Ha! So true. And Bill briefly mentioned London and Paris. The city-suburb situation is flipped in France, where many poorer folk live in suburbs, and richer ones live in the cities. I'm not certain about London or other major cities across the pond Considerable rioting in the suburbs right now around Paris and other major French cities over a police shooting, so I assume if Bill returns to Paris soon, there will be lots of police protection around Charles de Gaulle Airport, which is fortunately in an outer suburb of Paris. And I expect the rioting won't have any effect on the Eurostar route into downtown Paris.
In aviation the term is Top of Descent(TOD). That is the point where an aircraft starts its’ descent for the destination airport. Our economy, our culture, our nation is running well past TOD, which arguably occurred some time in the 1990s, although some would peg it at the Vietnam War, with an altitude hold from 1984 to 1996. I have always been a realist, neither manufacturing optimism nor succumbing to pessimism. The latter requires a lot more work these days.
“What will our cities look like when the cycle reaches the end?” That’s an interesting question. Over the last 50 years the West gave up its manufacturing to the East and lived off its goodwill which was its only real asset. By lowering interest rates, asset prices when up and hence we could borrow more to buy more stuff from the East. However, when you get to zero interest rate and you need to begin printing money you know there’s no more goodwill left to leverage. The game is up!!
Which leads us to our cities ... we in the West either begin a manufacturing renaissance, produce some surpluses and pay off debt or the nations that produce those surplus will make our cities there cities ... and in there image ... and probably change the names too!!
I would also assume that many office buildings were bought with low, fixed financing over 30+ years. Many people forget too that in Europe 100 year mortgages are common, often at fixed rates. That said, fixed rates do not replace the vacuum left by the exodus of office workers and terminated leases. Indeed, what will the note holders use to pay the mortgage? The office park where I work in is, let's say, 20% filled on a busy day. I don't see how lessee's and lessor's can keep going on like this. Something will break.
Thank goodness commercial properties are in trouble. The ridiculous spending, free money and the asset price climb has produced the WEF, EU and Biden who are heading toward WWIII hoping to stay in office. Al this nonsense is really getting just plain absurd to listen to and its a pain to fret over this constant nonsense. Maybe this collapse of commercial real estate will help lower all property prices to the point where a productive family can afford a house. Maybe they will be buying from Blackrock which might be selling for 10 cents on the dollar with a little poetic justice to boot.
The vortex pulling commercial office building valuations down the drain is reminiscent of the '90-'91 era, which marked the end of the S&L industry as well as the shift of ownership of such properties from private ownership to institutional ownership. Different causes, similar result - leverage gone wrong doesn't discriminate. The shareholders of said institutions (banks, insurance companies, REITs, pension trusts) will take the hit this time.
I lament the large city destruction, I grew up in one. If there can be a bright spot, I would like to bring it forward. My two daughters went to two different colleges and married boys that grew up within 30 miles of each other. I am of your vintage and have a small business in a polarized part of the south. I have a home, and all my children and grandchildren live in middle Tennessee, not Nashville, but small towns hours from there. It is strange; but what I witnessed was the community of people that gather for ball games of all sorts, and other activities,. I expected the young people to know each other but, their parents and grandparents all new each other and race played no part in the association, all hugged when they arrived. I'm not saying there are no issues in their communities but they are nothing like what we witness every night on the news. Just to give people hope, it's possible.
Thank you Jim for pointing out the fact that if “ All politics are local “ as Bill stated above, then so is life. Most folk just want to work, support their families, and get along with their neighbors and communities. Then you have the democrat/communist who wants to take all you work for, riot and steal for things you don’t give them, and create Hell on earth because of their self loathing, ignorance and mental illness. Yes Jim C, hope is possible, just not in Democrat run towns, cities nor States…as we watch our nation fall to the same hopelessness 🤔
I have two small commercial centers, one in Asheville, NC, and one in Naples, FL. We are full, with tenants wanting more space, and we are raising rents. We have no debt, and monthly requests to purchase the properties. I just wonder what we are doing wrong?
I have been a newsletter subscriber for years, Bill, and really enjoy all your people's comments.
Hmmm, one must wonder what type of local politics dictates policy in those two areas?
I don't know about NC, but I do know about SW Florida. There is an obvious pattern emerging with regard to a direct correlation between which political "party" is in power and a locality's ability to thrive as a viable community...
I mentioned it for that that reason. The politics are polar opposite. Asheville is solid Liberal, and Naples, Conservative, yet the are good commercial real estate areas. Go figure?
I gotcha. That is interesting and I have to wonder if it is just a matter of time until Asheville RE falls on hard times due to dimo government policies? Higher taxes, reduced protective services and a dirtying-up of what is allowed/accepted/celebrated in the local culture may make living there less appealing. Who knows - it's obvious some people enjoy wallowing in a sewer quality of life and live primarily to add to the degradation. I would hope that doesn't happen in your corner of NC.
On a side note - I am in a labor intensive industry (Landscape - Construction and Maintenance) and we have a branch in Naples. The rents are such that we must shuttle our workers into our physical location everyday because none can afford to live in Naples, even though they work there daily. Note that we pay rather well compared to the rest of the industry, it's just that rental prices are too high in that area and apparently 8-10 young latino men all living in one residence is frowned upon. :) We have a manager on the East coast that owns a riverfront vacation rental in Naples - last time we talked about it the property was 100% pre-booked through March '24. I told him he wasn't charging enough.
Naples is a beautiful, peaceful place with a high percentage of retirees. Fantastic beaches and LOTS to do if you like the outdoor lifestyle. Great small town place to live if one can afford it...
The best of times always seems to lead to the worse of times, and there will be blood in the streets. The smart money will not (as the politician decry) take advantage of a bad situation. The smart money will create the market allowing the fools to take less of a hair cut or a total loss.
I wonder what our incompetent leaders will do in an effort to save the day. Whatever they do it will be bad for everyone, and add 20 years more to right the ship, if they don't sink the ship entirely.
Then again if the ship sinks the Swamp will get a second chance to right all wrongs. I believe all debts will be forgiven and all bank and brokerage accounts will be drained to refinance the banking system. This time around we'll have a Federal digital currency. Both parties will cheer in unison, and the newly minted piss poor wiped out middle class will love the debt relief even if it put them in the same boat as the poor. The poor don't own anything and as we've witness in every big city will take what they need from Walmart as they feel necessary.
Mr. Bonner … perhaps your article should have noted the difference between “recourse” loans and “nonrecourse” loans …. Many of us cannot simply “walkaway” from our financing, regardless of rental income & property taxes.
Empty office buildings means empty city centers. A version of this phenomenon can be already be seen in small cities whose "downtown" shops shuttered when WalMart came to town and/or when their industries moved to China. Few of the small town city centers have ever been able to restore their vibrancy. Asheville NC is one of the exceptions.
Obviously to prop up the market and get reelected. See forgiveable loans to businesses during covid. Loan forgiveness during mortgage crisis, etc. I was actually looking for a response from Bill.
Me? I'm nobody*. Just one of the producers enabling this sh*tshow to continue seemingly unabated.
Nothing personal with my comment Mr. Jarvis and Yea! for you, being able to commune directly with the poohbah "off and on for 20 years." He doesn't ever send me personal notes nor does he answer my prayers.
*Apparently evidenced by the fact that I don't get personalized communications...
A play on words comes to mind: "Downtown" is becoming "Town Down"
Ha! So true. And Bill briefly mentioned London and Paris. The city-suburb situation is flipped in France, where many poorer folk live in suburbs, and richer ones live in the cities. I'm not certain about London or other major cities across the pond Considerable rioting in the suburbs right now around Paris and other major French cities over a police shooting, so I assume if Bill returns to Paris soon, there will be lots of police protection around Charles de Gaulle Airport, which is fortunately in an outer suburb of Paris. And I expect the rioting won't have any effect on the Eurostar route into downtown Paris.
Those damn white French kids just don't know when to let up...
😂😂😂😂😂😂😂
In aviation the term is Top of Descent(TOD). That is the point where an aircraft starts its’ descent for the destination airport. Our economy, our culture, our nation is running well past TOD, which arguably occurred some time in the 1990s, although some would peg it at the Vietnam War, with an altitude hold from 1984 to 1996. I have always been a realist, neither manufacturing optimism nor succumbing to pessimism. The latter requires a lot more work these days.
“What will our cities look like when the cycle reaches the end?” That’s an interesting question. Over the last 50 years the West gave up its manufacturing to the East and lived off its goodwill which was its only real asset. By lowering interest rates, asset prices when up and hence we could borrow more to buy more stuff from the East. However, when you get to zero interest rate and you need to begin printing money you know there’s no more goodwill left to leverage. The game is up!!
Which leads us to our cities ... we in the West either begin a manufacturing renaissance, produce some surpluses and pay off debt or the nations that produce those surplus will make our cities there cities ... and in there image ... and probably change the names too!!
I would also assume that many office buildings were bought with low, fixed financing over 30+ years. Many people forget too that in Europe 100 year mortgages are common, often at fixed rates. That said, fixed rates do not replace the vacuum left by the exodus of office workers and terminated leases. Indeed, what will the note holders use to pay the mortgage? The office park where I work in is, let's say, 20% filled on a busy day. I don't see how lessee's and lessor's can keep going on like this. Something will break.
Thank goodness commercial properties are in trouble. The ridiculous spending, free money and the asset price climb has produced the WEF, EU and Biden who are heading toward WWIII hoping to stay in office. Al this nonsense is really getting just plain absurd to listen to and its a pain to fret over this constant nonsense. Maybe this collapse of commercial real estate will help lower all property prices to the point where a productive family can afford a house. Maybe they will be buying from Blackrock which might be selling for 10 cents on the dollar with a little poetic justice to boot.
And, very soon, the interest on the Federal Debt will be more than the Defense Department Budget.
The vortex pulling commercial office building valuations down the drain is reminiscent of the '90-'91 era, which marked the end of the S&L industry as well as the shift of ownership of such properties from private ownership to institutional ownership. Different causes, similar result - leverage gone wrong doesn't discriminate. The shareholders of said institutions (banks, insurance companies, REITs, pension trusts) will take the hit this time.
Bill,
I lament the large city destruction, I grew up in one. If there can be a bright spot, I would like to bring it forward. My two daughters went to two different colleges and married boys that grew up within 30 miles of each other. I am of your vintage and have a small business in a polarized part of the south. I have a home, and all my children and grandchildren live in middle Tennessee, not Nashville, but small towns hours from there. It is strange; but what I witnessed was the community of people that gather for ball games of all sorts, and other activities,. I expected the young people to know each other but, their parents and grandparents all new each other and race played no part in the association, all hugged when they arrived. I'm not saying there are no issues in their communities but they are nothing like what we witness every night on the news. Just to give people hope, it's possible.
Jim C.
Thank you Jim for pointing out the fact that if “ All politics are local “ as Bill stated above, then so is life. Most folk just want to work, support their families, and get along with their neighbors and communities. Then you have the democrat/communist who wants to take all you work for, riot and steal for things you don’t give them, and create Hell on earth because of their self loathing, ignorance and mental illness. Yes Jim C, hope is possible, just not in Democrat run towns, cities nor States…as we watch our nation fall to the same hopelessness 🤔
I have two small commercial centers, one in Asheville, NC, and one in Naples, FL. We are full, with tenants wanting more space, and we are raising rents. We have no debt, and monthly requests to purchase the properties. I just wonder what we are doing wrong?
I have been a newsletter subscriber for years, Bill, and really enjoy all your people's comments.
'All politics are local' - Tip O Neill
Hi Mr. Ellis -
Hmmm, one must wonder what type of local politics dictates policy in those two areas?
I don't know about NC, but I do know about SW Florida. There is an obvious pattern emerging with regard to a direct correlation between which political "party" is in power and a locality's ability to thrive as a viable community...
I mentioned it for that that reason. The politics are polar opposite. Asheville is solid Liberal, and Naples, Conservative, yet the are good commercial real estate areas. Go figure?
I gotcha. That is interesting and I have to wonder if it is just a matter of time until Asheville RE falls on hard times due to dimo government policies? Higher taxes, reduced protective services and a dirtying-up of what is allowed/accepted/celebrated in the local culture may make living there less appealing. Who knows - it's obvious some people enjoy wallowing in a sewer quality of life and live primarily to add to the degradation. I would hope that doesn't happen in your corner of NC.
On a side note - I am in a labor intensive industry (Landscape - Construction and Maintenance) and we have a branch in Naples. The rents are such that we must shuttle our workers into our physical location everyday because none can afford to live in Naples, even though they work there daily. Note that we pay rather well compared to the rest of the industry, it's just that rental prices are too high in that area and apparently 8-10 young latino men all living in one residence is frowned upon. :) We have a manager on the East coast that owns a riverfront vacation rental in Naples - last time we talked about it the property was 100% pre-booked through March '24. I told him he wasn't charging enough.
Naples is a beautiful, peaceful place with a high percentage of retirees. Fantastic beaches and LOTS to do if you like the outdoor lifestyle. Great small town place to live if one can afford it...
The best of times always seems to lead to the worse of times, and there will be blood in the streets. The smart money will not (as the politician decry) take advantage of a bad situation. The smart money will create the market allowing the fools to take less of a hair cut or a total loss.
I wonder what our incompetent leaders will do in an effort to save the day. Whatever they do it will be bad for everyone, and add 20 years more to right the ship, if they don't sink the ship entirely.
Then again if the ship sinks the Swamp will get a second chance to right all wrongs. I believe all debts will be forgiven and all bank and brokerage accounts will be drained to refinance the banking system. This time around we'll have a Federal digital currency. Both parties will cheer in unison, and the newly minted piss poor wiped out middle class will love the debt relief even if it put them in the same boat as the poor. The poor don't own anything and as we've witness in every big city will take what they need from Walmart as they feel necessary.
Mr. Bonner … perhaps your article should have noted the difference between “recourse” loans and “nonrecourse” loans …. Many of us cannot simply “walkaway” from our financing, regardless of rental income & property taxes.
Empty office buildings means empty city centers. A version of this phenomenon can be already be seen in small cities whose "downtown" shops shuttered when WalMart came to town and/or when their industries moved to China. Few of the small town city centers have ever been able to restore their vibrancy. Asheville NC is one of the exceptions.
As is Naples, FL...
My guess is the appearance of a classical bottom causing gold holders to sell gold and by something because it is cheep only to have it go cheaper.
I would like to know your speculations on how the government will react to plummeting commercial office values. How big is that market?
The government won’t react at all. Why would they?
Obviously to prop up the market and get reelected. See forgiveable loans to businesses during covid. Loan forgiveness during mortgage crisis, etc. I was actually looking for a response from Bill.
Hi Mr. Jarvis -
Don't hold your breath.
Are you new here?
lol
Have corresponded with Bill off and on for 20+ years.
Are you new here? Who are you?
Me? I'm nobody*. Just one of the producers enabling this sh*tshow to continue seemingly unabated.
Nothing personal with my comment Mr. Jarvis and Yea! for you, being able to commune directly with the poohbah "off and on for 20 years." He doesn't ever send me personal notes nor does he answer my prayers.
*Apparently evidenced by the fact that I don't get personalized communications...
nice.. struck a nerve. :)
Keep it up producer. You are doing great police work.