Too Many Office Buildings are 'Literally Obsolete,' Says Canyon's Friedman
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- เผยแพร่เมื่อ 4 ต.ค. 2024
- Canyon Partners Co-CEO, Co-Founder, and Co-Chairman Josh Friedman discusses the current market for distressed real estate debt. In an excerpt of "Bloomberg Wealth with David Rubenstein," Friedman describes a portion of the office building stock as "literally obsolete". This interview was recorded May 28 in New York.
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Just a few years ago, i interviewed for a job that was downtown (commute, cruddy parking, etc). That sucks about 1.5 - 2.0 hours extra out of your day. Soon after that I found a decent job in the outskirts of the city - nearby, no traffic, parking right outside the building.
Why would anyone want to work in those office buildings at all? Ever?
As someone who has worked in them for almost two decades and recently got out of it, I will tell you that it is sickening to enter some of them. The HVAC systems circulate stale air and illness all day long. No such thing as fresh air. Office jobs suck the life out of you in many ways.
@@TBonerton Hi T - i also worked in similar offices for decades. In the last one, the air units were right above the floating ceiling. We looked up there. NONE of them had filters on them. Basically they were recycling cruddy air and human skin particles all day....just like you said.
There's no need to work in an office anymore. No one wants to get up two hours early to go somewhere far from home and repeat that at the end of the day.
An hour is not bad at all Americans so spoiled
@@10MM-MAGAMAN-420One hour a day traveling is nothing but if you are in a big city the commute is much longer than that. Try three or four hours a day.
Companies led to their own demise on this. No one asked for open concept offices, being spied on all day, glass walls, playing musical seats and just plain awkward and uncomfortable environments. Cubicles were even better than what we have now and that is saying something because those s*cked too
I had a cubicle with a floor-to-ceiling window overlooking New York Harbor with a view of the Statue of Liberty. It sucked less than most cubicles ...
So we are stuck with these buildings for now. But in the end many are just tear downs. Thank you for speaking some truth
That's not truth, just foolish policy.
@@etchedinstone7562Why is that foolish policy?
We? We are stuck? What’re you talking about?
@@1525boy LOL.... they create the problems they tell us they need to sell us the solutions. and you ask why is that foolish policy? lol LOL lol
@@SRofKingsbecause they won’t turn the properties/land into (affordable) housing. 💁♂️
Friedman has a first-rate tailor and shirtmaker. The collar on that shirt is perfection.
Ever since I can remember I been poppin my collah
He can dress well with all his stolen wealth. So happy your morals are that pathetic.
And those glasses! One classy dude for sure
Im a semi-professional tailor of men's historic suits [1890 - 1940] - I was thinking the same. Absolute perfection, brass collar stiffeners in the shirt
What are brass collar stiffeners?
Any estimated guesses from either of you what brands he's wearing?
Or assigning a dollar amount to shirt, suit, tie, etc.?
If only there was a major housing shortage or something.
But there isn't. They've got units sandbagged coast to coast so that they can keep the rent sky high. And they are using software to do it. Being investigated as a conspiracy by the feds as we speak.
You can’t convert office space to residential easily. There’s many things you gotta do to make an office livable but let’s just use water as an example. In an apartment building, every unit needs a shower, sink, toilet, kitchen sink, maybe even a washer. Think about how much water an office floor uses. Maybe 4-5 sinks? A few toilets? Commercial buildings therefore aren’t built to handle water demands of residential. Now multiply that across all areas
@@jkacvbhijfn Its expensive but not impossible, they're converting old factories in my town into apartments, takes a couple years to gut and plumb and add AC and turn into a living space.
@@jkacvbhijfn Yes plumbing. Laying a few pipes is real high tech business..
They're like giant VHS tapes
I 🤔 wonder how many different state pension funds across the country are holding that 20% obsolete CRE loans 💸
Very few. The preponderance of CRE loans are on regional bank balance sheets.
Insurance companies also maintain ~15% allocations to CRE loans, but have shifted away from office and retail the last few years.
The remainder of CRE loans go to conduit securitizations, and pensions generally have very low allocations to CMBS.
Why would anybody use buildings in expensive cities as data centers? Makes zero sense.
Very very good networking + electricity infrastructure very close to consumers. So if the rent is cheap due to the office bust, why not!
There are certain places where networking latency costs money - ie the further the data center is away the more money they lose. Wall Street is an example of this.
@@calculuscondensed812 The problem is rent is only "cheap" until they find out you are in place and making a profit.
It is where the IT professionals are.
Look at the costs of data centers that Microsoft and others are building in the midwest. Microsoft is building their 6th in Des Moines, with a single 1.8 million square foot center costing over a billion dollars. So it makes sense if they can buy these buildings at a fractionr of their original value. And I'm sure these cities and states would be offering insane incentives to these companies to fill otherwise obsolete high rises.
Malls, strip malls, office buildings, these things were all products of bad zoning and public planning and they're all falling apart.
You don't need to add "literally", you can just say they're "obsolete" and it would mean what you intend it to mean.
Two of the most overused words are literally and existential.
This election is literally existential
@@maxmusdan2484 I would add "I feel".
What I don't understand is how these buildings will survive the AI transition. Are these buildings compatible with AI? Will they be able to integrate AGI? I don't see how AI can get through the doors, it's really big from what I've heard.
😂 nice
I asked an AI how to solve this problem for AI, it said AI could solve it.
No one predicted the power of old daddy internet.
Obsolete ... beyond bankruptcy.
lol. the investment is not going from billions into zero but into debt by mean of negative balance. oh shyt lol
It’s not isolated to office: many apartment buildings in the city are obsolete. Doesn’t stop them clearing at the world’s highest rents.
Yes……we have condos for half a million dollars and no jobs that pay enough to afford them……..so they are empty…….
Gotta love a throwaway society on this sort of scale...
Technology changed,, that changed society. These cities were established during the horse and buggy days, ,, we adapted new technology to old buildings but at some point, ,, there's a better way of doing things and people abandon opsolet tools.
Now we have fiber optics and 5g allowing white collar jobs to be done anywhere. If managers bitch, than make an mmrpg of an office and tell them you've been working from him me since 1st grade...it was called homework
We are on the cusp of a giant change. Politically. Economically. Socially.
All these have reset or are about to reset.
Even now, Capital is repositioning.
Billions of people either are stranded or soon will be.
Sigh …
So a glut of office space in areas with housing shortages?
what a puzzler! there must be like *no* solution to a problem that complicated.
You going to install a shower in your cubicle?
Maybe if they charged rent someone could afford they could turn them into apartments but nooo they envision “luxury flats” for $5000 a month for something that looks like exactly what it was. An office. Not a home.
The taxes and rules for apartments are way different and office spaces are like tax havens. The government helped protect renters but also has helped make it way more expensive for renters.
Its because every company wants to maximize profit on paper (but not for real). So they target only rich people.
Its like when the ceo of McDonalds said he sees them as “a luxury brand” when they were jacking up prices. Its stupid and they always lose more than if they had a more realistic strategy.
@@billyj.causeyvideoguy7361 true. But the CEO of Don's really said something that stupid? I only visit Culver's now.
They're 5000 dollar apartments to avoid the bank taking the properties away, if they became reasonable then they're suddenly not was as much which defaults a loan. They can sit empty due to the tax code.
They're not zoned residential. They don't meet codes that define what a home is and all the safety regs that go with it.
Too many CEOs pay themselves vs investing in their own talent and infrastructure
Think there is a major price reset coming for the urban office markets in the US??
Recall the domino effect in rents that occurred in the early 90’s?
Need to start converting commercial to residential.
I have a bank holding a property next to me that was foreclosed nearly two years ago and will not ease the price on the auction for a reserve price, so there it sits boarded up month after month.
But they hire people to keep up the property creating a job.
Working in cities is literally obsolete. Modern communications has negated the need to work in large cities. Until the banks acknowledge the fact that, but for a tiny proportion of the population, no one wants to live or work in a city, this problem will get worse.
You are assuming that someone who doesn’t want to work in a city also doesn’t want to live there. I think plenty of people would love to live in a city simply because they want to enjoy amenities and social opportunities not offered at such large a scale by suburbs and smaller towns.
@@italianbeans877 I acknowledged that tiny proportion of the population. Learn to cook. There. Now even that population doesn't want to live there.
I love living in a city but hate working in one, but yeah you’re right about the banks
Hm....wonder if giving people actual offices instead of cubes will lure them back... probably too late.
I doubt it would make that much of a difference at this point. Most people want to work from home.
Can they not renovate some of these office buildings and resell them as condominiums?
CRE are overvalued, SFH are undervalued, simple as that
Vast swaths of cities lying empty for years because it’s easier for the bank’s cap tables. Behold the efficiency of the free market! /s
It’s not a free market
Bailing out SVB is a indicator of something other then free market
great summary!
You said nothing. Waffle.
Housing for those who need it?
I didn't see his last name was "Friedman" before I thought,,.........geez, this guy looks just like Milton!!!
That's why the businesses should have paid taxes to build public transportation. The commute is why people don't want to go in.
The crime! The crime is why I wouldn’t ever go into any city right now. Public transportation?! You crazy?!😮
Office building is the new Compact Disc.
Haha i wonder how many was considered “obsolete”say three years back
3% interest rates cover up a lot.
Technology and the internet have changed the game. America never thought those office towers in big cities would go vacant and unused like they are now, a person can do and run an entire business or department on a tablet. The rescue plan would be to convert most of these office towers into living spaces.
Owners will hold these buildings forever in hopes of a big payday when something turns. A lot of stuff that got redeveloped in Times Square in the '90's had been sitting for 30 or 40 years doing very little. Anything in Manhattan "should" be worth a huge amount of money simply since it's in Manhattan, so they wait, if necessary for generations. Only cure would be establishment of an alternative financial center elsewhere in the country, but since the big shots like to hang out with each other in NYC there's a huge part of this that's driven by culture regardless of the economics. There's only so much Manhattan to go around, and if you won't pay, you can't play.
Tax the empty structures.
Miami.
Turn them into apartments. It's a shame there are so many homeless because apartments are unaffordable. And people like this are part of the problem!
A lot of office buildings, but not all, are difficult at best to convert into residential units. This is due mainly to the depth of the floor plate which is great for offices but not so great for residential units that require windows and daylight.
who will pay for those apartments every month?
@@TurnkeyTrading Tenants.
Housing for the homeless? Do the homeless people pay for that? Or do I?
@@Rubbernecker I doubt that you that much in taxes. What I am talking about, is MARKET rage units in converted high-rise office buildings. Comprehende.? I know that FOX News has skewed your brain. Sorry about that but it is your problem not mine. You see, MAGA people like you don't mind getting government handouts but the moment a person of color does, all hell breaks loose. This why we don't have nice things in this country. Racists like you way back in the 1960's. Public pools in many places because they had to be integrated. The racists have none of that thus NO one could have a public pool. That his why we have country clubs and private day schools. You MAGA people will never ever learn.
...as opposed to figuratively?
Not figuratively, literally. Literally, I cant
Can't these old office buildings be modified to turn them into apartment buildings?
People will tell you no. Its too expensive. Cheaper to tear down and rebuild. If you can convince people to live in a place where they have to share bathroom facilities then you could reconfigure any office building into an apartment complex.
@@peatyxxjxxx1494 And the other issue is that larger office buildings are too wide/deep, which means some of the apartments would have barely any (or no) natural light. You'd have to cut a big hole through the center of the building :p
It's expensive and would only make sense if catered to the wealthy. So wouldn't help the middle and working class
No building has negative structural value for the reasons he describes in NYC without government interference. If there were no restrictions on residential conversion, it wouldn't take much to install some kitchens and bathrooms and call it an apartment building. Even at half the median rent in NYC due to bad floor plans and such, that would still make a really high yield per square foot that would create a huge return on capital for the cost of conversion. The only explanation for that not happening is that the government is getting in the way.
Kinda simplistic view. It’s not as easy as adding a few bathrooms. There are residential fire codes, square footage requirements, laundry rooms, structural changes, amenities that are expected to attract buyers, etc. And many folks don’t want to live in Downtown San Francisco or NYC’s Financial District as there are no supermarkets, entertainment venues, etc.
@@edwardp3502 You could try understanding it before calling it simplistic. Half of what you said supports my point, where you list how the government gets in the way with things like fire codes, square footage requirements, etc. Everything else you list pertains to the attractiveness of the units that would be created by such bare bones conversions, which I addressed by stating they would rent well under the going rates for similar sized units. If I had a middle income in NYC and I could save over $1000 a month by dealing with all the inconveniences you said, I would gladly do so.
@@idwtgymn I’m guessing people in the real estate business can look at the cost of conversion and charging less rent and figure out if there is a sufficient roi. As for the government getting out of the way, i.e. relaxing fire codes, we live in the 21st century, not the 19th.
@@miketuttle9319 People like you are the problem. If you are opposed to relaxing fire codes when you don't even know anything about the actual fire safety situation, you are ignorantly getting in the way because someone said the word "safety" and you shut off your brain. Any one of those buildings as it currently stands is 10 times as fire safe as a regular house, blocking use of the property drives up the cost of housing for no good reason and so makes everyones' lives worse. That is what your mindless adhearance to the government every time they say "safety" accomplishes.
@@idwtgymn
The government is always getting in the way with silly things like rules to help people from burning alive in case there’s an accident.
A reckoning is coming.
Is it safe? Is it secret?
…and it will be ugly, making covidiocy seem like nice times in retrospect.
Yep- RATES Yuck... Grandmother had inheritied an appartment with 2 rooms with close to $30,000.00 rates to pay per year... don't even understand how it was sold.
secondly imagine iF you owned a Whole flood! and that half of it was opened like a veranda- for plants or kitchen/garden which water comes down from the last dude showering or kitchen excess... Owner could open his place a restorant once a week, or retail or entertain.. Could Own Great Artworks or have a work space... Why are we building smaller and smaller cages, with narrow corridors... even why dont people build homes with Masssive strength roof, so that they can sell their roof for somebody else to develop their home... or else just build underground or else just have a tent on a few sqmeter of owned land in the city.. WOwowo
Good points. Buildings erected in the 1890s and early 1900s were woefully outdated by the 1960s. Office buildings erected 60 years ago are just as old and obsolete. They were built for a very different market that couldn’t anticipate the needs of businesses in the 2020s.
... or even earlier. The lifecycle of a NYC office building is notoriously short.
Outdated means nothing !
@@LetomDeCambrai Outdated means not competitive !
@@LetomDeCambrai It does if you want to run a modern business and make money.
At least the older buildings that you alluded to can be converted to residential housing.
Looks like Larry Silverstein was ahead of everyone when he decided to pull his towers 😂
Go ahead, that top floor is pancaking, so "work your way down" that 'capitalization structure'.
The words they use never change.
There’s been stupid amounts of unoccupied offices for decades because NOT RENTING is great for loans (collateral) as the buildings retain their high values from the last renters who rented.
Is this supposed to explain the vacancy rate for business space in NYC? The building is obsolete?
I think that term is related to the repurposing of them.
I prefer to call them a diminished commodity as renters have so many other suitable choices.
@@wjatube No not entirely according to what he said. He's blaming the layout of the space as part of the cause as to why business don't want to rent. That's a total misreading of what is actually happening.
Lol I wonder what the copper and steel of a skyscraper is worth these days.
6 cents a pound for steel and copper anywhere from $2.50 to $3.50 a pound (copper is a commodity, it goes up and down on a daily basis). As a building owner get what you can before the wrecking company comes (the wrecking company gets their estimated fee (bid ) plus all the scrap metal they separate). I just had one torn down and leasing the land so Chase Bank can build another branch. You couldn’t give me a C office building today.
Yes but what about all that asbestos.
@@SusiesRepeat hmmmm well if they were built after the 70s? ... I think you're good. If they were built before the 80s maybe they already performed the removal. But definitely something to watch out for..
Low ceilings? Really? Low ceilings!?
Some of those buildings should be turned into health clinics and clinics.
Schools,malls and apartments.
Why?
Indeed there is a shortage of all of those. How about some low income housing and get some of those people off the streets maybe.
Why not just turn them into office buildings?
NYC and maybe San Francisco are the only two cities where high rise makes sense. Everywhere else it's just ego.
Imagine how different and better our world would be without the fragile "ego" . . . . so much waste for one man's insecurities.
San Francisco is famous for how few high rises it has. There are actual height limitations to a lot of zoning in that city to prevent high rises.
If a city is large enough it makes sense to build high rises so people don't have to move as far to get to a destination.
@TheNobleFive I disagree. In the the Midwest and South, with their abundance of land, there is no need for 80 floor high rises.
Boston is another compact city where skyscrapers make perfect sense.
No data presented, just jargon & hand-waving.
More hand waving please! Yaaaas Queen!
Its never going to get better
Turn the old office buildings into apartments
There are other TH-cam videos that talk about the process. But not many commercial office buildings are convertible to apartments.
Oy vey!
Irony: Empty Buildings, homeless living in front of them. We can do better.
Yes. The homeless can get jobs and pay their fair share.
You have the right heart but not a logical mind. Lets just give homeless people free housing while regular tax payers pay for it... Sorry life isnt that easy.
If it was, Id just be homeless because I know they'd give me free housing in an empty high rise LOL
Is that Gavin Newsom speaking?
We already provide free housing for the homeless, smart guy. And yet, you’re not homeless. I guess the world doesn’t work the way you think it does. Turns out that people aren’t driven to homelessness by laziness.
The majority do work, smart guy.
Pigs get fat; hogs get slaughtered.
And you’re just noticing this? Hers a real question, why haven’t these owners sued the local or state governments who caused this hmmmmm? Is the US government involved in compensating them for this? Yup- the real ugly truth!!!
Affordable housing isn't obsolete.
Literally…it is
big deal. It's time for a massive demolition and rebuilding. this is great news for those involved with this industry.
What about giving a tax break and turning them into homeless shelters
We have shelters that are empty.
You can't use those commercial buildings as residences.
Who's going to keep the insane homeless calm on the 35th floor?
You?
You don't even know what you're talking about anyways 😂
Take them into your own home and be a real hero.
You trying to create a Judge Dredd scenario?
Oy vey
Cool it with the anti semitism
Oy vey! It’s a Rubenstein!
HAHAHHAHAHAHAHAHAHAHHAA
Never blame the Interest Rates as the Market Values are Independent.
The Business Models in giving Occupancy for different categories of Work and Living are determined from the Economy's Purchase Power but when can be given at Right Pace the Downtown Real estate is all Good with the Floorspace Ratios but not to be in Shanty Towns.
This hurt my brain
Simple solutions to build residential duh
Who wrote the title? A millennial? "literally". 😆
It's a direct quote from the interviewee. 1:00
@@containercore6832 I didn't catch that. But funny how he picked up on the current lexicon. Usage of the word where it isn't needed. 😄
force office workers back to the office, problem solved
AGENDA 2030
Project 2025
NYC needs a flatter low rise office landscape
You can thank Blackrock & WEF for scaring everyone away. Also, those people have a false sense of reality & momentum because of ESG.
😭
From $37K to $45K that's the minimum range of profit return every week I thinks it's not a bad one for me, now I have enough to pay bills and take care of my family.
Excuse me for real?,how is that
possible I have struggling
financially, how was that possible?
I always appreciate God for his kindness upon my life
Thanks to Elizabeth Marie Hawley.
YES!!! That's exactly her name (Elizabeth Maria Hawley) so many people have recommended highly about her and am just starting with her 😊 from Brisbane Australia🇦🇺
I have heard a lot of wonderful things about Elizabeth Maria Hawley on the news but didn't believe it until now. I'm definitely trying her out
Those old buildings can all be turned into data centers. But nothing in the deplorable United States is of any value.
You’re an ignorant spoiled brat. You take the USA for granted. Yes there is problems and bad things about the country. But to say it’s deplorable makes you deplorable. And what are you even talking about saying that there’s nothing of value in the country. What world are you living in?
Data centers require large amounts of cooling and wire passthrough. They don't need expensive locations to build on. It's cheaper to build a warehouse style building outside a small city like Omaha or Des Moines.
I'm favoured, $27K every week! I can now give back to the locals in my community and also support God's work and the church. God bless America.
Pitching a get rich quick scheme ?
Go away.
Makes no sense
yes, Arthur C Clark and others have said that cities are obsolete which seems true in a lot of cases!!!