In my jihad against lax over-lending on commercial property....
Office CMBS Delinquency Rate Spikes to 10.4%, Just Below Worst of Financial Crisis Meltdown. Fastest 2-Year Spike Ever
by Wolf Richter • Nov 30, 2024 • 13 Comments
Office-to-residential conversions are growing, but are minuscule because not many towers are suitable for conversion.
---30---
In fact, it is ugly.
Unlike housing, which is always in demand except in most-dying of Rust Belt cities, the office towers...really seem derelict. You can re-purpose housing into better housing, but not office towers, which take about $500 sf to re-do as housing.
Perhaps if building codes were radically altered to allow "substandard" housing to exist in old office towers there could be hope. Exposed conduit piping and plumbing, for example.
One developer suggests large "outdoor" patios on each unit might help. Self-storage onsite.
Maybe.
But a round of moralizing against against sloppy lending practices is in order, for sure.
The way you frame the shortages in this post gives me a better understanding of how the mortgage access problem is the BIG problem. I tend to fixate on land use regulations, but that has had an outsized effect on specific metro areas like Boston, L.A. etc...and I contend that it's politically unfeasible to fix those places in this century. The national problem had a solution in place prior to 2006 which was migration and re-settlement. The mortgage crackdown has broken the migration pumps, but if they could be restarted the growth potential in the South and the West the housing shortage could be fixed in a few decades.
Yeah. We went from homes being built in limited places, so that migration was an alternative, if a painful and disruptive one, to homes not being built so there is no alternative. A much worse proposition.
Also, I probably tend to underemphasize this, but the reason the mortgage crackdown bit so hard is because land use regulations are too tight everywhere, so infill & multi-family couldn't make up the difference. So, fixating on land use isn't wrong. It's just that mortgage access was the marginal change in 2008 that made it bite everywhere.
The first figure is very eye-opening. I hope that it goes viral.
In my jihad against lax over-lending on commercial property....
Office CMBS Delinquency Rate Spikes to 10.4%, Just Below Worst of Financial Crisis Meltdown. Fastest 2-Year Spike Ever
by Wolf Richter • Nov 30, 2024 • 13 Comments
Office-to-residential conversions are growing, but are minuscule because not many towers are suitable for conversion.
---30---
In fact, it is ugly.
Unlike housing, which is always in demand except in most-dying of Rust Belt cities, the office towers...really seem derelict. You can re-purpose housing into better housing, but not office towers, which take about $500 sf to re-do as housing.
Perhaps if building codes were radically altered to allow "substandard" housing to exist in old office towers there could be hope. Exposed conduit piping and plumbing, for example.
One developer suggests large "outdoor" patios on each unit might help. Self-storage onsite.
Maybe.
But a round of moralizing against against sloppy lending practices is in order, for sure.
The way you frame the shortages in this post gives me a better understanding of how the mortgage access problem is the BIG problem. I tend to fixate on land use regulations, but that has had an outsized effect on specific metro areas like Boston, L.A. etc...and I contend that it's politically unfeasible to fix those places in this century. The national problem had a solution in place prior to 2006 which was migration and re-settlement. The mortgage crackdown has broken the migration pumps, but if they could be restarted the growth potential in the South and the West the housing shortage could be fixed in a few decades.
Yeah. We went from homes being built in limited places, so that migration was an alternative, if a painful and disruptive one, to homes not being built so there is no alternative. A much worse proposition.
Also, I probably tend to underemphasize this, but the reason the mortgage crackdown bit so hard is because land use regulations are too tight everywhere, so infill & multi-family couldn't make up the difference. So, fixating on land use isn't wrong. It's just that mortgage access was the marginal change in 2008 that made it bite everywhere.