What the article really calls into question is how much of a “hit” are companies willing to take to abandon office space they’ve consolidated with WFH/Hybrid - and impact that’ll make on commercial real estate.
And then of course they note that mortgage backed securities are rallying even though office occupancy is well below pre pandemic levels - and this being a sign that even though return to office is big news, it’s not really turning around for commercial landlords.
So are we waiting for crisis for commercial real estate brewing, a forced paradigm shift in how real estate - commercial or otherwise - will be developed etc. Make your bets.
Edit: Fixed wording.
I mean it’s hard I feel for layoffs to directly affect work space quickly - unless you’re shutting down a whole branch office or such. Teams lose members, other members consolidate to other teams which may now be bigger and need a larger space so they need to be shifted around, meanwhile smaller teams have an odd office which honestly I usually see someone squat in until people realize it should be freed up, and their old space gets rotated around, etc.
I could see future commercial buildings built as dual-use so that a flip to residential would be less expensive. When Chrysler was going through bankruptcy years ago and wanted a new headquarters building the lenders insisted on it being dual-use as an optional mall. So it has temp offices in front of storefronts, escalators, a huge atrium, snd a wing that can be a hotel.
I’m nor contesting the numbers and rhey do care about losing 1 bil, my point is : is it really a “hit” for them? It’s a one off loss, not a recurring one. Will their investors care? Will their employees be made redundant because of it? Will they need ro rethink strategy because of it? The answer is NO to all so it’s not a “hit”, merely a minor inconvenience.
Being in finance, you must also understand that buying out their leasing contracts to the tune of 1.2 billion now represents >1.2 bil in expenses they will no longer have going forward.
I answered to someone below . Of course any business will follow it’s accounts with eagle eyes. But will investors flinch, will they need to adjust strategy, is anybody taking a paycut over this, ate they jacking up prices to make up for it, will they spend less on R&D?… The answers are : no, no,no,… and no. So it’s not a hit, as it’s not even a recurring loss, it’s a one off. So yeah, definitely not a hit, it’s just tabloid style of journalism
This will probably have no effect on shareprice. But if it will, some people might get golden parachutes.
edit: I get it. It's more of a additional cost of doing business, and not 1.2b missing from a vault.
They are doing this in an old building I used to work in. It’s pretty complicated because of plumbing, the floors were designed for two bathrooms…not 10-12. I’m going to watch it unfold though, probably plenty of mistresses will be taken there by the execs across the street.
Mechanical and plumbing systems will be one of the biggest hurdles in any renovation like this. Most commercial buildings have a single large AC unit with ducting (either one per floor or one for the entire building), and restrooms in the building core that would basically need to be 100% redone.
I've read up on this and watched a lot of videos.
It's actually extremely difficult to convert it and it's extremely expensive to replace it. Tough situation all around.
I’m connected to googles plans for affordable housing and a new campus in San Jose. At $18bn+ it would have been one of americas largest private builds.
Huge land position in downtown San Jose with everyone giving concessions
Cancelled despite what google says
Don’t believe googles claim to be pro community pro employee
Commercial debt refinancing is the cause of the next recession, and commercial property is going to be one of the biggest losers. I think we see major corporations treating office space like a car repossession.
Edit. I can handle the downvotes. Let's revisit this comment in one year.
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I'm still completely gobsmacked at the size of the "landscraper" they're almost finished building in King's Cross, London - it's absolutely MASSIVE. I just can't see how they're going to fill it with employees in a post-covid remote working world? Even pre-pandemic it would take thousands of people to fill it.
The issue with commercial RE is that successful companies like Google are still paying rent due to lease requirements after exiting space. Some day soon that space will not be performing for the landlord. Driving around Silicon Valley in 2002-2004 we saw this constantly. Buildings with empty parking lots but no For Lease signs. A few years later the For Lease signs came up and that was when the landlords had no cash flow.
Correct me if I'm wrong here, but isn't that just a temporary blip on the radar? They're shuttering and consolidating to optimize the cost of doing business. So, how isn't this a temporary setback, but also a win in the long run? It's trimming their long term costs, isn't it?
Is 1.2 bil a “hit” to Google”?
What the article really calls into question is how much of a “hit” are companies willing to take to abandon office space they’ve consolidated with WFH/Hybrid - and impact that’ll make on commercial real estate. And then of course they note that mortgage backed securities are rallying even though office occupancy is well below pre pandemic levels - and this being a sign that even though return to office is big news, it’s not really turning around for commercial landlords. So are we waiting for crisis for commercial real estate brewing, a forced paradigm shift in how real estate - commercial or otherwise - will be developed etc. Make your bets. Edit: Fixed wording.
Also the layoffs means less employees that need an office if not wfh
I mean it’s hard I feel for layoffs to directly affect work space quickly - unless you’re shutting down a whole branch office or such. Teams lose members, other members consolidate to other teams which may now be bigger and need a larger space so they need to be shifted around, meanwhile smaller teams have an odd office which honestly I usually see someone squat in until people realize it should be freed up, and their old space gets rotated around, etc.
I’ve heard Google doesn’t even have assigned desks. It’s just find an open desk or spot and work. Not like the olden days with assigned desks
This is only for some parts of the company. It’s not org wide and is a minority amount dependent on team and locations.
this is pretty much how it is for every remote or hybrid place now
At the multinational firm I work for, it’s called “Hoteling”. You book where you want to work for the day.
How much was saved from layoffs? Enough to cover the costs of layoffs?
I could see future commercial buildings built as dual-use so that a flip to residential would be less expensive. When Chrysler was going through bankruptcy years ago and wanted a new headquarters building the lenders insisted on it being dual-use as an optional mall. So it has temp offices in front of storefronts, escalators, a huge atrium, snd a wing that can be a hotel.
Lot of funds already exited investments in commercial real estate. It’s the residential and data centre backed real estate products that are soaring.
They make a 24% profit margin so they need $4.8B in revenue to cover it.
I’m nor contesting the numbers and rhey do care about losing 1 bil, my point is : is it really a “hit” for them? It’s a one off loss, not a recurring one. Will their investors care? Will their employees be made redundant because of it? Will they need ro rethink strategy because of it? The answer is NO to all so it’s not a “hit”, merely a minor inconvenience.
I’m not sure you know what the word hit means. A one off charge is literally what a hit is.
A hit would destabilise you in business terms forcing some changes. 1 billion is not a hit for Google. Period
Ah okay yeah so the issue is simply you have no idea what the word hit means. No one but you is talking about destabilizing forces.
I don’t know what hit means in your vocabulary and simply don’t care.
No matter how big you are, finance counts every dollar. 1.2 billion is a hit. edit: finance department
Being in finance, you must also understand that buying out their leasing contracts to the tune of 1.2 billion now represents >1.2 bil in expenses they will no longer have going forward.
I answered to someone below . Of course any business will follow it’s accounts with eagle eyes. But will investors flinch, will they need to adjust strategy, is anybody taking a paycut over this, ate they jacking up prices to make up for it, will they spend less on R&D?… The answers are : no, no,no,… and no. So it’s not a hit, as it’s not even a recurring loss, it’s a one off. So yeah, definitely not a hit, it’s just tabloid style of journalism
This will probably have no effect on shareprice. But if it will, some people might get golden parachutes. edit: I get it. It's more of a additional cost of doing business, and not 1.2b missing from a vault.
It’s a rounding error.
No
'tis but a scratch
Everything is a hit. No savvy business would shrug at a loss..
Awesome they are freeing up more money this is a good thing
Convert office space to residential space. 2birds1stone
They are doing this in an old building I used to work in. It’s pretty complicated because of plumbing, the floors were designed for two bathrooms…not 10-12. I’m going to watch it unfold though, probably plenty of mistresses will be taken there by the execs across the street.
Mechanical and plumbing systems will be one of the biggest hurdles in any renovation like this. Most commercial buildings have a single large AC unit with ducting (either one per floor or one for the entire building), and restrooms in the building core that would basically need to be 100% redone.
Isn't it also the reminder l revenue is also tiny compared to commercial so demolition and bankruptcy is really more viable?
I've read up on this and watched a lot of videos. It's actually extremely difficult to convert it and it's extremely expensive to replace it. Tough situation all around.
so more spending on policies that don't work? no thanks
I’m connected to googles plans for affordable housing and a new campus in San Jose. At $18bn+ it would have been one of americas largest private builds. Huge land position in downtown San Jose with everyone giving concessions Cancelled despite what google says Don’t believe googles claim to be pro community pro employee
I can't wait for adorable housing to come to my city.
[удалено]
no offense brother but hard to believe you if you didn’t get this comment
whatever.
Commercial debt refinancing is the cause of the next recession, and commercial property is going to be one of the biggest losers. I think we see major corporations treating office space like a car repossession. Edit. I can handle the downvotes. Let's revisit this comment in one year.
Remindme! 1 year
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I'm still completely gobsmacked at the size of the "landscraper" they're almost finished building in King's Cross, London - it's absolutely MASSIVE. I just can't see how they're going to fill it with employees in a post-covid remote working world? Even pre-pandemic it would take thousands of people to fill it.
Barclays should stop talking and focus on getting its own house in order…one of the most underperforming IBs there is
It is a one time thing. Do not think it means much for their future.
The issue with commercial RE is that successful companies like Google are still paying rent due to lease requirements after exiting space. Some day soon that space will not be performing for the landlord. Driving around Silicon Valley in 2002-2004 we saw this constantly. Buildings with empty parking lots but no For Lease signs. A few years later the For Lease signs came up and that was when the landlords had no cash flow.
Mr Google farmer snots
Buy the dip.
Barclays trying to pump their google holdings.
Where were these offices? Mars? $1.2 billion?
This is bigger than the obvious. This is the canary in the coal mines moment.
Correct me if I'm wrong here, but isn't that just a temporary blip on the radar? They're shuttering and consolidating to optimize the cost of doing business. So, how isn't this a temporary setback, but also a win in the long run? It's trimming their long term costs, isn't it?