[HN Gopher] Uber attempting to reduce office space in SF / 31% o...
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Uber attempting to reduce office space in SF / 31% of office leases
open
Author : omgJustTest
Score : 51 points
Date : 2023-05-19 17:43 UTC (5 hours ago)
(HTM) web link (www.sfchronicle.com)
(TXT) w3m dump (www.sfchronicle.com)
| renewiltord wrote:
| There seems to be a market opportunity here for someone like
| WeWork because it's hard to find competitive smaller offices
| currently, though the big spots are cheap / sq.ft.
|
| Look on LoopNet and the 1.5k sq.ft. section is still competitive
| with before. Unless someone here knows where I can find that size
| with high-speed internet, good power, and temperature control
| close to BART.
| paxys wrote:
| There are two factors at play here:
|
| - Tech companies are moving to remote/hybrid work (whether by
| choice or not) and don't need the office space.
|
| - Tech companies rode the bubble and made wild headcount
| projections between 2018-2021 and leased space accordingly. Now
| after the freezes and layoffs the exponential growth stopped and
| they realized they don't need as much of it anymore.
|
| So while covid/remote work is partially to blame, it doesn't tell
| the full story. Companies in Uber's cohort have just never been
| sustainable at all. Now that VC money (including tens of billions
| from Softbank/Saudi Investment Fund) has stopped flowing in and
| the market demands actual profit, they are having to face reality
| and cut spending wherever they can.
| hackernewds wrote:
| [flagged]
| nemothekid wrote:
| If I didn't live in SF and got my news exclusively from
| Twitter I'd be calling the President to send in the national
| guard to save SF from Mad Max style anarchy.
|
| SF has problems, for sure, buy you have in another thread
| OpenAI calling remote work "over" and continuing to stay in
| SF. The "rapid denigration of social law" just sounds like
| the media cycle doing its job to get clicks.
| bushbaba wrote:
| That's an effect not a cause
| ethanbond wrote:
| Well, it's both. Such is the case with most components of
| most hard problems.
| joshu wrote:
| > denigration
|
| is this the word you meant to use?
| Convolutional wrote:
| Do you mean the entrepreneur who killed the angel investor,
| or the fire chief who sprayed a homeless man (the last in a
| series) and the homeless man fought back in self-defense?
| [deleted]
| mrits wrote:
| We know what he meant. Just 10 years ago SF, Seattle, and
| Vancouver were my favorite cities and all 3 have undergone
| very unfortunate changes.
| slaw wrote:
| A lot of cities are worse than 10 years ago.
| paxys wrote:
| I have lived in SF for close to a decade, and the only
| thing that has really changed is the amount of
| politically-charged media coverage the city receives.
| reducesuffering wrote:
| The (former) fire chief Carmignani allegedly, probably,
| bear maced homeless previous previously. That is a separate
| crime. But the day the assault happened, April 5th, there's
| no evidence that the homeless man, Doty, was bear maced.
| The video footage shows Carmignani confronting Doty, Doty
| putting up his blanket like he thinks Carmignani is going
| to bear mace him (maybe he did in the past), and Carmignani
| confronting Doty as Doty is backing up out of the street.
| Then we have footage of Doty cornering Carmignani with a
| crowbar (not self defense), and then running and chasing
| after Carmignani hitting him with a crowbar (not self
| defense). There is a high chance that Carmignani could've
| died from being crowbar'd to the head.
| LewisVerstappen wrote:
| "Fought back in self-defense"
|
| Ah okay, so you're just going to blatantly lie about what
| happened?
| closeparen wrote:
| Uber calls all employees into the office on Tuesdays and
| Thursdays. https://www.uber.com/blog/our-return-to-the-office/
| crooked-v wrote:
| How many actually go, though?
| sokoloff wrote:
| https://archive.is/Owzg2
| zackangelo wrote:
| Every time stories like this get posted, the first question is
| typically "when will they convert these buildings to
| residential?". And, like clockwork, there's always someone there
| to point out that residential conversion is prohibitively
| expensive and it would be cheaper to just tear the building down
| and start over.
|
| My question is: is it possible to design high rise buildings in
| the future that can flex between residential and commercial?
| What's the extra upfront cost in plumbing, etc to build in this
| optionality from the start?
| smileysteve wrote:
| You only have to start over if you're not going to have
| communal bathrooms and kitchens.
|
| For the latter, many of these buildings do punch holes for
| restaurants closer to the ground floor.
|
| The part we don't talk about in zoning and missing middle
| conversations is that the US eliminated the lowest income
| housing, which was temporary, single occupancy, with shared
| resources ie the Saloon, brothel, short term rent, and multi-
| tenant housing in the 70s.
| CydeWeys wrote:
| Buildings don't have holes punched in them on the ground
| floor for restaurants! Buildings are almost always the widest
| at the base (for obvious reasons).
|
| "Punch holes" means actually removing building mass, not just
| adding windows. The floor plans on office buildings are so
| massive that you literally need to punch holes into every
| floor to bring windows inwards for apartments. This is a good
| example: https://twitter.com/SustainableTall/status/165728519
| 81518315...
| oh_sigh wrote:
| Do we really need windows? Yes, I'm channeling my inner
| Munger. We could have simulated windows, and as long as the
| HVAC is good I think a lot of people would live in a place
| like that, especially if those apartments sold at a
| discount relative to windowed apartments. It seems crazy to
| not even give the people a choice of whether they want to
| have a window or not. You could trial it on luxury
| apartments so no one can say "Well they don't have a choice
| they have to live in an apartment with no windows".
| texuf wrote:
| Funny, I would much rather work in a building with inward
| windows, parent comments about regulating this into
| existence are starting to sound pretty reasonable.
| ghaff wrote:
| Well, and tenement housing was eliminated before that. There
| are presumably some proper minimum standards though people
| will reasonably on what those standards should be.
| silisili wrote:
| Nobody...well, very few people want communal bathrooms and
| kitchens. If my time in offices taught me anything, it's that
| everyone else is a damn slob.
| anigbrowl wrote:
| _residential conversion is prohibitively expensive_
|
| You're quite right about how the discourse goes, but let me
| suggest that just as the office space targets and economics are
| now badly out of date, so are the default assumptions about how
| space can and should be used. Bureaucrats by nature are
| incapable of creativity, and their inability to solve the
| problem means their opinions should be heavily discounted. This
| isn't to say they have no role to play; after some new
| solutions emerge, they can look at the ups and downs and codify
| some new standards. But in a problem situation, they are just
| in the way.
| slaw wrote:
| The problem is, it is difficult to convert modern commercial
| building to have tiny 500sqft apartments. But it is not a
| problem to convert to 2000sqft apartments.
| somethoughts wrote:
| I did some fun math yesterday, the Empire State is 102
| stories and valued at 1 billion and 2.73 million square feet.
| Each floor therefore is ~26,000 square feet and ~$9.8M.
|
| If you divided each floor into 10 2,600 square foot ultra
| high end condos, the pre-improvement base cost would be
| $980,000 per unit. You could then turn around and sell them
| for probably at least $3-4M. Assuming buildout/sales costs of
| $1M per unit, you could conceivably clear $1M-2M in profit.
| 0zemp2c wrote:
| > Every time stories like this get posted, the first question
| is typically "when will they convert these buildings to
| residential?"
|
| HN needs some AI to just autofill " _asked and answered N times
| already - see here:..._ "
| derefr wrote:
| What's the point? Buildings don't cost anything. 90% of the
| value of these buildings is the land they're on.
| MichaelZuo wrote:
| What? In SF? Where construction costs alone are easily
| several hundred million dollars for a modern office
| skyscraper?
| slaw wrote:
| Permits cost more than construction.
| noughtme wrote:
| Floorplate size. Floorplate size. Floorplate size.
|
| If you required all new office buildings to have the same small
| floorplate size of a residential building, then they would be
| convertible, but thay would significantly change the economics
| of commercial real estate.
| epicureanideal wrote:
| Maybe build a new kind of housing that is INSIDE the large
| open place office, and doesn't need to have the same
| structural integrity, but focus on noise reduction and being
| secure from external entry?
|
| Like a bunch of tiny homes inside an open plan office.
| CydeWeys wrote:
| People want windows and natural light. That's the
| fundamental problem here that this doesn't solve.
| xiphias2 wrote:
| That's actually true for offices as well. That's also why
| highly paied people are running away from offices.
| epicureanideal wrote:
| I think to live for a reasonable price in SF, a lot of
| people would give up the natural light. I likely would.
| I'd just use it as a place to sleep and spend my time
| somewhere else.
| derefr wrote:
| Tall steel-and-concrete buildings are still structurally
| sound with all the facade torn off. (After all, they were
| structurally sound before the facade went _on_.) There 'd
| be plenty of light and fresh air for these "indoor
| houses" -- at least the ones around the outside -- if
| this was done.
|
| If you want even more light and air, design office towers
| to have some extra "wasted" central space, beyond just
| that needed for an elevator shaft and plumbing -- i.e.
| make them into squared-off toruses. Then, post-facade-
| stripping, it won't be dark in the middle, either.
|
| Or just build office towers that are long and narrow,
| rather than square, such that if you convert them into
| residential, you get functional "commie block"
| architecture where every unit gets not only a window, but
| a balcony.
| singleshot_ wrote:
| Counterexample, WTC 1&2, whose concrete columns around
| the outside supported it.
| singleshot_ wrote:
| A Counterexample: WTC 1&2, whose concrete columns around
| the outside supported it.
| anigbrowl wrote:
| The residential units go round the outside* and the inner
| core of the building is used for creative space, retail,
| services and so on.Just needs a little imagination.
|
| * round the outside, round the outside
| marcosdumay wrote:
| So, in other words, the requirement that offices are unwieldy
| uncomfortable spaces conflicts with the requirements that
| people feel well inside their homes.
|
| I keep wondering where do the office requirements come from,
| but I know I won't like the answer.
| bombcar wrote:
| There is a good NYT article on it - old buildings are easier to
| convert but modern office buildings are huge and you have to
| literally punch a hole in it.
|
| But it could certainly be designed to be easier to convert, as
| the older one was easier. The problem you may run into is that
| the people who want _office_ buildings won 't want the easily
| convertible building; so you might have to _legislate_ that it
| be convertible.
|
| https://www.nytimes.com/interactive/2023/03/11/upshot/office...
|
| https://archive.ph/gQiQW
| awaythrow483 wrote:
| This shouldnt be a problem due to the massive demand for office
| space in SF...
|
| I wonder at what point it will be cheaper to lease out an entire
| floor of a corporate office and throw an air matress in it then
| to rent a 3 bedroom house.
| darth_avocado wrote:
| >massive demand for office space in SF
|
| There is no demand in SF. The whole commercial real estate
| sector is in a downward doomsday spiral, something that was
| easily predictable and preventable, but the city didn't care.
|
| 30% of office space is vacant (not rented), a number that will
| only go up because the other 70% may be rented, but a lot of it
| isn't actively utilized.
|
| https://www.nbcbayarea.com/news/local/san-francisco-office-v...
|
| In fact a lot of commercial real estate owners are realizing
| this and trying to minimize losses. Some selling entire
| buildings at 75% discounts.
|
| https://www.sfchronicle.com/sf/article/this-downtown-s-f-bui...
|
| Anyone still holding a real estate lease at the ridiculous
| historical prices right now is only going to try and shed them
| even if they actually are using the space.
| awaythrow483 wrote:
| Its a joke. Sf is a basket case
| RC_ITR wrote:
| Some interesting stray observations about this:
|
| 1) SF actually has a hard cap on the amount of new office space
| it can develop in a given year. [0] A lot of people pre-
| pandemic called it one of the worst NIMBY laws in America, but
| in retrospect, what a smart policy move.
|
| 2) Depending on how much you believe Apartments.com, there are
| c. 5k apartments available for rent in SF proper (a city of
| 800k) vs. c.31k in Dallas proper (a city of 1.3mn).
|
| 3) SF currently has 35mn square feet of vacant office space and
| needs to (by law) build 80k units in the coming decades. That's
| about 500sqft of vacant space per necessary unit...
|
| It will be interesting to see if SF can transform itself into
| the world's foremost 'people live here because they want to,
| the jobs are virtual' city. I certainly wouldn't bet on other
| cities slightly lower office vacancy rates as a long-term
| structural advantage.
|
| The only problem I see with the above is the amount of doom-
| and-gloom SF residents have bought into.
|
| [0]https://sfplanning.org/office-development-annual-
| limitation-...
| tristanb wrote:
| I live here because I want to.
| georgyo wrote:
| From the article
|
| > About 31% of downtown San Francisco's office space is now
| available for lease or sublease. In early 2020, the vacancy
| rate was around 4%
|
| Demand is gone
| ghaff wrote:
| The situation in Boston isn't quite so dire but still record
| availability. What still puzzles me though is commuting
| traffic is as bad as ever. I assume some is reduced
| transit/rail schedules and usage but I wouldn't have thought
| that would account for the whole thing.
|
| (And a coworker was telling me it's the same thing in Phoenix
| which barely has a transit system.)
| Andrex wrote:
| Lived in Boston 2012-2018, I'm somehow both annoyed and
| comforted* the MBTA SILL hasn't gotten its shit together.
|
| * I wonder if there's a German word for this feeling?
| bombcar wrote:
| Maybe it's like those stories about the loyal dog in Japan
| who still goes to the train station each day even though
| their master is long dead.
|
| All the laid off people still commute to an empty office
| and stand outside hoping for a job.
| ilc wrote:
| The T is SEVERELY fucked right now. Anyone who can drive
| will in Boston, at the moment.
| Kon-Peki wrote:
| What's going on with it? I have to be in Boston next week
| and was planning to use the T...
| ghaff wrote:
| There have been some major (overdue) maintenance projects
| that have caused service cutbacks on, I think, the red
| and orange lines in particular. I also saw just a couple
| days ago there were delays on my commuter rail line due
| to rail work.
|
| But the parent is being a bit hyperbolic. There is still
| a mostly functioning subway system. You can check the
| mbta.com website. As I look now there are delays but
| probably nothing too awful for someone in the city for a
| few days.
| Kon-Peki wrote:
| Ugh, I will be needing to get from Revere Beach to
| Harvard Square, so Blue/Orange/Red was the plan. Perhaps
| Blue/Green/Red is better?
|
| I'd really prefer to avoid a ride share or rental car.
|
| Edit - it appears that it's less than a 10 minute walk
| from Govt Center (blue) to Park St (red). That's better
| than waiting for a train and taking for a single stop,
| right?
| ghaff wrote:
| Just check the site.
| jewayne wrote:
| Oh, I happen to know the root cause on this one. Remember
| the Big Dig? It went so horrifically over budget, either
| the city or the state forced the MBTA to assume a large
| share of the debt. Since then, the MBTA has been
| hamstrung financially, leading to deferred maintenance,
| etc.
| awaythrow483 wrote:
| Oh weird. Well, no biggie. Im sure SF will figure something
| out and it will all be fine
| jnwatson wrote:
| Manhattan is at 22% now.
| zdragnar wrote:
| Offices are built to different standards than residential use.
| The amount of effort to add new plumbing and wiring, to
| separate out utilities, etc is very seriously underestimated.
|
| There's an old office building near where my parents live that
| got converted to residential units. The contractor who did the
| conversion said it would have been cheaper to tear the building
| down and rebuild, but the owner felt there was some historic
| value to the building. Either way, the only way to make the
| transition feasible was to price the units at a luxury level.
|
| Mind you, this isn't even California, but the Midwest, where
| zoning, regulations and construction costs are more sane. I
| don't know how viable the same project would have been out
| there.
| bilbo0s wrote:
| Conversions are always attractive in real estate because they
| are nearly always luxury. When I was active in that business,
| the main problem my bosses had Was rezoning. If they got over
| that hurdle, they always made a killing.
|
| Even before my time, conversions were enormously profitable.
| In NYC, long ago, converting warehouses and factory spaces to
| luxury lofts was enormous business. I don't think people
| should dismiss the amount of money to be made on conversions.
| The main drawback is that the areas the conversions are in
| become even less affordable. Which may be more than offset by
| affordability increases elsewhere in the city.
| f1yght wrote:
| It's much easier to convert older buildings than newer
| ones, just due to them being designed differently. You lay
| out structures different if you're designing a small
| building for PI style offices than you do if it's a huge
| open floor plan. It's just more difficult to break out
| those big spaces into smaller apartments while making sure
| people have enough light.
| bsder wrote:
| > converting warehouses and factory spaces
|
| Maybe not a warehouse, but a factory is a _very_ different
| conversion than a gigantic open-floor office--especially if
| the building is old enough that it existed prior to
| electricity.
| f1yght wrote:
| They're also difficult because modern office buildings just
| don't lend themselves to small apartments very well. One of
| the conversions in New York cut a giant hole through the
| middle of the building so they could have interior units that
| get light. Giant modern office buildings take a ton of effort
| to convert.
| RC_ITR wrote:
| This is actually one of the reasons SF is so well
| positioned to do this - our floorplates are notoriously
| small.
|
| Take these new buildings for example:
|
| SF Offices:
|
| - Salesforce Tower: 1.4mn square feet over 61 floors (23k
| sqft/floor)
|
| - 250 Howard: 734k sqft over 43 floors (17k sqft/floor)
|
| - 350 Mission: 455 sqft over 30 floors (15k sqft/floor)
|
| Office Elsewhere:
|
| - 10 Hudson Yards (NYC): 1.8mn sqft over 52 floors (35k
| sqft/floor)
|
| - BMO Tower (Chicago) - 1.5mn sqft over 51 floors (29k
| sqft/floor)
|
| - Block 158 (Austin) - 720k sqft over 35 floors (20k
| sqft/floor with bottom floors c.3x larger than top floors)
|
| Newly built large residential buildings in SF were usually
| 15-20k sqft/floor (e.g., The Avery), so there are actually
| very few buildings here that don't work for residential.
| alephnerd wrote:
| The square footage isn't the issue - it's the water+gas
| pipes along with windows and lighting. You'll need to do
| a floor by floor renovation of water+gas lines along with
| thinking about how to architect apartments in a way to
| get lighting.
|
| All that is a significant investment in a city with very
| high labor prices (because most skilled trade types got
| priced out), so it might not be economical to do such a
| redesign at the moment.
| RC_ITR wrote:
| The alternatives are building a building from scratch
| while these offices sit empty, no? Certainly you must
| agree retrofits are cheaper than _building an entire new
| building._ Also fyi, SF isn't even allowing gas in new
| buildings anymore.
|
| I agree with your logic when CRE yields 1.5x the rent of
| residential, but the model needs to be updated now that
| it's no longer the case.
|
| Is your base cases these offices sit empty forever? Get
| torn down?
|
| I think _that_ line of thinking is the one massively
| ignorant of the realities of real estate.
|
| In a city with almost no residential rental vacancies?
| That's the end-game?
|
| EDIT: For everyone direct-quoting:
|
| _The conversion alone might cost about $400 or $500 per
| usable square foot, Mr. Bernstein added, and would in
| many cases be more expensive than building a new
| development.
|
| A recent Moody's analysis of New York offices found that
| just 3 percent of the buildings it tracked would be
| viable for apartment conversions. The median rent for
| apartments in New York is $55 per square foot, which just
| 36 percent of office properties now fall at or below --
| and on top of that, there's all the cost of conversion._
|
| $500 is nowhere _near_ the fully-loaded cost to build new
| in _any_ US city. The quoted man is comparing the cost to
| the _delta_ in rent to his out-of-date understanding of
| what offices can yield.
|
| It is just a simple fallacy to believe that SF/NYC
| offices can command $75/sqft at any reasonable occupancy
| level.
|
| The economics of conversions only don't work _when
| offices command premium rents,_ it 's not some axiomatic
| fact about the world (the way it was before the
| pandemic).
| alephnerd wrote:
| > Certainly you must agree retrofits are cheaper than
| building an entire new building.
|
| Yes I agree with you, but who pays for it? JLL and CBRE
| are large and diversified enough that they can eat the
| cost of their SF commercial properties being vacant.
|
| It doesn't make sense for them to spend funds on
| retrofitting their properties into apartments when they
| can regeotiate their mortgage commitment to be much more
| amenable in the short term, especially when similar
| residential properties in SF like NEMA, The Gateway, and
| others continue to have elevated vacancy rates.
|
| You can't force private businesses to do residential
| retrofits - they'll only do it if there is a viable
| financial case for them to do it.
|
| Most luxury residential property in SF is owned and
| managed by Greystar, Avalon, and UDR. These are different
| companies from JLL and CBRE who own the vacant office
| buildings. At that point, who pays for the retrofit -
| JLL+CBRE or the residential landlords line
| Greystar+Avalon+UDR? It doesn't make sense to either
| because they are large, diversified international
| companies that have better opportunities to deploy the
| capital they have at hand (eg. NoMA in DC, NYC, etc). Why
| spend $1-2 billion renovating+retrofitting when you can
| spend the same amount with a better RoI in other markets.
| zamnos wrote:
| I hear you on all that, but that seems to be an argument
| that corporations with headquarters outside the bay area
| (like landlords who live outside the bay area) shouldn't
| be allowed to own real estate in San Francisco.
| bilbo0s wrote:
| The point is that you can do these conversions in places
| where you'll make a ton of money from them. No one's
| talking about converting them to 3 or 4 thousand dollar a
| month apartments. I think most people understand that you
| do a conversion in lower Manhattan and you're doing it for
| the "multi million per" class. So there is plenty of money
| to pay for these in Boston, NYC and San Fran.
|
| Of course, that also means there is plenty of money to pay
| for a teardown. But being torn between making a killing
| tearing down and rebuilding vs making a killing doing a
| conversion is a good problem to have.
| smileysteve wrote:
| Now shift to communal bathrooms and kitchens, possibly on the
| ground floor.
|
| Immediately the safety codes for ventilation no longer
| matter, immediately the plumbing is satisfactory.
|
| You could even have walls made of cubicle panels.
|
| Is this going to be the equivalent of a studio apartment, no,
| but it should cost a lot less.
| RC_ITR wrote:
| >Offices are built to different standards than residential
| use. The amount of effort to add new plumbing and wiring, to
| separate out utilities, etc is very seriously underestimated.
|
| People _always_ say this and it is true when CRE yields 1.5x
| the rent of residential, but we are no longer in that world.
|
| The _real_ thing that people underestimate is that now the
| alternative is _building new_ residential, which is _always_
| more expensive than converting.
|
| I think a lot of people, for whatever reason, have seen the
| entire world change due to COVID, but are just unwilling to
| believe anything has changed about office conversions.
| refulgentis wrote:
| Unfortunately, or fortunately, it is not the case that
| building new is always more expensive than converting. NYT
| article on this subject linked in the thread above this one
| is extremely informative (as well as the anecdote in
| another comment)
| [deleted]
| closeparen wrote:
| A condo in this neighborhood is at least $1 million. Just how
| complex can these plumbing jobs be?
| [deleted]
| pyinstallwoes wrote:
| What demand for office space?
| awaythrow483 wrote:
| I know a guy who said he wants to work there
| makestuff wrote:
| I can see the next "disrupting" startup now. Sublease a bunch
| of office space, skirt regulations and convert it into
| "apartments" that are more like hostels, and finally lease it
| out at a loss. Maybe that is why adam neumann raised 300m for a
| housing startup.
| spamizbad wrote:
| Seems like all that bluster from mayors and certain business
| leaders to get people back into the office isn't working.
| 0zemp2c wrote:
| it will eventually
|
| call centers, tax prep sweatshops, data entry, cold-call sales
|
| i.e. people who can't just say "no" to RTO orders
|
| SF government will brag about low vacancy rates, but the towers
| will be filled with minimum wage workers
| spamizbad wrote:
| Rents are still too high to support those.
| erehweb wrote:
| I don't think that pencils out well. Call center work or
| stuff that can be done remotely is best done in a low cost of
| labor state.
| TomK32 wrote:
| Just call Sam Altmann, he sure will be happy to spend money to
| rent all the available space, now that he just called remote work
| to be over...
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