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The statistics vary among the different firms but they tell the same story. Overall office vacancy rates in downtown are more than 20%, at or near record highs for recent years. One firm focused on the added wrinkle of “shadow” vacancies, putting the sublease inventory at about 8 million square feet, amounting to around 5% of everything downtown. Avison Young said in the downtown Chicago market, $2.9 billion worth of commercial mortgage-backed securities are under pressure and could be headed toward foreclosure or forced sales.
Summary and audio linked here.
Chicago’s political leadership is floating a pension buyout program as evidence it is seriously addressing the city’s thirty-six-billion-dollar unfunded pension liability, but Mark Glennon, founder of the Illinois policy research organization Wirepoints, said that the proposal moves debt from one column to another rather than reducing it, and that the broader fiscal picture facing the city continues to deteriorate across every measurable dimension. Audio here.
Expect no retraction or apology. This what they do.
The state’s existing buyout program for its own pensions is the precedent for Chicago, which should be a warning: Look out for similar exaggerated claims and shoddy analysis.
Full interview and summary linked here.
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Good article about commercial real estate issues in Baltimore currently.
https://www.zerohedge.com/markets/i-see-wave-coming-assessed-value-baltimore-city-office-tower-nearly-halved-amid-cre-panic
The wheels are falling off and that may be a good thing because at some point the voters are going to catch on to the city government as the source of the problems
I can’t say I blame the people for wanting to work from home. The new “No Cash Bail” system will assure many more will opt for new employment rather than brave the streets of downtown Chicago. The empty buildings will not be empty long as Pritzker can simply fill them with immigrants that will make him a great headline for his Presidential run and the bills that come later…that’s the Illinois taxpayer’s problem. Not to worry though; Pritzker says the immigrants pay taxes.
When everyone in these buildings does their work on computers, there is no reason to be in an office, you can be at home. I’d venture to bet that the companies still paying their leases have less than 50% of the desks they are leasing being filled. So why not downsize. When middle management and upper management wants to work from home, you can’t expect the grunts to show up either. It starts at the top, if companies want everyone back, they must first compel all employees that have report to’s to be there 100%. And that won’t happen. The… Read more »
Are you still in the workforce? Because the work from home, while liberating for those with long commutes, is clearly leading to a lower standard of productivity and quality from what I can tell. I see stats both ways but my first hand experience is half the workforce is dialing it in right now. I can’t tell if it’s work from home or general malaise or both but what I can tell is quality, timeliness and ability to get a hold of someone is still better with the people still in offices Im working with and there’s been a fall… Read more »
Electronic / Industrial / Firmware engineering here too. Our productivity is measured by the completed deliverables. Also measured by the number of code or drawing check ins. Also measured by the change logs for monthly releases. There is no difference, also getting in touch with others is easier now.
Productivity is increasing daily with layoffs especially in tech. That scares workers back to actual work. Also, in some cases, especially at large companies, workers dialing it in are really just scammers with 2, 3 or 8 different full time jobs. It’s a real problem right now especially for companies that try to hire in foreign countries. There’s probably tens of thousands, if not hundreds or even millions of workers in foreign countries right now ‘working’ 6 jobs, collecting a paycheck for each job, and not doing any work at all other than logging in once a month. I have… Read more »
Look out below. This is going to be an economic disaster for banks and pension funds. Not to worry the taxpayers will pick up the tab for the pension funds and the shareholders with bank stocks in their IRA portfolios will lose money. No one in their right mind would buy Illinois real estate, taxes are going to keep going up, up and away.
THERE MANY DOWNTOWN OFFICE BUILDINGS THAT ARE OWNED BY THE FEDERAL, CITY AND STATE, ARE THESE VACANCIES INCLUDED ?
There are no solutions, only trade-offs, and with those trade-offs can be unintended consequences.
Vacant downtowns nationwide brought to you by the Democratic party.
State and local government’s tyrannical decision to close down most office buildings was one of the dumbest decisions in the history of governance.
I’d say WFH was the only good thing to come out of the plandemic. Massive work-life balance was handed to millions of office workers that they would have never gotten from their employers otherwise. I for one am delaying retirement because work has become so much less burdensome, no commute, full control of my time flexibility, etc. its like semi-retirement but with a full paycheck and benefits, no cuts. Sure many will abuse WFH, but productivity is actually up.
I don’t disagree. I have family and friends who, like you, are much happier with their WFH status. But, to debtsor’s point, that single benefit is far outweighed by downtown’s current slide into decrepitude, 100% caused by governmental tyranny. Now, many companies/workers may have naturally transitioned to flexible WFH hours on their own in the coming years. That trend was already developing. Were it allowed to continue, clever solutions to the office vacancies would have organically developed. Sadly, the idiots in charge made idiotic decisions which are going to have long-term, far-reaching, real-world negative consequences. Everyone stay frosty out there.
Prepandmic I worked at my employer’s downtown office 2-3 days a week, because the commute, in retrospect, was so crushing. Post-pademic, I moved to my employer’s suburban office, and it’s a much closer commute for me, and gets me out of my house 2-4x a week. I am a lot happier, and spend more time with my family, or doing things I like to do (exercising) because I save so many hours not commuting.
In the 4th year of the work from home shift, it’s obvious — anyone who hasn’t gone back to the office by now is NEVER GOING BACK.
Da Doom Loop is increasing faster in Sheeetcago.
How will the Sheeeetcago Dems make up for the loss of commercial property tax revenue?
By increasing property taxes on everything else including residential homes in Sheeetcago.
Illinoisans, vote with your feet before the Dems in Sheeetcago and their masters the Illinois public sector unions come for more of your wealth to feed their golden pensions and OPEB!!
Chicago’s commercial real estate challenges are immense. But they are not confined to Chicago. Drastic reductions in value will occur throughout the country. What makes Chicago different than other cities is its already precarious financial state. Chicago has little margin for error. One wonders whether Mayor Brandon is aware of the challenges – including the need to run a tight financial ship to survive?
Given the news that Mayor Brandon defaulted on his credit cards and never paid his water bill, he likely has a FICO score in the 500’s or 600’s. He’s likely overleveraged himself and has a lot of debt. His own personal life probably involves borrowing a lot of money, at high interest rates, to pay off other debt at high interest rates, stealing from Peter to pay Paul, and engaging in this ‘hustle’ from one day to the next to survive. So when the light bill gets shut off, you stop paying the car, and then when the car about… Read more »