Yeah, it ends with the littles guys footing the bill for the big guys so they don’t get boo-boo’s. Corporate socialism ho!
You know what they say “privatize the profits, socialize the losses”
Kinda. The housing crisis was caused by new schemes around high risk home loans. A lot of these commercial property loans were likely deemed very low risk, but then a global pandemic completely upended a century of commercial real estate precedent.
Go to any major metro area in the western world, and you’re probably going to find lots of vacant offices and commercial tenants thirsting for their lease to expire.
So a similar end result, but how we got here was likely a less about greed and negligence, and more about a radical shift in human behavior.
The ‘reserves’ are just money they put away for bad loans. All this means is that they’ll have some quarters of lower profits, NOT that they’re going bankrupt.
Lower profits means death
Perhaps. But my guess is that this ain’t going to be a “few quarters” thing. More people are working remote and we just don’t need commercial office space like we did 5 years ago. Things have radically changed, and many companies are bailing on their leases as soon as they come to the end of their term. And commercial leases are often 3 to 10 years. So people are going to be bailing from those over the rest of this decade. That risk of large loan default could continue to increase.
Bingo. My company sub-leased some downtown office space to get out of it and will bail on it completely in about 5 years when the lease expires.
Yeah, same story for my company and just about all of my friends with white collar jobs. Most offices that lease property are downsizing and consolidating their spaces. Most of the people trying to use their offices are the big tech giants who actually built and own their campuses outright. Everyone else just sees a giant waste of money for very little productivity gains.
Yeah, I don’t disagree that these loans are going to cause trouble for a long time, but I disagree with the headline implying these banks can’t meet their deposits.
I think that, over the next decade, many of these commercial buildings will undergo retrofits (say to turn them into housing) which will help the owners / lenders recoup much of the costs.
IMHO, I need context for the risk numbers they’re throwing around. I don’t have enough information to make a call one way or the other.
What should a healthy bank, that is doing right by its clients, have in reserve? What does the trend line for reserves look like? What is going to happen if banks are sitting on a bunch for foreclosed office buildings that are cheaper to demolish than to redesign into housing? If banks take a giant unexpected loss on a formerly safe investment, what does that do to the other customers using other financial products?
Wrong country bud
Well yes but no
I mean, this is literally a very China specific housing problem, and it is not related to the main article, which is about people vacating offices to work remote.
This is like comparing a burrito to a cheesecake. They might both include flower and cheese, but they are very different things. Just because these stories both involve real estate and lending doesn’t mean they’re related.
China’s problem is a big mess with developers over borrowing in the past, and not and being able to borrow now. The problem in your main article is mainly about commercial buildings like offices, which people no longer want to lease, because so many people are working remote.
This vacant office problem has less to do with greed and more to do with white collar humans deciding to instantly, and radically, change where they go to work.
Oversupply in real estate causing banking debts to go underwater is the same problem, regardless of how that oversupply happened.
The nuance is important because who or what we blame will guide our solutions to the problem and what we do to mitigate the risk of it happening again.
The burrito and the cheesecake are both food, but if you start eating a cheesecake a couple times a week for lunch, you’re going to have problems. Nuance is important.
Can you name a source that isn’t some boomer propaganda?
Convert them to condos, like they did with all the warehouses when supply chains transitioned to just-in-time. Two birds, one stone.
AGAIN ???
Didn’t we JUST do this shit? How many goddam times are WE, the people who pay for it, going to give money to “THEM” - the people & corporations the government will “bail out”. Fuck this game.
I wonder how much of this is driven by the shift to remote and hybrid work. My city (San Francisco) is littered with vacant and sparsely populated commercial properties that are desperately trying to attract corporate tenants with cheap leases.
Moreover, no one is converting these unused offices in to residential properties. I’m guessing because the average price per square foot is significantly lower for SF property targeting residential use.
