Office Landlords Can't Get a Loan Anymore (wsj.com) 229
The office sector's credit crunch is intensifying. By one measure, it's now worse than during the 2008-09 global financial crisis. From a report: Only one out of every three securitized office mortgages that expired during the first nine months of 2023 was paid off by the end of September, according to Moody's Analytics. That is the smallest share for the first nine months of any year since at least 2008 and well below the nadir reached in 2009, when 47% of these loans got paid off. That share is also well below the rate before the pandemic, when more than eight out of every 10 maturing securitized office mortgages were paid back in some years.
While the numbers cover only office mortgages packaged into bonds -- so-called commercial mortgage-backed securities -- they reflect a broader freeze in the lending market for office buildings. Many office owners can't pay back their old loans because they can't get new mortgages. Remote work and rising vacancies have hit building profits, making it harder to pay interest. Higher interest rates have pushed debt costs up and building values down. That combination is fueling a rise in defaults. The share of office CMBS loans that are delinquent has tripled over the past year to 5.75%, according to Trepp. It doesn't help that many banks no longer issue new office loans and that many insurance companies and debt funds have become more cautious.
While the numbers cover only office mortgages packaged into bonds -- so-called commercial mortgage-backed securities -- they reflect a broader freeze in the lending market for office buildings. Many office owners can't pay back their old loans because they can't get new mortgages. Remote work and rising vacancies have hit building profits, making it harder to pay interest. Higher interest rates have pushed debt costs up and building values down. That combination is fueling a rise in defaults. The share of office CMBS loans that are delinquent has tripled over the past year to 5.75%, according to Trepp. It doesn't help that many banks no longer issue new office loans and that many insurance companies and debt funds have become more cautious.
Good. (Score:3, Insightful)
Re:Good. (Score:5, Insightful)
Residential landlords are totally different. They get a TON of hate. I’ve had conversations with people who advocate abolishing residential rentals. Seems to be a thing among certain strands of left-wing thinking. When I ask them “what if someone comes to town for a summer, or for a 12 month job and needs temporary housing?” they make the argument that housing and transaction costs would be so low they could just buy a house or apartment for that brief period of time.
Which is absolutely foam-at-the-mouth bonkers. Residential landlords are a necessity.
Re:Good. (Score:5, Informative)
Residential landlords are totally different. They get a TON of hate.
With their almost usurious rates, it's no wonder. On top of which, the bigger companies are colluding [reuters.com] in price fixing [propublica.org] to keep rates high so they deserve all the hate they get.
On top of which, the smaller landlords generally don't care how their places are kept up. They use them as tax write offs. This in turn keeps the number of available places for let low. Many cities, even smaller ones, have resorted to confiscating the properties since a) the landlords no longer pay their taxes and b) the buildings are a blight. Buildings are torn down and either someone else buys the vacant lot to build something worthwhile, after being vetted by the city, or the lot remains empty. Better an empty lot than a crumbling building used by drug dealers and users.
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Yeah. Better to have all the drug users living in public parts and downtown streets and such. Great plan.
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Yeah, there's a plan: Listen, mister, don't like it that you're living in public parks and downtown streets. So you can keep doing that for free and spend what money you can scrape together on drugs, OR for from $1,600-2,000 per month, you can have a roof over your head. That is, until you can't come up with the money one month, and then we'll kick you out on your ass again. Sound good?
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If they could scrape together $1600-$2000/month, they would just spend it on drugs.
Besides which, they would get that money by either selling drugs, or stealing it from someone else.
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With their almost usurious rates, it's no wonder.
If rents are "usurious", more people will rent out extra rooms and buy rental properties to cash in on the excessive profits.
Where that isn't happening is where the government restricts rentals and/or housing construction.
On top of which, the bigger companies are colluding [reuters.com] in price fixing [propublica.org] to keep rates high
If rents are higher than the market price, why aren't new rentals coming onto the market?
On top of which, the smaller landlords generally don't care how their places are kept up. They use them as tax write-offs.
That makes absolutely no sense. Please explain how, in your imaginary world, landlords get tax write-offs by letting their units fall apart. Rent control can lead to deferred maintenance and even prope
Re:Good. (Score:5, Informative)
He has no idea what he's talking about on the small land lords (or anything else but I'll address the small landlords).
My wife had a house from before we got together which she has rented out to a family since then.
They pay roughly enough to cover her mortgage and other expenses. Her profit, if there is one, is the hope that when she sells it later, the sell price is higher than she paid for it. Likely but not guaranteed.
I can't imagine what tax write off she would get if she let it decay and collapse. All that would happen is she'd lose her initial investment, upgrades and repairs along the way and have a crumbling structure she'd take a huge loss on greatly exceeding anything she might recover in some mythical tax write off.
The guy is both ignorant and delusional.
Re: Good. (Score:4, Insightful)
Her profit, if there is one, is the hope that when she sells it later, the sell price is higher than she paid for it. Likely but not guaranteed.
Strictly speaking, if the rent pays the mortgage (and costs associated with owning the house regardless of who lives in it, like property taxes), then the price later on doesn't have to be higher for her to make a profit, since none of the buying price was her loss - it was her tenants'.
If she sells the house for the worth of a cold pizza, then she'll still have made... a cold pizza worth of profit already.
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If rents are "usurious", more people will rent out extra rooms and buy rental properties to cash in on the excessive profits.
A) Most landlords forbid renting out rooms and local muncipalities mostly don't allow it either and B) the vast majority of people do not have the resources to buy any available rental properties, nor the wherewithal to be a landlord. This goes back to people being told to start their own ISP if they don't like the high prices.
Where that isn't happening is where the government restri
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A) Most landlords forbid renting out rooms
Sub-letting is often prohibited, but that's not what we're talking about.
local muncipalities mostly don't allow it either
Bullcrap. I've never heard of a city banning renting a spare bedroom. It certainly isn't "most".
the vast majority of people do not have the resources
I know over a dozen people who own rental units, including friends, relatives, and co-workers. I bought a rental unit in 2009 at the bottom of the financial crisis and rented it for a decade. Most people aren't interested in being landlords, but it isn't "the vast majority". It is common.
It costs money to build new rental units and landlords certainly aren't going to pay for it.
Landlords "certainly" won't pay for property to rent??
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Sub-letting is often prohibited, but that's not what we're talking about.
It's not if you're here in the PRC. At least, my lease contract here in the LA area says you can do that with the only stipulation being that you notify the landlord and find somebody that meets the same requirements you had to meet for your lease. Though this isn't as nice as it sounds -- the law doesn't give you, the lessee, any ability to cancel your lease. If you need to leave for whatever reason, then either you find somebody to take over, or you're on the hook for the entire remainder of the lease. I
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Houses are on larger plots now than they were in the 1960s.
Housing construction is apparently the one part of the economy that hasn't gotten more efficient in the last 50 years. Part of that is larger land costs. Part of that is that there are very few large housing construction companies (most employ 100 people). Part of that is the government (and private businesses) haven't priorotized pre-built fab houses. Probably a lot of other reasons as well.
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If rents are higher than the market price, why aren't new rentals coming onto the market?
NIMBYism and zoning restrictions mostly.
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If rents are higher than the market price, why aren't new rentals coming onto the market?
There can be many reasons, even ones as basic as the geography of the region meaning that the available land is already in use. Or, perhaps, there is a credit crunch meaning finance to build is not available.
Go look up the number of empty units (Score:2)
You know Apple Computer right? Why don't they cut their prices so they can sell more, ever think of that? Well, you know the answer don't cha? They make more money selling fewer computers at a much higher price.
Mega corporations are doing that with housing now. It's why we've got 40% of homeless working full time jobs.
If you're under 50 that's not gonna end well for you. A few medical bills later in a state with weak consumer protection and there goes your house. The
Re: Good. (Score:3)
If they are to abolish residential rentals, they better review how purchases can be worked out. I am apparently OK paying 2500/month rental, but I do not qualify for a 2000/month first time buyer, as per the eleven (!!!) different financial institutions (including non-banking industries) I checked with in the past three years. So no, do not abolish rentals or I have no place to live.
Maybe I should rent an empty office space from desperate landlordsâ¦
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Taxes, insurance, maintenance etc.
Re: Good. (Score:2)
Re:Good. (Score:5, Interesting)
Public housing. Not section 8, not private landlords, just borrow/rent it from the city itself. Shelter is a right that should not be means tested.
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You're full of shit. There are real problems with residential rentals at the moment, but no one is trying to ban them.
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When I ask them “what if someone comes to town for a summer, or for a 12 month job and needs temporary housing?”
Not to excuse them being dumb that renting still has a place, but we'd be looking at much closer break-even points if, like an article earlier this week mentioned, we broke the cartel that is the real estate agent market and got rid of the 6% commission and went to something more like the rest of the world at 1-2%.
IE rather than it taking 5-10 years to make owning cheaper, it'd be closer to 2-3.
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It is the height of hyperbole to equate "let's make things better" with "let's ban every trace of any existence of residential lettings".
Of course renting has its place. That place is not for the vast, vast, vast majority of the populous, with little to no alternative, while being exploited endlessly in order to fund someone ELSE'S escape from the renting trap.
It's like asking the rats in your maze to put all their effort into helping you escape, then building the maze walls higher when you do finally get
Re:Good. (Score:5, Interesting)
This 100%. All of the vacant offices in San Francisco should be converted to section 8 housing ASAP. It will revitalize the city, so get it done already.
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Works for me. Either way would be high-quality entertainment that will likely result in elitist tears [youtube.com].
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Public housing owned by HUD was and still is a disaster, which is why Section 8 has replaced it in so many places.
Re: Good. (Score:2)
Odd definition of disaster if you ask me.
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The cost of renovation will likely be astronomical. Most office buildings don't have showers or baths, just for starters. And who would want to pay even "sub-market" San Francisco rent if their only access to their shared kitchen area and shared restrooms is by walking through somebody else's apartment? Also, while there are a lot of greedy corporate landlords in San Francisco, it is generally a tenant-friendly city. There are a lot of extra laws that apply when you want to lease a building as a residence.
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They tried that in the UK, the problem is that office buildings don't make for good residential accommodation. Often they are not in a good location, not near schools, shops, etc; and almost always, there aren't enough windows for the floorplate size.
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Are you serious?
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It's a parody post. So no, not really.
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Son, humanity itself is a joke.
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Why is that? Why do you care about other people's vaccination status? Do you care about the haircut of the other people?
Haircuts aren't generally contagious.
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Yes, some collateral damage is to be expected. But look at it that way, stupid people die at elevated numbers and we could be just one lockdown away from making WFH the standard.
Ain't that worth a few dead old and stupid people?
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Segregating all the poor people into slums is always a great idea that turns out well. You do realize that's what you're advocating, right?
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Depends on how large your same-zoned lots areas are. I'm just saying a home built for single family occupancy shouldn't be able to be purchased and rented out. It ought to be owner-only, unless and until the municipality responsible for the zoning decides it should be altered.
Where I live, we're seeing vast numbers of homes purchased by wealthy people which is leaving fewer homes for people trying to get into the market, forcing them into renting. It's accelerating wealth concentration and that's a bad t
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So you want to make it illegal for people to rent out their own property to someone else on a short-mid term basis?
What else should we ban people from doing with their property? Not allowed to drive your car further then work and work must be within 5 miles? Not allowed to own more than 1 TV or video screen (your laptop counts)? May not have more chairs than family members plus one for a guest, but the guest chair must be a folding chair? Beds may not be larger than single unless 2 people are sharing, i
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Not banned but tax policy should be adjusted to discourage rentals in favor of ownership. In other words tax the hell out of the rent-seekers who produce nothing. I used to think otherwise but I've seen first-hand many examples of people with a few rental properties who expect to never work another day in their lives from that revenue and make it their mission in life to prevent any new affordable development.
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Rent seekers often do produce something, though. There's a lot of property (granted, not always single-family housing) that gets built expressly for rent-seeking. If you take a shotgun to landlords who seek to rent out property, you'll see a lot less housing built overall.
Plus where I live, back in the 80s and 90s, a great many houses were built by developers that were in a hurry to sell and scoot. The houses were large and seemed nice until you "checked under the hood". Loads of problems with air condi
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Ok so let's see what happens your way... taxes raised on rentals will lead to fewer rentals and/or higher rental prices.
So you just priced out the poor and many middle class from your city who now have to commute long distances to the same job or find a new job in BFE that pays a lot less.
Was punishing the poor the goal of your new tax policy?
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Instead of taking it to absurd levels, why not look at how other countries manage to do it?
For example, you could have a higher rate of property tax on second homes, or homes rented out. Maybe it only kicks in after a year, to allow for short term rentals.
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I find your version absurd already. Mine just highlights it by taking it where it might as well go anyway once the government starts fucking around.
Why are you fucking with the housing market? How many times has the government fucked the housing market with some form of rent control? All that happens is the original tenants never leave, the owner never makes enough money to bother doing upkeep and there's no incentive because his tenants won't ledge anyway. And you get slums. Great.
Rent control makes fe
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Your version is clearly absurd because there are places in the world where it has been working well for decades, and those things you predict have not happened. There's no "might as well go to insane lengths".
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Working well according to who? And where are these magical places?
I've given very specific named examples on this article where government getting involved in the rental market has fucked the whole thing for both renters and owners, you gave me, "but it does work! But really does! I promise!"
I will repeat: NYC and SF housing are both absurdly out of control directly attributable to government interference in the normal functioning of the market place. And the proposed solution in both cases is even more
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Not all rentals are in slums. Far from it. Also slums tend to form on their own even without zoning laws.
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When a house is sold, shouldn't it be up to the new owner whether they want to occupy or rent?
Many people rent out extra rooms when their kids leave for college, or they rent out their big house for retirement income and downsize to a smaller house or condo. Under your scheme, that would be illegal.
Re:Good. (Score:5, Insightful)
Yes, it should be illegal, because we're now in a situation where richer people are buying up all the homes which drives up the price on the remaining inventory, and less and less inventory is available to people who aren't already wealthy.
Too many people are being priced out, and that is our society failing the younger generations.
If people want a secondary property to rent... they can look for one that's zoned that way.
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rentals in TX lose the homestead exemption
You lose the exemption if you rent the entire unit while living elsewhere.
You do not lose the exemption for renting spare rooms to boarders or for renting an "in-law" unit on the same property.
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Boarders and 'in-law' rental are (from a housing inventory POV) a good thing.
Other people must have more tolerable in-laws than I do, though.
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We have a situation where boomers have a massive amount of wealth tied up in property, and they don't want to lose it. So they don't want prices to come down to reasonable levels.
Many of them have gold plated pensions that simply aren't available to gen X and later. In the UK it's stuff like final salary schemes, the likes of which have not been available for decades because they are unaffordable. Worse still, a lot of boomers are looking to the rental market to supplement that income.
This has to change, an
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Yes this exactly! So after we tax retail landlords out of existence we can just take our property back from them and give it to the poor who need it.
From each according to their ability;
To each according to their need!
I feel a Five Year Plan coming on! I know this next Plan is gunna be the one that works this time! We just need to double down!
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Standard residential-zoned homes should stay that way. Rental should be its own zoning, to ensure there are enough ownable properties on the market.
Many of what were once called single-family homes in San Francisco that have more than one story have long ago been converted into flats. So if you buy the building, you are almost by definition going to live in one story and rent out the other.
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While commercial real estate in the US might actually get the well-deserved collapse, things could not be farther in residential real estate right now.
The US is undergoing a transition where residential is moving into the hands of Big Landlord. Think billion dollar hedge funds. They have no problem getting finance, and they have been gobbling up everything and consolidating ever since the 2008 crisis.
Who can not get finance any more is a normal person who wants to buy a home, since the hedges are driving up
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Just to bring a little quantitative sanity to your histrionics:
https://www.redfin.com/news/ge... [redfin.com]
So, yes,
They are (Score:2)
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And once they go bankrupt, the bank will be your landlord, only with a lot less experience at running rentals (and all of the very complicated laws that go with it).
Yeah, that'll improve things.
I hope this happens to retail landlords as well. (Score:2)
I hope all those NYC retail landlords that YouTuber Louis Rossman talked about in his videos (the ones charging obscene prices, lying in their ads etc) get the same treatment.
Re:I hope this happens to retail landlords as well (Score:5, Funny)
Yeah how dare they put an insane price on a rental contract and force me to sign it! And then demand that I pay a number I agreed to!
The audacity!
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You can always commute from New Jersey.
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Many do.
People choose to work in big cities for the higher pay but that comes with a cost elsewhere in their lives. They don't -have- to work in NYC.
I used to drive/train 2-3 hours a day to San Francisco. I exchanged my time for money. SF simply doesn't physically have enough room for everyone who works there to live there. I could have taken a closer to home job but pay would have dropped dramatically. City pay is higher because market forces require it. No one -wants- to work in the city, it sucks.
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The issue is landlords who would rather earn zero income from a property than lower their rents a bit to a level that might get them a tenant and some income. Although the real issue is the greedy banks that force them to do such a thing (and go after landlords that lower rents)
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Why would a small retail landlord prefer to have an empty house rather than lower the rent a little?
The math behind that makes no sense. They are always better off renting for a little less than making nothing on an empty house for months.
Example:
Let's say the mortgage is $5k and they want $5k in rent but can't get it due to market conditions.
If they can rent it for a year for 4500 then they're down 500/month for 12 months = 6k loss for a year.
If they wait 2 months or more in the hope of getting 5k then th
Re:I hope this happens to retail landlords as well (Score:5, Informative)
Why would a small retail landlord prefer to have an empty house rather than lower the rent a little?
Mortgages on commercial property is a very, very complicated affair that makes zero sense to anyone, including the people who do it.
The way the property valuation (which is based, in part, on expected income) and required equity (so the bank doesn't lose money if they have to foreclose) works, if they lower the rent, they have to up the amount of equity (because commercial property owners tend to pull out whatever equity they can to buy more property). On a reasonable sized complex, that can be six figures. But if they leave it empty, they can deduct the lost rent from the mortgage payment and tack that on to the end of the payment schedule.
So yes, in many cases, they would prefer to leave it empty, because it is financially advantageous (in a fairly long definition of "short term"), especially when cash flow is tight to begin with.
I told you it didn't make any sense.
The real question (Score:3)
How much is this going to cost the taxpayers? You know it will. Guaranteed. There will always be some excuse why the taxpayers are forced to bail out private industry. Can't have it any other way.
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It will be interesting; there isn't much appetite for bailing out large landlords, and the vultures with cash are circling the weak. In economic theory, this is what is supposed to happen with the Fed raising rates: there is pressure to allocate cash to useful assets.
The reality is that many of these landlords operate not for building equity but using revenue for cash flow. With 50-60% vacancy rates the property values have plummeted, so someone is going take a hit. The landlord might only have 20% equit
It's banks that will be in trouble (Score:2)
And yes, they will be bailed out
Re:The real question (Score:4, Insightful)
Always socialize the losses.
It's the BANKS that will be bailed out (Score:2)
The companies that currently own the properties will go bankrupt - or possibly just surrender the property to the bank who holds the mortgage because it's now worth less than the value of the mortgage. When enough of these arrive on the bank's balance sheet, it will also be bankrupt, having had to write down the value of the loans...
Why did the landlords live beyond their means? (Score:2, Insightful)
Why did the landlords live beyond their means? They were jacking up the rent high enough to pay the property over the decades. Did they not plan ahead?
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Nope.
In a lot of cases corporate landlords take the income above the loan costs to buy the next place and so on. That's the nature of the game.
And if they own a place long enough to pay it off? Take a loan out on it to buy another place.
Around and around.
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They did plan ahead. They took the money above the cost of the loans as profit and handed it off to the executives and investors, and used the equity built up by paying down the loan to help get the loan to buy the next property. And, as another said, around and around again.
You see, they know it's a game of musical chairs, and that at some point the music's going to stop. Their plan is that when that happens the company is left without a seat, but the people behind the company can walk away with all the mo
Archived copy (Score:5, Informative)
For those without a wsj subscription...
https://archive.is/W0ASs [archive.is]
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I recommend creating a bookmarklet that you can click on any paywalled site. 9 times out of 10 it removes the paywall.
javascript:void(open('http://archive.today/?run=1&url=%27+encodeURIComponent(document.location),"_self"))
can't they rent one (Score:2)
The big issue is just the rise in interest rates. (Score:3)
Let me elaborate. Most office buildings are purchased with interest only loans that have balloon payments after five to 10 years. The financing is based on the rents that the building generates covering the interest payments.
Anyone paying attention to interest rates can see where this is going wrong. Interest rates are roughly twice what they were five years ago, so to cover the increased interest rates rents would have to double to refinance to make the balloon payment and rents are down, so people are walking away and losing their down payments.. I'm not sure I understand the logic of giving those loans at 3% in previous years. Probably theory would have said you had at least a 20% and maybe 30% chance of losing money for a 1% increase in your yield
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Historically office loans were pretty stable. The buildings appreciated over time, so the risk was reasonably low. After 2008 owners were forced to have significantly more equity, but people didn't envision a 50% drop in values over a 3-year period.
The problem is not what you all think it is (Score:5, Interesting)
I see lots of the usual pointless rhetoric about landlords, profiteering etc. Expressions of dislike or distaste for the operators.
This is not the point to pay attention to. How you feel about landlords is unimportant. What matters is to understand what is happening and what the consequences will be.
Commercial office real estate was mostly financed by loans, which were in turn financed by rents. The loans have to be rolled over. What we are seeing is a collapse in rents, because tenants are moving out. At the same time there is a rise in costs, due to when the loans are rolled over, its at much higher rates.
The initial consequence is a collapse in office real estate sales prices. Lots of stories about this, many of them documenting the phenomenon in San Francisco. Building being discounted by 50% or more.
What do you think happens when the operator of these buildings makes a huge loss because of increased costs and lower revenues? They default. Now, what do you think happens to their loans? They go into default too. Who is the ultimate loser in this?
Banks is who. So if the present trend continues, you are going to see a wave of banking insolvencies. Its not going to be confined to commercial real estate either, it will hit the residential rental market.
Now a lot of people here may say, great, serve them right... But that is not the point. The point is that a wave of defaults and insolvencies on the scale we are seeing now, and can expect to see increasing, has real effects on the whole economy, the job market in particular. It leads to a contraction of money, which means that financing availability for all businesses becomes harder to get and more expensive when you can get it.
So when you all cheer the collapses of the real estate markets, think a bit ahead. Are you also enthusiastically welcoming bank failures? Probably. Then, are you still cheering when your employer can't finance the next project? When customers stop buying? When you are laid off?
Be careful what you wish for. This is one of the markers that we are in the early stages of a deflationary recession. To be followed by government bailouts, which will then, if done on a scale which solves that problem, lead to a currency crisis and hyperinflation.
In the background to all this is the US national deficit. Take a look at the numbers for US debt. Now ask yourself, what happens if there is a buyers strike? What cannot carry on, stops. The current bubble is bursting but everyone is talking and behaving as if nothing much was happening. When the commercial real estate market collapses, and takes banks with it, its not their problem. Its our problem.
When? Wish I knew. Maybe in the next year, but its staggered on for a long time now when it seemed impossible it should. It will end, the debt is not repayable, so there will be a default. Calling the timing however is very hard. In previous episodes like this there have been a few false alarms, the bubble reflates, and then finally you have the big one. It may not be next year, but we are getting closer all the time and one day it will blow up. They always have.
Your fear of inflation is overdone (Score:2)
Neither the massive expansion of the money supply after 2008, or, on the whole, after 2020, have caused massive amounts of inflation; the spike we have seen isn't really that exciting. You're absolutely right that the banks will have to be bailed out - again - but inflation? Not necessarily.
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What do you think happens when the operator of these buildings makes a huge loss because of increased costs and lower revenues? They default. Now, what do you think happens to their loans? They go into default too. Who is the ultimate loser in this?
Banks is who. So if the present trend continues, you are going to see a wave of banking insolvencies. Its not going to be confined to commercial real estate either, it will hit the residential rental market.
Banks have securitized those loans and on-sold them. Whoever bought them will take the hit.
What is your leap of logic that expands this to residential? Residential doesn't have the vacancy problems, the massive oversupply or the falling prices.
If a few banks turn out to be too exposed to Commercial property, they will be bought up by other banks that weren't. Or they'll get liquidated like any other failed bank. It's not usually a big deal. [bankrate.com]
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It's always irked me working in finance (Score:3)
Re:It's always irked me working in finance (Score:4, Insightful)
Re:There's only one solution for this. (Score:5, Insightful)
Why the hell should I suffer to prop up a dead business?
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Unless you work in a hands-on field (retail, nursing, machinist, etc) there's no reason for any information worker to travel to an office every day spewing CO2 by the tonne.
Re:There's only one solution for this. (Score:5, Insightful)
There's more than just those, but I personally find it wasteful to make people commute for jobs that don't really need it.
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Why on earth should tenants care about the ability of their landlords to make their loan payments? It's a lease for a reason. At the end of the lease term, if the tenant doesn't want so much space, they can give it back and save money for their company. If that hurts the landlord, that's their problem! That's the risk landlords take on, when they choose to lease their space rather than sell it.
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Why on earth should tenants care about the ability of their landlords to make their loan payments?.
Because if the building changes.hsnds underneath you due to your landlord's financial issues sit can affect your business. A new company may technically honour your lease but still change the effective conditions you, as a leader, experience which may result in additional costs. Perhaps you'd have a valid claim in a court of law over that, even but suing is expensive and time consuming.
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Let me see if I follow your logic. I'm running a company, and I've been letting my employees work from home. I should force them back into the office because if I don't, the building might change hands and I might have worse management? That's some pretty far-out reasoning.
My current employer was in this predicament. They had been letting their employees work from home. Only a handful came in to the office. So they just closed the office entirely, allowing everyone to work from home permanently. Problem sol
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Let me see if I follow your logic. I'm running a company, and I've been letting my employees work from home. I should force them back into the office because if I don't, the building might change hands and I might have worse management? That's some pretty far-out reasoning.
Sorry, you lost the path of the logic completely and followed a rabbit rather than the fox you wanted to chase. Note the specific part quoted. You asked why tenants should care about the ability of their landlords to make their loan payments. I'd summarize that as "care about the financial health of their landlords". The idea is that you haven't stopped being a lessee completely. You're still renting.
Ergo, you are still in a fiscal relationship with the company. To wit, a customer. They're supplying
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That *IS* how commercial office mortgages work. In home mortgage, at the end of the mortgage term, your loan is paid off. In commercial loans, however, at the end of the loan term, there is still a large balance, a balloon payment. The borrower is required to either find a new loan to pay off that balance, or pay the debt in full.
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You want to go back to ... horses??
I'm not even sure what to say to that. You're joking, right?
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Ah yes. The company town.