Leaving New York City

[LearningMachine]

I kind of assumed that, along with your quite bearish tone because that is what you had conveyed in some other threads. I think in the ESRT thread you were talking about $100-$200 sq/ft.

The thread is about NY, and if those couple things return, ie nightlife, entertainment, etc...so will the people. They do have an interest to get crime down, although there's tended to be cyclical trends with that, and it is not uncommon for there to be high crime during periods of economic disarray. Those issues shakeout, and you'll be seeing record prices again. Similar areas will likely see similar progression. If this isn't what we are talking about, then I dont now what we're doing in a thread about folks fleeing NYC.

So if we are talking about this as an investor, there's really not a whole lot of "risk" posed to NYC or major city hubs, by WFH. The risk is that the drivers that make the city attractive go away...this is a low probability risk IMO.

If we are just talking in general about a hiccup in terms of demand...so what? Thats what cycles are.

If it isn't any of the above, then I am not quite sure what you are saying.... If anything, I think WFH is a ticking time bomb for suburban office space. Although anecdotally, I've been able to WFH since 2014. I've leased 5 different offices during this time and still pretty much did a hybrid 3/2 type of thing. I was still paying the full rent. Most offices in non prime locations regularly operate at below 100% occupancy and have had no problem gradually raising prices either. Either way, cities will be fine. The question is when, not if.

Yes, I handicapped on ESRT, got in below $5.50 and got out at $10.  Thanks to your and pupil's contribution to that handicapping as well.

Because someone was talking about Seattle in this thread, I went along. When trying to handicap residential prices next to Microsoft, Amazon, Facebook and Google in Seattle area, I'm saying there will be some negative impact to prices in real life as a result of Bill Gates' prediction of more than 30% of days not being spent in office anymore (which I agree with), and there will be some positive impact to residential prices in exurbs in Seattle area. 

I agree with you that young people will not leave cities.  I hope you will also agree that young folks also don't have to live next to their employer anymore.  Some can live in the middle of Seattle next to bars cheaper than for living next to Facebook, Amazon, Google or Microsoft.  Some family folks can live in exurbs with water view cheaper than for living next to headquarters.

Looks like you also agree with Bill Gates' prediction, and that's why you are saying suburban office real estate might be in trouble.

[Gregmal]

I kind of assumed that, along with your quite bearish tone because that is what you had conveyed in some other threads. I think in the ESRT thread you were talking about $100-$200 sq/ft.

The thread is about NY, and if those couple things return, ie nightlife, entertainment, etc...so will the people. They do have an interest to get crime down, although there's tended to be cyclical trends with that, and it is not uncommon for there to be high crime during periods of economic disarray. Those issues shakeout, and you'll be seeing record prices again. Similar areas will likely see similar progression. If this isn't what we are talking about, then I dont now what we're doing in a thread about folks fleeing NYC.

So if we are talking about this as an investor, there's really not a whole lot of "risk" posed to NYC or major city hubs, by WFH. The risk is that the drivers that make the city attractive go away...this is a low probability risk IMO.

If we are just talking in general about a hiccup in terms of demand...so what? Thats what cycles are.

If it isn't any of the above, then I am not quite sure what you are saying.... If anything, I think WFH is a ticking time bomb for suburban office space. Although anecdotally, I've been able to WFH since 2014. I've leased 5 different offices during this time and still pretty much did a hybrid 3/2 type of thing. I was still paying the full rent. Most offices in non prime locations regularly operate at below 100% occupancy and have had no problem gradually raising prices either. Either way, cities will be fine. The question is when, not if.

Your figures are an exaggeration above, but yes, I handicapped on ESRT, got in below $5.50 and got out at $10. 

When trying to handicap residential prices next to Microsoft, Amazon, Facebook and Google in Seattle area, I'm saying there will be some negative impact to prices in real life as a result of Bill Gates prediction of more than 30% of days not being spent in office anymore, and there will be some positive impact to residential prices in exurbs in Seattle area.  That's all, no extreme statements.

Thats hardly a controversial statement then and Id even agree with you. There will be some softness and suburbs/rural will benefit. Thats already occurring. But I also wouldn't underestimate the desire of people otherwise priced out of an area to be waiting for the opportunity. I dont think its Gates prediction but rather supply and demand at work. However longer term, the question, and investment opportunity I think is pretty clear. What happened following the GFC where masses of folks were evicted/foreclosed? When the forecasted "new normal" was that everyone and their mother would be renters from now on. An unprecedented wave of private investor/institutional money came in and snapped up homes in desirable but out of favor areas. And its been nothing short of a home run for them. I wouldn't confuse the current covid hysteria where people are literally forced to WFH and daily occupancy rates are like 20% as a new normal. Two years from now most people who were working in an office will still work from at an office. Not just younger people; you dont think the average middle aged married person with kids doesnt cherish the break from that? Or the single, middle aged person not quite young enough for dating apps to be appealing? Where do they get social interaction? The distortion often emerges when there are irregularities and imbalances. Not a whole lot different than when we had an excess supply of stocks in March. The pendulum is always swinging. Sometimes it is fairly straight forward/easy to step back and simply determine whether we are in or out of favor, and then look at what needs to occur to get to the other side. In relation to the thread topic, for NY, its opening back up businesses, getting crime down, and probably looking in the mirror as far as tax policy goes. Pulling shit like they did with Amazon certainly didnt help, but I dont think thats something they can get away with doing repeatedly, and sooner or later they'll see that.

[Cigarbutt]

Not just NYC, I noticed a massive exodus of Seattle as well. Just check redfin listings for Seattle. Lots of listings, especially condos, with hardly any buyer taking a tour.

Make sense though. Large city with many renters, large population of young and single people and high cost. But I bet Seattle suburbs are white hot.
I'm throwing 700k cash offers at 3bed/1bath 1,000 sq ft houses  in the east bay of San Francisco. I'm not even competitive apparently...

Suburbs have largely lacked the price appreciating that Appartement or houses in the city areas had. I lived in Long Island and now in Boston area and in both cases, houses were still below ~2005 prices.  I think RE in thr city core might have doubled with8b the same time frame. If this trend reverses, it could have a long way to go, but I somehow doubt that it will.

Actually good bay area suburban housing has been on fire since a couple of years after the GFC. The suburban city of Burlingame (17 miles south of San Francisco) has seen a 2.5X price rise for single family homes in the last 10 years (Dec-2010 to now). That is annualized appreciation of nearly 10%. If you take last 25 years for this suburb that number comes to about 7.5% annualized which is rivaling S&P returns (without dividends reinvested of-course).
https://www.zillow.com/burlingame-ca/home-values/
For comparison San Francisco (SF) has appreciated "only" 2X in the last 10 years for single family homes (7.5% annualized) and about 4X in the last 25 years (for a return of 6% annualized).
SF Zillow:
https://www.zillow.com/san-francisco-ca/home-values/
SF Case Shiller:
https://fred.stlouisfed.org/series/SFXRSA

Thank you patience_and_focus, that was intersting (i like the SF area).
i recently finished the traditional communication round to US acquaintances (most graduated in the late parts of the last century) who happen to form a relatively reasonable representation of the US territory. Covid was the big topic but, every year, it seems that the 'mood' tends to be related to trends in the stock market and, especially, real estate.
i thought the following interactive tool was interesting (national, regional etc)
https://www.visualcapitalist.com/20-years-of-home-price-changes-in-every-u-s-city/
-----)Back to the "Leaving New York City topic"; i like NYC too and the real estate market there went through Covid like a walk in Central Park but it seems to me anybody interested by NYC real estate in a big way should consider reading chapter 2 (pages 55-112 1996 edition) of The Trouble with Prosperity,  written by Mr. James Grant. The chapter concludes with the 1995 40 Wall Street acquisition.

[thepupil]

I love that chapter, but don’t quite understand the relevance other than “office RE values can fall very low / are very cyclical over long periods of time”; is that your point?

[Cigarbutt]

There is no embedded 'forecast' either for an individual looking for a specific property or real estate investments in general.
It's looking at various scenarios and remembering that cycles can last a long time (both good and less good).

It's fascinating to see that real estate values (including NYC, residential and commercial, as far as i can tell) have diverged from inflation trends for some time now and there are (may be) very good explanations for this. It seems to be though that (very) low interest rates are a key driving force and i wonder if that's good or bad or whatever.

To paraphrase Mr. Grant, skyscrapers are the architectural expression of optimism, and no bookkeeper is likely to frustrate the way of progress.

[patience_and_focus]

https://www.visualcapitalist.com/20-years-of-home-price-changes-in-every-u-s-city/

This is pretty cool resource. Thank you!

[Gregmal]

Goldman to Florida!

[fareastwarriors]

Goldman to Florida!

https://www.bloomberg.com/news/articles/2020-12-06/goldman-plots-florida-base-for-asset-management-in-a-blow-to-nyc?srnd=premium

[fareastwarriors]

Renters return to Manhattan, driving 30% gain in new leases in November

https://www.cnbc.com/2020/12/10/renters-return-to-manhattan-in-november-driving-30percent-gain-in-leases-.html

[BG2008]

Renters return to Manhattan, driving 30% gain in new leases in November

https://www.cnbc.com/2020/12/10/renters-return-to-manhattan-in-november-driving-30percent-gain-in-leases-.html

People got bored in the boondocks, demand is elastic, young people can't stand living with their parents and want their freedom/get laid