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.

  • Bye@lemmy.world
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    6 months ago

    lol how tight would it be if I could buy my own mortgages off of the bank for a discount

  • aodhsishaj@lemmy.world
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    6 months ago

    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.

      • phdepressed@sh.itjust.works
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        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.

        • Cryophilia@lemmy.world
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          6 months ago

          I’ve seen estimates that it’s frequently cheaper to demolish the building and build a new one.

          • phdepressed@sh.itjust.works
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            6 months ago

            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

      • BakerBagel@midwest.social
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        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.

      • kent_eh@lemmy.ca
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        6 months ago

        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.

      • kent_eh@lemmy.ca
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        6 months ago

        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.

  • FuglyDuck@lemmy.world
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    6 months ago

    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.

    • clutchtwopointzero@lemmy.world
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      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.

    • aramis87@fedia.io
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      6 months ago

      Why are you paraphrasing the article like this is your own personal analysis?

      • FuglyDuck@lemmy.world
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        6 months ago

        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.

  • Treczoks@lemmy.world
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    6 months ago

    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…

    • Wes4Humanity@lemm.ee
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      6 months ago

      Probably selling them to our corrupt government… So we can all be left holding the bag

      • BeMoreCareful@lemmy.world
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        6 months ago

        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.

      • Asafum@feddit.nl
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        6 months ago

        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.

        • Bytemeister@lemmy.world
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          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.

    • r0ertel@lemmy.world
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      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.

  • Metz@lemmy.world
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    6 months ago

    Mind your expenses and plan to save where possible just in case

    So… like always? Nothing changed. We are already fucked.

      • Etterra@lemmy.world
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        6 months ago

        You say that like somebody who’s never had to choose between rent and food before.

        • tb_@lemmy.world
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          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.

  • Etterra@lemmy.world
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    6 months ago

    What’s that? Rich fuckers are worried about being less rich? However will I be able to sleep at night.

      • blusterydayve26@midwest.social
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        6 months ago

        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 economists billionaire simps.

          • Glytch@lemmy.world
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            6 months ago

            They’re just pointing out that history is repeating itself because we learned nothing from 2008

            • LilDumpy@lemmy.world
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              6 months ago

              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:

              Image

      • Asafum@feddit.nl
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        6 months ago

        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…

  • Zess@lemmy.world
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    6 months ago

    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.

    • Asafum@feddit.nl
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      6 months ago

      “if you owe the bank $100 that’s your problem, if you owe the bank $932,514,634 that’s their problem.”

  • sunzu@kbin.run
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    6 months ago

    If you are reading this… it is clearly not “quietly” lol