Commercial property deals in the US are starting to pick up at deep discounts
US office buildings are being sold at steep discounts as remote work, higher interest rates, and overbuilt commercial space drive down values, raising concerns about banks and regional economies exposed to this debt. Commenters debate whether empty offices can realistically be converted into housing, pointing to zoning rules, floor-plate design, plumbing, and safety standards that often make conversions costly or impractical. Some see parallels to 2008 in the potential for wider financial fallout, while others argue the damage will be contained but highlight deeper structural problems in U.S. urban planning and housing policy.
Remote Work, RTO, and Demand for Offices
- Many see the office crash as predictable: remote work lets firms shed expensive leases, so office landlords and commute‑dependent businesses are hit.
- Some argue RTO pressure is about protecting commercial real estate values; others insist executives mostly want productivity and culture, not to prop up landlords.
- Ancillary downtown businesses lose traffic, but some posters report more vibrant local/suburban centers as workers stay near home.
Urban Form, Suburbs, and Mixed Use
- Strong interest in walkable, “15‑minute city” style neighborhoods with local shops, schools, and services; cited as common in Europe/Asia and rare in the US.
- Debate over preferences: some love dense, walkable living; others strongly prefer large suburban houses and space. Cost and scarcity are seen as key constraints, not just taste.
- Examples given of mixed-use midrise patterns (e.g., shops/office on lower floors, housing above) as environmentally and socially efficient.
Office-to-Residential Conversions
- Widespread skepticism that large US office towers can be cheaply converted:
- Deep floor plates leave large windowless interiors; residential codes often require windows and different fire egress.
- Plumbing, sewer, and ventilation are centralized for offices; redistributing them for many units is very costly.
- Some point to successful but expensive conversions (e.g., factories to lofts, specific towers), often into luxury units.
- Others argue shared-bath “dorm style” or very small units could work, but clash with regulations and political fears of “lowering housing standards.”
- Big debate on allowing windowless/“capsule” or tenement-style units:
- Pro: better than homelessness, increases supply, should be a choice reflected in price.
- Con: fire/flood risk, long-term social harms, enables slumlords and a “race to the bottom.”
Zoning, Planners, and Regulation
- Many blame Euclidean (use-separated) zoning and parking minimums for both housing shortages and office over-supply.
- Harsh criticism of urban planning as serving incumbent homeowners/developers; counter-argument that planners often oppose bad patterns but are constrained by politics.
- Mixed-use and more flexible zoning seen as a partial fix, but lawsuits, local opposition, and cultural expectations (space, cars) are barriers.
Macro Risk and Investing
- Higher interest rates are seen as a core driver of falling CRE values; WFH amplifies the hit to offices.
- Some fear a 2008‑style crisis; others note this is different from the mortgage/CDO mania, but still worry about banks, “extend and pretend,” and potential credit tightening spilling into residential.
- Discussion of office REITs/ETFs and institutional products:
- Concerns that equity can be wiped out by lenders in distressed assets.
- Warnings that private real estate vehicles likely mark values slowly and opaquely.
- Debate over whether Fed policy is “doing something right” (inflation down, GDP and jobs up) versus squeezing the middle class with high living costs.