- cross-posted to:
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- cross-posted to:
- hackernews@lemmy.smeargle.fans
If landlords can’t pay back loans on office buildings, the lenders will suffer. Some banks are trying to avoid that fate.
Hard times are likely ahead for a lot of people. Mind your expenses and plan to save where possible just in case. Apologies for having a doomer outlook; I’m very cynical about capitalism, especially in the USA.
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lol how tight would it be if I could buy my own mortgages off of the bank for a discount
You joke but when you default on a loan they will eventually offer to settle at a lower amount
At the expense of your credit score tanking and never being able to recover.
Your credit will eventually recover, and you already have a house!
Oh no you get a lower score in a stupid game
Commercial real estate, likely a restructuring due to folks not returning to the office. Been a downward trend since before Covid. Initial downturn was corps leaving downtowns, minor spike in 2022 and trending south.
Remodel as residential?
No one wants to take the upfront cost of renovation. Corporate buildings aren’t an easy conversion into normal apartments. Plumbing especially is very different.
I’ve seen estimates that it’s frequently cheaper to demolish the building and build a new one.
That may be true depending on the extent of remodeling necessary. Do that and make it a green building with modern heat pump and you could make a profit in a few years. But they want the profit now
It really just isn’t possible for most ooffice buildings. Think about how many bathrooms/kitchenettes are on a floor of any office building. You would have to likely double or triple that number to convert to housing, which is an absolutely insane and expensive prospect that would require gutting the entire building and resoing the entire plumbing and electric systems. It’s chraper to jist tear the fuckers down and build something made for condos/apartments.
Remodel as residential?
That’s expensive and time consuming.
I’ve seen it done a couple of times and it took way longer than just bulldozing and rebuilding. But that would have been even more expensive.
Remodel as residential?
That’s expensive and time consuming.
I’ve seen it done a couple of times and it took way longer than just bulldozing and rebuilding. But that would have been even more expensive.
What’s hilarious is some of the crisis- at least in the commercial real estate space- was created by the banks.
when you take out a loan for commercial real estate- like office buildings and such like- it’s somewhat abnormal for the building to be monolithic in tenancy- most spaces are a leased out like apartments. The glaring exceptions to this are mega-corporate HQ’s like Amazon’s or Google’s or Apple’s.
The value of the property is then usually described by minimum lease per square foot. The owners/property management are then locked into keeping rates above that minimum by the lender as terms on the loans. When there was a comercial real estate boom in the late teens to early 2020’s… the value of commercial real estate skyrocketed… and so did this minimum.
when covid hit, the values plummeted and continue to fall. Demand has changed and fallen with remote work… and the rates are too high because all the corporate places dumped their offices and now the people wanting offices are more the start ups or professional types that don’t need massive amounts of space, and don’t want to or can’t spend 30-50/sqrft/month.
the landlords are going to go tits up because everybody always assumed property value would go up.
*Part of the change in how we use office spaces is now being more “social”- with office buildings adding in features you might expect to see in apartments; things like gyms, seating/booths/meeting spaces in lobbies, tenant lounges; rooftop patios, which also chews into the amount of revenue because that all takes up space.
Tough situation for banks and people working inside them. For those clamoring that it is 2008 all over again, it is, because the way markets and companies work has not changed (and a bank is just another type of company).
Suppose you are a chief risk officer of one of those banks before Covid hit. You have been hired by the CEO so you need to play with the CEO to advance his/her agenda. Other banks are lending more and more to commercial real estate developers as there is demand and they are paying their loans on time. Your own bank’s board of directors and CEO are putting pressure to join the market and lend more to those property developers otherwise you own bank’s profit will look lower than the competition. You know that, by doing so, the concentration of loans in that sector will become quite high but, if you keep resisting, the CEO and/or the board will find someone more amenable who doesn’t seem to panic when every other bank is making money. Then you cave in. You decide to approve more business going to those loans although you caveat that this might exceed risk appetite and gets the board and CEO to formally approve it as well.
Now the bank is proudly going with the flow and investors are not complaining anymore.
the CRO isn’t there to stop risk, in the same way that HR/ethics-and-compliance people aren’t there to protect people.
this is true. but regulators still hold CROs accountable for that .
Sucks to be a CRO, heh.
Why are you paraphrasing the article like this is your own personal analysis?
Because I didn’t read the article.
NYT’s has paywalls for days… I deal with a lot of property managers and this is more or less what they’re talking about. the banks could ease the problem by waiving the terms, but they’re electing not to.
The big question is : Whereto are they dumping toxic loans? I would not put it pst some assholes to sell such “products” off to unassuming private shareholders as a “wonderful investement in business property” for their retirement…
Probably selling them to our corrupt government… So we can all be left holding the bag
I mean, it’s proven financial strategy. Money is just a number to rich people and if you need more the government will just give it to you.
Oh they don’t need to do that, we’ve already determined that some companies don’t have to suffer the consequences of their own actions because they’re “tOo BiG tO fAiL” so society has to suffer the consequences.
Just remember: when they win, they win. When they lose we lose and they still win.
Our form of capitalism is a fucking joke. Socialism for the wealthy owners and rugged individualism for the poors.
Yep. Biggest disappointment about the 2008 crisis was that all the people who caused it were able to go back to work and start doing it all over again
I say, if you crash the global economy, you ought to be relegated to fast food service for the rest of your life.
I was wondering this same thing. Who would take on a loan that a bank deems unprofitable? Is this like turning the loan over to a loan shark and the shark has means to ensure payment that banks don’t due to regulations? Are they selling to the govn’t? Either option is not good.
Mind your expenses and plan to save where possible just in case
So… like always? Nothing changed. We are already fucked.
Please save, and put your money in the bank.
You say that like somebody who’s never had to choose between rent and food before.
I’m saying that the banks, who appear to be struggling, would like you to save your money by putting it in their system. So they may use it.
I’m not making any other judgement.
That said, no clue where the person I replied to got their apparent quote from, as it does not appear in the article itself.
What’s that? Rich fuckers are worried about being less rich? However will I be able to sleep at night.
They will never be less rich.
You will sleep after paying taxes for their bailouts.
Anyone know how to prepare for 2008 part 2?
Wait until 2012 part 2 and BUY BUY BUY
Lol yeah but like with what capital? I expect stocks to crash with it. Do I just save in cds?
Cash is king.
Problem is cash is not inflation proof. Not sure if I should horde gold. I bet crypto will take a hit too.
I hear abortion medication could be pretty valuable in November.
And toilet paper
ROFL let me get the pallets in my horde.
And toilet paper
I’m thinking porcelain sheet for the streets.
Ah pushing illegal drugs.
Everything illegal is bad right?
Probably need to diversify.
They say that but what didn’t take a hit?
Hey, I’ve seen this one!
What do you mean you’ve seen this? It’s brand new.
Nah, it’s a repost from late 2007.
Sorry, I mean a repeat of late 2007, the fourth or fifth “once in a lifetime economic crisis” for millennials that will somehow magically end with billionaires owning an even larger percentage of the GDP.
“How could this possibly happen, again, again, again, again,” will cry the
economistsbillionaire simps.What’s a repost?
Are you back from the future or something?
They’re just pointing out that history is repeating itself because we learned nothing from 2008
My bad, I should have put a “/s” on all my comments in this thread.
Those lines are directly out of a movie. Except they say rerun instead of repost. It just seemed that the OP was driving one of these:
If it makes you feel any better, I liked your joke and even read it in raccoon hat kid’s voice.
You know what, that does make me feel better.
But I guess those jokes stunk like manure! I hate manure!
I’ll take the woosh. We’ll played.
Isn’t this just going to be “great recession 2 office building bugaloo?”
Part 1 was the great recession caused by sub prime loaning assholes and combined debt packages.
Similar story different players apparently…
deleted by creator
Same reason why banks kept giving loans to Trump. He had so much debt that their best option for a long time was to just give him more money in the hopes he could use it to earn enough to repay all the loans. Sunk-cost fallacy at the major financial level.
“if you owe the bank $100 that’s your problem, if you owe the bank $932,514,634 that’s their problem.”
If you are reading this… it is clearly not “quietly” lol
The hero we all needed but don’t deserve.
You can too, just paste the article URL into archive.is
This is a gift article so no need for archive.
Some folks have been calling this for a while. The Bigger Short
Now wheeeeere have I seen this before…? Hmmmmmmm…
Largest print outlet in the US: “look at these guys being quiet”
Can they dump mine please?
Nope. Bankruptcy only exists for people who will never need it.
