Originally published at: https://boingboing.net/2020/12/29/__trashed-20.html
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A similar situation is happening in Manhattan, with the median asking rent falling 12% to a 10-year low of $2800/month.
It’ll take at least another year for rents in NYC and the Bay Area and other desirable cities to start climbing back up to the usual insane rates, so if there’s a time to grab a “bargain” and live in these alpha cities it’s now.
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That presumes they will climb immediately post-pandemic. I do not personally believe that to be true given the number of silicon valley businesses who are now offering telecommuting as a way of life.
For me personally my Austin-area office is no more and I expect to be working from home indefinitely. While this doesn’t have me leaving Austin (I mean, it’s awesome here, really) - it does have me looking outside the usual “core” of the city, something I wouldn’t have done pre-pandemic in case I needed to commute downtown.
It’s going to be really interesting to see what happens to the “tech diaspora” in the next year - and that has far-reaching implications far beyond real-estate. I bet a lot of “safe” gerrymandered red political districts near urban centres are about to become less so.
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I don’t know if it will be immediate, but my guess is that once enough people are vaccinated there will be a surge return to the cities, more as a lifestyle choice than a work requirement. In the longer term I don’t see the attraction of cosmopolitan cities waning too much for either young child-free singles or couples or for affluent people who can afford the premium.
Post-pandemic, I’m expecting most companies that are able to do so to permanently reduce their rented commercial office space square footage by 25%-50%, install hotdesks, and allow (if not mandate) WFH for 2-3 days a week. The pandemic has made it clear that corporate America’s claims that white-collar and service-sector remote work was “impossible” were always utter BS driven by insecure managers and executives.
My hope is that what will result will be quality office-to-residential conversions that will create more urban housing stock and keep rents down, but one thing I’ve learned to count on in life is the short-sighted greed and corner-cutting of landlords and developers.
With the presidential election and now the Senate run-offs, I’ve been seeing a lot of articles like this one about that change already occuring around Atlanta:
It doesn’t seem to be driven by the “tech diaspora”, and we have to keep in mind that not all techies – even young ones – are liberals or progressives. Still, I agree that things are changing and that the Republicans won’t be able to rely on the “guns and abortion” social policy plays in those districts to the same degree to which they’ve become accustomed.
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Agreed and also believe that this is true across industries. Any industry that can sustain remote work (which is a lot of them) is currently watching their lease eat up huge amounts of capital while sitting mostly empty. Commercial real estate is about to completely tank. Watch for commercial properties to begin converting to mixed-use or full residential and flood these markets even more.
ETA: @gracchus beat me to it. I’m not sold on the flight into traditionally expensive cities, though. The past couple of decades have killed a lot of what made NYC, SF and others cool in the first place. Meanwhile, mid-sized cities like Kansas City have bloomed culturally and become much more accessible for those interested in a career in the arts, for instance. But the fact is that this is such a massive upheaval and literally nothing has been done to address it that we really have no way of knowing what the impacts will be or how to anticipate and mitigate them. Anyone with sense can see that this will play out over an entire generation, though.
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That definitely true for leased spaces. One of the things I wonder about is what will happen to the corporate campuses (exurban and urban) that the major tech companies sunk billions into purchasing and developing for cash free-and-clear over the past decade. Apple in particular would be smart to convert some of its “UFO” headquarters into employee housing, given that Cupertino has a severe lack of housing stock (they already provide temporary housing close by for interns, but they could probably do it for permanent employees who need access to labs).
I’m hoping that’s the case and that there’s some benefit to mid-sized cities. Same goes for some of the re-vitalised towns in the Northeast. As far as the traditionally expensive cities, I just anticipate a lot of less imaginative young people saying: “The pandemic is over! Rents are low enough in NYC that I can afford to live there like I always wanted to!” followed by landlords raising rents again. Somehow NYC and its rents rebounded after the 1918 Flu, and I’m pretty sure it will again a few years from now.
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Not the people I know who have recently moved out of the city (NYC) to escape the madness resulting from COVID. They will never go back. No way. No how.
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I think so too. San Francisco in particular has (or had) a lotof people living there and commuting to Google, Facebook, and Apple in the “suburbs”. Some of them may take advantage of remote work by moving to less expensive urban areas around the country but it isn’t necessarily going to result in a redistribution from urban to suburban. I could just as easily see the reverse – someone who currently lives in a suburb because it is the only affordable place to live near their work might decide to move to a downtown area in a less expensive city once they aren’t constrained by job location.
I don’t think that is particularly fair. First off, video conferencing and other remote collaboration technology was worse even 5 years ago, and much worse 10 years ago. If this pandemic were in 2010 I’m sure we would have made it work, but I think it would have been a lot harder. Also, I am not convinced that we aren’t going to see long term downsides. We don’t really know how effective remote work has been this year, and right now, most remote workers are still working on projects that were already in motion with mostly the same set of people they worked with pre-pandemic in-person. I have already found it harder to connect and work with people who joined during the pandemic and I doubt I am alone in that. I certainly think it is possible that remote work for 3-5 years would have downsides that we haven’t seen in the 9 months we have so far. Plenty of jobs and people did make it work pre-pandemic: I don’t doubt it is possible, and even if there are downsides the benefits may outweigh them.
Disclaimer: I like my job and my colleagues. YMMV.
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Well, yeah. Just as I was losing interest in living in NYC, my neighborhood was exploding, so I’m sure you’re right.
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In the past decade it wasn’t a technology issue so much as a corporate culture issue. The assumption on the part of managers and executives was always that the “lazy” employees would slack off working at home. Also, a lot of managers justify their salaries only by holding endless meetings, team-building exercises, and Lumbergh-like check-ins.
There are down-sides to remote work, especially in collaborative “creative-class” occupations. However, those downsides didn’t exist to the degree that tech companies (IBM is the notorious example) – ones with the capability to build effective remote-work systems and that were happy to outsource things overseas when they could – could claim that WFH for Americans was “impossible” and that “we all have to be together” in one office to make things work.
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Yep. Just had a zoom meeting about this right before everyone left for Jesus-day. WFH until the vaccines roll out, then after that we’re moving from everyone having their own office to a cube-sharing farm 2-3 days per week just to have people on premise in the server room to swap out dimms, PCI cards, AC cycle as needed etc.
Personally, I hate it. It’s so much easier to concentrate with an office environment where you can get off your bumm and go talk to Raja down the hall where he/she can white-board and show you why you are doing something wrong.
But now we have kids at home and my spouse and I work full time and she’s in retail so no WFH.
I’m just glad we finally moved before the pandemic hit since we were already running out of space and going crazy. Now we have plenty of space in the burbs, and we’re going crazy outside of the city.
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Completely agree. I spent an incredible amount of time in SF over the last decade (as in, more than 300 nights!) and love that city to death, but the fact is, Austin has quite a bit of culture of it’s own and is vastly cheaper to live in. I’m certain it isn’t the only city of its’ size enjoying some diversification right about now 
One of the most unexpected sights I saw when I first started visiting SF in the 2005-ish era was the veritable ghost-town that was the San Jose corporate lands - there was abandoned office park after office park out there. I first encountered them on the way to the Computer History Museum, itself housed in SGI’s old offices. I bet most of that area was redeveloped by now, only 15 years later, but little of it into housing.
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are there really that many techie telecommuters that they would flip districts by moving around
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I saw the same thing around the same time when I came in to help wind down some startups: the empty parking lots, the empty reception areas visible through the front windows, the less-faded areas on the facade where the corporate signs used to be. It was amazing how quickly it happened between 2000 and 2005.
For the FAANGs and other companies with large treasuries, though, we’re in a different situation. These aren’t generic office parks (leased or owned) but purpose-built and fully owned corporate campuses. One of my Google friends who used to work in Mountain View is now living in small-town Oregon with his young family, but the Googleplex still exists as does the fully-owned 2.9-millionSQF 8th Avenue building (plus Chelsea Market) in Manhattan. They’re not stopping re-development of the old Westside Pavillion mall space they’ve leased in L.A. either, and there’s a whole bunch of office space in numerous cities around the country and the world. I can see these companies dropping their smaller leases but that leaves a lot of square footage owned or leased long-term by them in expensive cities.
What I hope doesn’t happen is a process of forced centralisation to a handful of expensive cities/regions with leased spaces in mid- and small-sized cities being abandoned, but realistically that might be the response. Amazon’s HQ2 “beauty pageant” process didn’t shake out entirely as expected, but it did highlight what’s important to these companies in terms of situating offices. Well-funded transport and mass transit infrastructure and access to the financial services industry’s HQs and to major universities and teaching hospitals – in the U.S. more commonly found in alpha cities or greater urban areas – rank as highly as a city’s willingness to offer tax breaks, its lower cost of living (read lower wages), and its ability to provide a vibrant cultural scene. Austin made Amazon’s final 20, but it was the smallest city on that list.
The zoning history of the Bay Area over the past 30 years (at least) is a litany of missed opportunities to build affordable and convenient housing. I hope it will be different this time, but again: I don’t discount the influence of greedy landlords and developers.
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Nah. The endless office parks are still there. San Jose only started to come around on housing in the last five years. Pre-pandemic, the parks were less of a ghost town. 2005 was the tail end of the post crash doldrums, and in the decade after new businesses moved into those spaces. I haven’t been down to the South Bay since lock down started.
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The flip side of that: prices in the Central Valley have been going up a lot this year as people from the Bay Area moved here, having discovered the wonders of teleworking. For most, that appears to be a permanent move. Post-pandemic, if they do need to be in the office once or twice a week, they can always drive over or take a commuter train.
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So this means that one only need be super duper rich to rent in San Fran at the moment, yes?
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I think what’s missing there is that the dropping rents and property values aren’t just down to those people who can relocate, relocating.
If it was you guys might be right. Even if those people never come back there’s plenty to replace them.
But a major reason these cities got so expensive in the first place was a glut of luxury housing, sold as investment properties and largely left vacant. 2nd and 3rd homes owned by individuals outside the US. The short term rental market eating up big chunks of what used to be normal people rentals.
Big portions of the drops in rent, and property values are apparently being driven by all of that stuff being dumped on the market. The Air BnB rings are flipping to long term rentals because that psuedo-hotel revenue is dead. Part time residents are listing their homes because they can not use them. Luxury condos are sitting unsold in that investment market. While the existing ones are getting rented or dumped either to hedge all the uncertainty, or because they’re useless to the owners in this circumstance.
And in both commercial and residential real estate. You’re seeing owners who aren’t seeing rents paid, but can not evict. Sell the properties on the assumption they’ll never practically be able to get that back rent. Basically cash in the property value and bank it while they can. I know more than a few restaurants that ended up shuttering that way, new owners declined to renew the lease.
Seems like it’s less people leaving than sudden a glut of supply from all those other angles. Lot of that stuff was basically vacant anyway, just unavailable to residents so it didn’t cause an over supply.
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