but I've worked architecture from both sides, so it's not an uninformed one.

B. I fucking hated WFH when I did it during the pandemic. It sent me into the worst depression I've ever known. Getting a new job that "forces" me to leave my house everyday and go somewhere else to get my shit done has been a freaking godsend! I guess I'm just way too highly compartmentalized to mix business with pleasure.


But tellingly, and to your last point, I have zero female co-workers, so....... yeah...... there is that......


But architecture tends to be a bit of a sausage fest profession anyway.

[homebucket]

Most of the people I know (they also tend to be younger, female, and ethnically diverse than folks on here) won't even consider applying for a position unless there is at least a hybrid schedule, and full WFH is highly preferred if possible. The ones that tend to push for full RTO are older, male, white upper management. Age and gender are probably the biggest drivers here.

[LAsam]

The Real Estate Nightmare Unfolding in Downtown St. Louis

https://www.wsj.com/real-estate/comm...9aes2uj17plg1j

Cities such as San Francisco and Chicago are trying to save their downtown office districts from spiraling into a doom loop. St. Louis is already trapped in one.

As offices sit empty, shops and restaurants close and abandoned buildings become voids that suck the life out of the streets around them. Locals often find boarded-up buildings depressing and empty sidewalks scary. So even fewer people commute downtown.

This self-reinforcing cycle accelerated in recent years as the pandemic emptied offices. St. Louis’s central business district had the steepest drop in foot traffic of 66 major North American cities between the start of the pandemic and last summer, according to the University of Toronto’s School of Cities. Traffic has improved some in the past 12 months, but at a slower rate than many Midwestern cities.

The price for the AT&T Tower, three blocks from the Railway Exchange, was a sliver of the $205 million it sold for in 2006. Its value has been falling for years. In 2022, it changed hands for just $4 million.

[Crawford]

Originally Posted by homebucket

Most of the people I know (they also tend to be younger, female, and ethnically diverse than folks on here) won't even consider applying for a position unless there is at least a hybrid schedule, and full WFH is highly preferred if possible. The ones that tend to push for full RTO are older, male, white upper management. Age and gender are probably the biggest drivers here.

This is my general sense. Women, especially younger women, and nonwhite women, want at least hybrid flex, whether or not they have children. Not a SSP demo.

My wife doesn't even respond to recruiters if there aren't hybrid options. There is no salary/benefits level that would get her in an office 5 days a week. And she isn't watching Youtube videos all day. She frequently works till 10, and is answering emails 24/7.

[homebucket]

Originally Posted by edale

This idea that the Rust Belt could teach a thing or two to the rest of the country about residential conversions seems odd to me. What is there to teach? Unless the lesson is to totally blow up your economy so that skyscrapers are completely devalued and able to be sold to developers for peanuts. Cleveland's second tallest building (maybe third behind Terminal Tower, not sure), the 45 story, 600+ foot BP tower just sold for $54 million despite having an assessed value of $137 million. Even with massive devaluation occurring in coastal cities, huge skyscrapers aren't going to be selling for $54 million.

Originally Posted by Crawford

Office conversions aren't really a municipal bragging point. It means the office space is dead in the water. A downtown with mass conversions is one where owners have no hope of recovery.

Agreed.

[Nouvellecosse]

Originally Posted by jtown,man

This is brought to you by the whiners who refuse to go back to the office and Covid fanatics who are scared of their shadow.


Who else to blame?

Whiners...

I find it so disconcerting to see the rise of this type of mindset in the US. At one time the US mantra was freedom and individualism, but increasingly I see people frame it as some type of wrong-doing to exercise control of one's own life. Someone working a standard full time, 40 hr per week job spends over 1/3 of their waking hours at work. Yet exercising any control over how they spend 1/3 of their life is wrong? The ideal is now to simply do whatever one is told? Not to mention that getting to/from work and preparing to work in public can take hours more a week - or even per day - of one's personal time for which they are not getting paid.

There are also countless people who consider vaccine mandates, mask requirements, etc. to be against freedom and bodily autonomy. They feel it's ok or even good to treat these as personal choices. Yet exercising personal bodily autonomy on how much risk you want to expose yourself to not ok, and is derided as fear and fanaticism when at one time that type of individualism and freedom would have been celebrated.

[Nouvellecosse]

Originally Posted by Crawford

Office conversions aren't really a municipal bragging point. It means the office space is dead in the water. A downtown with mass conversions is one where owners have no hope of recovery.

I'm not against office conversions, but when every other building is being converted, that's actually a really bad sign. Historic conversions can be pretty cool, but when 70's-era stuff is being mass-converted, that's generally not good.

I think it depends how much new construction there is and whether or not the total office inventory is growing. If a market just happens to demand more premium spaces with the modern amenities which are provided by new builds, that isn't necessarily a bad thing. But if it's a market where conversions are happening just because total demand is dropping and vacancy is rising then it isn't great. But having enough residential demand to make such conversions feasible is still something at least.

[Crawford]

Originally Posted by LAsam

The Real Estate Nightmare Unfolding in Downtown St. Louis

https://www.wsj.com/real-estate/comm...9aes2uj17plg1j

I'm sympathetic to this and realize WFH is generally bad for American city centers. But you aren't going to put this genie back in the bottle, and cities are going to have to adapt.

And downtown STL has problems far beyond WFH. Most healthier city centers are now semi-back to normal.

[Steely Dan]

Originally Posted by Nouvellecosse

At one time the US mantra was freedom and individualism

I think a lot of that is just the self-created mythology we like to tell ourselves.

In reality, I think "shut up and get back to work" sums up America more accurately.


Fucking puritans ......

[Nouvellecosse]

^ Yes I think you're probably right. A lot of it seems to basically translate to, "Freedom is when I'm free to make decisions for myself, and when others are free to do what I've decided is best for them."

Aka, It's a noble demonstration of autonomy for me to make a decision I agree with with, while it's a cowardly act of laziness or fanaticism for others to make decisions i disagree with.

Unfortunately, hypocrisy is in no way limited to a subset of the US. It can be found in cultures all across the globe.

[Crawford]

Reading that WSJ article, STL now might have the most troubled core of any major legacy city. It sounds really bad. Almost a Johannesburg type situation, where the core is just vacated to squatters. The largest office building in STL just sold for the same price as an upscale 2 bedroom apartment in a major world city.

I have to give credit to Detroit leadership. While the city is still super-troubled, and the most decayed of any major city, core Detroit sounds like Manhattan or Paris compared to core STL. Detroit, Cleveland, Buffalo, etc. have vastly healthier cores now.

[iheartthed]

From the WSJ article:

The price for the AT&T Tower, three blocks from the Railway Exchange, was a sliver of the $205 million it sold for in 2006. Its value has been falling for years. In 2022, it changed hands for just $4 million.

A building losing 98% of its value in less than 20 years is about more than just the pandemic. That is absolutely bonkers.

[edale]

Originally Posted by Crawford

Reading that WSJ article, STL now might have the most troubled core of any major legacy city. It sounds really bad. Almost a Johannesburg type situation, where the core is just vacated to squatters. The largest office building in STL just sold for the same price as an upscale 2 bedroom apartment in a major world city.

I have to give credit to Detroit leadership. While the city is still super-troubled, and the most decayed of any major city, core Detroit sounds like Manhattan or Paris compared to core STL. Detroit, Cleveland, Buffalo, etc. have vastly healthier cores now.

Yeah, downtown STL seems to be much worse off than its Rust Belt peers. It's been 10 years or so since I've been to St. Louis, but even then, downtown was pretty dead. There are some really impressive urban neighborhoods in STL that are growing and sprouting new development, but downtown just continues to wither. I know we've discussed this before, but I think Clayton is a big reason for DT STL's woes. Also, the north side of STL and the communities just across the river from downtown look like they were bombed, and downtown is pretty inconvenient and not central for most of the region. Still, it's a bit puzzling how it can be so much worse off than other cities that have experienced big challenges. You're correct that Downtown Detroit is absolutely killing it, and Downtown Cleveland, while not the most vibrant city core, is still making huge strides and seeing a lot of new development.

[iheartthed]

It’s the cities far from the coasts that are suffering most. Six of the 10 U.S. office districts with the steepest drop in foot traffic between 2019 and mid-2023 are in the Midwest, according to the University of Toronto.

As in other Midwestern cities, the St. Louis office district has suffered a slow demise for decades. Population loss, competition from newer offices in the suburbs and failed urban planning left behind a glut of dreary, empty buildings and wide, dangerous roads. The business district has few apartments. There are some tourists, but not enough to make up for missing office workers.

“It’s a classic chicken and egg kind of deal,” said Glenn MacDonald, a professor of economics at Washington University in St. Louis’s Olin Business School. “People don’t go there because there’s nothing to do. There’s nothing to do because people don’t go there.”

Glad we're finally having this discussion about Rust Belt cities, and we need to have it a lot more. Politicians making bad planning decisions gets hardly any attention as a factor in urban decline, when it's probably one of the single biggest factors.