People forget, or might not know that in Sep '22 Gavin Newsom signed a state law opening up commercial real estate for residential development. NIMBY cities have no choice, as the location isn't re-zoned, the state just allows the construction to convert from Com to Res.
There is going to be a construction boom as commercial real estate demand and costs continue to fall, and companies start to look at what to do with their vacancies.
If you think CBRE is going to take a big hit in this, they could come out on the other side of the transition much stronger. During the boom and bust cycles of the Bay Area, especially in SF, some long term commercial tenants could use vacancy rates to argue to lower their lease. By converting to Residential, the owners have nearly no risk. Each tenant represents a smaller portion of their overall income from the building, versus dealing with larger commercial tenants, so if one of them tries to threaten to leave it's no big deal. In SF they will have 100 applications in the first hour. Or years long wait lists they can immediately pull from. A building full of $5k-$15k a month for apartments in SF will keep their revenue nearly the same.
I already know of several buildings in SF that have been commercial for 70+ years that are being converted. Some of them are offsetting the low income or below market value guidelines by doing multiple buildings at once and calling it one development. Prime location is all luxury apartments and the 10% of the low income apartments that should be there are in another building entirely.
TLDR: Commercial real estate market drying up, market changes to residential, CBRE: Global Commercial Real Estate Services GRES: Global Real Estate Services.
Janus408 t1_je73e1b wrote
Reply to SF commercial real estate: Office vacancy 28% (CBRE). Rents have fallen 15% (JLL) by scott_jr
INB4: Coomercial Real sTate fuked.
People forget, or might not know that in Sep '22 Gavin Newsom signed a state law opening up commercial real estate for residential development. NIMBY cities have no choice, as the location isn't re-zoned, the state just allows the construction to convert from Com to Res.
There is going to be a construction boom as commercial real estate demand and costs continue to fall, and companies start to look at what to do with their vacancies.
If you think CBRE is going to take a big hit in this, they could come out on the other side of the transition much stronger. During the boom and bust cycles of the Bay Area, especially in SF, some long term commercial tenants could use vacancy rates to argue to lower their lease. By converting to Residential, the owners have nearly no risk. Each tenant represents a smaller portion of their overall income from the building, versus dealing with larger commercial tenants, so if one of them tries to threaten to leave it's no big deal. In SF they will have 100 applications in the first hour. Or years long wait lists they can immediately pull from. A building full of $5k-$15k a month for apartments in SF will keep their revenue nearly the same.
I already know of several buildings in SF that have been commercial for 70+ years that are being converted. Some of them are offsetting the low income or below market value guidelines by doing multiple buildings at once and calling it one development. Prime location is all luxury apartments and the 10% of the low income apartments that should be there are in another building entirely.
It also shores up their street level commercial spaces because all those fucking people need coffee and food. The spaces have built-in customers. This is ground-up construction, but basically what they will try and do elsewhere
TLDR: Commercial real estate market drying up, market changes to residential,
CBRE: Global Commercial Real Estate ServicesGRES: Global Real Estate Services.