March 28, 2018

An Overbuilt Market Casts A Shadow

A report from WHO TV in Iowa. “There is no question that downtown Des Moines is growing, you can see apartment complexes popping up all over the city. Many people see how much building is going on downtown, they see the cranes, and they hear about vacancies. It leads many to ask if downtown is overbuilt, a question developers hear constantly. ‘The reason people are asking the question is for the last couple of years it just seems like there’s been building and building and building and I guess at some point I guess it needs to and should slow down a little bit and I think we are seeing that,’ Premier Companies Partner Troy Strawhecker said.”

“The market survey says nearly 3,000 units were built downtown last year and almost 3,000 units are under construction in 2018. The number of apartment units downtown has doubled since last year and still the vacancy rate in 2018 is only around 9.7 percent. Many apartments downtown are offering incentives to fill their vacancies quickly. ‘You want to fill it quickly without reducing your rents because once you reduce your rents, especially with the supply we have to drive those rents back up, so the concessions are an easy way to fill the physical occupancy and then after the concessions wear off maintain where the rents need to be,’ Senior VP CBRE, Hubbell Commercial Ryan Jensen said.”

From Mansion Global on California. “The Los Angeles real estate market is relatively strong and stable. ‘We have not seen enough new construction or an increase in housing stock of any kind,’ said UCLA Ziman Center for Real Estate Professor Paul Habibi. Mr. Habibi, who is also a builder, landlord and developer, remains optimistic about the overall market. ‘There have been fewer sales, but the deals are happening at a higher price point,’ he said.”

“‘Downtown has really been a hotbed of development, with domestic developers as well as developers from China and Canada,’ he said. ‘Just look at all of the cranes downtown. Downtown, no doubt, is being saturated by high-end rental and for-sale units. Most of the concentration of high-end housing is happening there—the Arts District is still on fire. The big question is whether downtown can absorb all of this inventory.’”

From the Press Herald in Maine. “The ambitious Midtown project – once seen as a transformational development for Portland’s struggling Bayside neighborhood – appears to be dead after missing a key deadline Saturday and losing city approvals. It failed to secure the permit before Saturday, triggering the expiration of city approvals for the entire project, including 445 apartments in three buildings with retail storefronts on the ground floor.”

“Portland has taken ‘numerous steps to impede the progress of the project,’ said Patrick Venne, who represents the Florida-based developer in Portland. ‘We are very disappointed with how this process has concluded, and are left with no option but to commence litigation against the City to enforce our rights and protect the significant expenditures associated with our commitment to this project.’ On Monday, Venne said that Federated will not appeal the denial.”

“City Manager Jon Jennings and other city staff pushed back Monday against the accusation that they are to blame for the expiration of the approvals. As Midtown has languished over the last seven years, millions of square feet of new development have been built in the city, Jennings said.”

The Herald Tribune in Florida. “An overbuilt market casts a shadow on the industry, at least in the short term. Steve and Maureen Wilson took a leap of faith in 1977 when they opened a self-storage business along a now-bustling stretch of Cortez Road. Back then, mom-and-pop operations dominated the industry. The tide changed in the wake of the Great Recession when many storage companies went bankrupt. Today, real estate investment trusts, or REITs, are scooping up independent owners with big money from Wall Street investors.”

“Now, unease about oversupply and rising vacancy rates looms over the self-storage market as expansion continues here and elsewhere across the country. REITs began invading the industry about five years ago, Wilson said. ‘Supply is catching up and overtaking demand, and vacancy is going up and rents are going down,’ Steve Wilson said. ‘The Sarasota self-storage market is saturated,’ said Barbara Denham, one of the senior economists at Reis Inc.”

“Nationally, the industry appears tense over its future. ‘The self-storage industry has been worrying about potential oversupply for at least the past 12 to 18 months — and fundamentals are starting to reflect that concern,’ Reis Inc. reported recently. ‘There is still demand but the market is oversaturated,’ Denham said. ‘There’s been too much construction.’”

“‘You can’t just go put a storage facility up, and say ‘if you build it, they will come,’ Wilson said. Denham agreed the haphazard approach is a loser. ‘Some self-storage markets have done very well and have exceeded the apartment market returns, but many of these now have significant construction underway. You have to do your due diligence, look at the data — especially on expected construction and vacancy, rent growth — and research the market.’”

From Curbed New York. “A planned luxury residential tower that would bring six ’sky gardens’ to Midtown is getting the kibosh, at least until the luxury market rebounds. ODA New York’s 41-story project planned for 303-305 East 44th Street has been indefinitely put on hold by developer Triangle Assets. ‘The condo market has been softening. We’ve decided to ride it out,’ Ben Stavrach, director of leasing and property management at Triangle Assets, told The Real Deal. ‘[The pricing] is going to be pretty high up there, and that market is not as strong.’”




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76 Comments »

Comment by Ben Jones
2018-03-28 10:11:21

‘As Midtown Looks to Compete in a New Manhattan Market, It’s Revive or Die’

‘Hudson Yards has changed the game for the city’s office landlords. In Midtown, developers are being forced to emulate and recreate to stay relevant.’

‘Over the next two years, Manhattan at large is set to see more new office supply—12.6 million square feet—arrive on the market than at any point since the mid-1980s, according to C&W data, with that number swelling to more than 22 million square feet over the next five years.’

‘The task for Midtown landlords then is finding a way to make their existing product more competitive against the challenge of the West Side’s rising citadels. The property owners who will continue to do well in Midtown, sources said, are those who will invest the resources into making their 20th century office buildings attractive to the needs of 21st century tenants.’

Comment by 2banana
2018-03-28 10:28:24

It is interesting that this article does not mention if ANY of these projects will be cash-flow positive and what happens with (mass) bankruptcies to the market.

+++++

Over the next two years, Manhattan at large is set to see more new office supply—12.6 million square feet—arrive on the market than at any point since the mid-1980s, according to C&W data, with that number swelling to more than 22 million square feet over the next five years.

Despite some landlords’ best efforts, multiple sources said the recent flight of tenants out of Midtown has forced many to offer higher concessions in order to lure those who may be looking elsewhere.

In 2017, Midtown landlords were offering average tenant improvement allowances of $86.74 per square foot and 13 months’ worth of free rent on new direct leases, according to C&W data provided to CO. Comparatively, Downtown allowances averaged $80.46 per square foot and 10 months’ free rent, while Midtown South saw allowances of $68.95 per square foot and nine months’ free rent.

Free rent, meanwhile, was traditionally offered to tenants “because they were in one space and moving to another, and it was meant to be an offset where [tenants] could build the space in the new building while paying rent in their old space,” Margolin said. “Now, free rents are something that tenants are enjoying on top of buildout time.” Margolin added that free rent is more pervasive in Midtown than other parts of Manhattan.

 
 
Comment by Mortgage Watch
2018-03-28 10:13:35

Boston, MA 02114 Housing Prices Crater 21% YOY As Housing Correction Expands In New England

https://www.zillow.com/boston-ma-02114/home-values/

*Select price from dropdown menu on first chart

 
Comment by Ben Jones
2018-03-28 10:14:13

‘Denham agreed the haphazard approach is a loser. ‘Some self-storage markets have done very well and have exceeded the apartment market returns, but many of these now have significant construction underway. You have to do your due diligence, look at the data — especially on expected construction and vacancy, rent growth — and research the market.’

This Barbara is a real whiz. Multi-family projects are headed into the crapper all over the US, and she’s announcing “we need to look at the data!”

Comment by Mafia Blocks
2018-03-28 10:23:25

These nitwits gambling with and losing investor money hand over fist are good at giving advice but they seem to never heed it themselves.

 
 
Comment by 2banana
2018-03-28 10:15:36

2banana’s Law:

Long term democrat rule + public unions + free sh!t army = misery, ruin and bankruptcy

Illin-owe…is going to mean mucho more in an era of a housing bubble deflating and a stock market fighting rising interest rates and a QE unwind.

+++++

Another time bomb for Chicago taxpayers
Chicago Tribune | 3/27/2018 | Chicago Tribune Editorial Board

Maybe you think the worst is over for Chicago Public Schools: Springfield sprang for millions in budget and pension relief last year. Time to lean back and sip an icy beverage.

Sorry to interrupt this reverie, but there are 1 billion reasons that you’re wrong. That is, the Chicago Teachers’ Pension Fund is short another $1 billion, according to the fund’s consultants.

Or put differently: If these estimates prove correct, taxpayers are likely on the hook for another $1 billion to shore up the teachers pension fund.

Over the years, CPS officials and City Hall have taken a two-step approach to the district’s money problems. Step 1: Hold out hand to lawmakers in Springfield. Step 2: Stick other hand into the pockets of Chicago taxpayers.

This is a familiar story in Illin-owe. Other distressed Chicago and Illinois public pension funds struggle with the prospect of insolvency — an inability to pay benefits as they come due. The state’s unfunded pension liability is crowding out other priorities. Taxpayers can’t keep up. Some take the easy way out: They move. The exodus of residents from Chicago and Illinois continues briskly to other states with lower taxes.

“The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent,” billionaire Bloomberg scoffed. “If I can give you one piece of financial advice: If somebody offers you a guaranteed 7 percent on your money for the rest of your life, you take it and just make sure the guy’s name is not Madoff.”

Yet CPS is counting on 7.25 percent. Taxpayers, guess what that means for you.

Comment by Anonymous
2018-03-28 12:28:49

Somewhere, RJ is breathing a sigh of relief…

 
Comment by Taxpayers
2018-03-28 13:27:57

rahmbo gave teachers (sainted) 17% 3 year raise- now they’re back
for da chllens

 
 
Comment by Ben Jones
2018-03-28 10:24:53

‘Amazon loses more than $30 billion in value on report Trump wants to ‘go after’ company’s tax treatment’

‘President Trump is “obsessed” about going after Amazon, a source said, according to Axios.’

‘Trump has discussed altering the company’s tax treatment because several of his friends told him Amazon is hurting their businesses and “killing shopping malls and brick-and-mortar retailers,” the report says.’

Comment by Mafia Blocks
2018-03-28 10:27:12

ScamaZone doesn’t pay taxes and still can’t earn a profit no differently than crApple, FB and the rest of the so called tech companies.

 
Comment by 2banana
2018-03-28 10:35:03

Amazon - with razor thin margins and a P/E of 230+ is ripe for a crushing drop in their stock price.

obama (and Hillary!) promised to bankrupt WHOLE industries (like coal) and barely a yawn from the fake legacy media.

Trump should break up the monopolies of Amazon, Google and Facebook.

Comment by Avg Joe
2018-03-28 12:49:20

Yeah, like that’s gonna happen.

 
Comment by BlueSkye
2018-03-28 13:27:11

the monopolies…

I don’t actually think they are monopolies. I never touched FB. I am pretty sure Google isn’t the only game in town. Amazon, their business model hasn’t made a profit yet, right? They have competition. I don’t think you could suggest anything I buy that I can’t get outside of Amazon, and probably for less money.

Comment by Observer
2018-03-28 13:58:39

https://www.nasdaq.com/symbol/amzn/financials?query=income-statement

Amazon is profitable by a wide margin.

Google is likely a monopoly in search. Alternatives exist but they could not effectively compete if Google wanted to manipulate that market they could.

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Comment by Ben Jones
2018-03-28 14:46:22

About 843,000 results (0.44 seconds)
Search Results
Amazon Getting Huge Subsidy from US Postal Service: Analylst …
fortune.com › Tech › Fortune 500

Jul 16, 2017 - The U.S. Postal Service and Amazon have a special relationship. In 2013, for instance, the USPS agreed to offer Sunday delivery of Amazon packages. But shipping industry watcher and money manager Josh Sandbulte thinks there’s an ugly underside to the USPS-Amazon collaboration. Sandbulte, writing …
Amazon Is Thriving Thanks to Taxpayer Dollars | The New Republic
https://newrepublic.com/article/146540/amazon-thriving-thanks-taxpayer-dollars

Jan 9, 2018 - Cities and states are offering Amazon eye-popping tax subsidies to win its second headquarters. But smaller, existing tax incentives have already made Amazon the leading recipient of so-called “economic development” subsidies in the country. According to Good Jobs First, a non-profit that tracks state tax …
The Amazon Effect: How taxpayers are funding the disruption of the …
https://www.bizjournals.com/bizjournals/news/2017/10/11/the-amazon-effect.html

Oct 11, 2017 - A Business Journals analysis of public records and financial filings from across the United States shows how at least $1.24 billion in taxpayer-funded subsidies and incentives have helped support the expansion of Amazon’s sprawling network of more than 257 sorting and distribution centers, a 141 …
For every Amazon package it delivers, the Postal Service loses $1.46
https://www.washingtonexaminer.com/for-every-amazon-package-it-delivers-the-post...

Sep 1, 2017 - In fact, they’ve climbed so much, according to a recent analysis by Citigroup, that the Postal Service should be charging Amazon $1.46 more per package than the $2 or so it does now. “Amazon now enjoys low rates unavailable to its competitors,” the Journal story said. “It’s as if Amazon gets a subsidized …
Trump declares war on Amazon amid US Postal Service subsidy, HQ2 …
http://www.businessinsider.com/trump-war-on-amazon-post-office-subsidies-hq2-2017-12

Dec 29, 2017 - President Donald Trump tweeted that the US Postal Service was undercharging Amazon and that it was making the “Post Office dumber and poorer.”
Your Tax Dollars Subsidize Amazon. Are the Jobs Worth It? - Bloomberg
https://www.bloomberg.com/…/your-tax-dollars-subsidize-amazon-are-the-jobs-worth...

Mar 14, 2017 - And what happens when cities and states across the country compete against each other to lure big corporations like Amazon, with increasingly bigger subsidies? Spencer and Aki Ito hear from people on both sides as a national debate intensifies over how to create more American jobs. Want to hear more …
Amazon received $241M in subsidies for warehouses | Good Jobs First
https://www.goodjobsfirst.org/news/amazon-received-241m-subsidies-warehouses

Dec 14, 2016 - Amazon is building warehouses across the United States to develop its own delivery infrastructure to guarantee next-day delivery. So why have state and local governments given Amazon $241 million to build facilities that they couldn’t build anywhere else? Why did Houston give $7 million for a warehouse …

 
Comment by Mortgage Watch
2018-03-28 14:52:48

“Amazon is profitable by a wide margin.”

Incorrect.

Even with massive subsidies amazon hasn’t turned a profit. Financial statements are made to deceive. It is their sole purpose.

 
Comment by BlueSkye
2018-03-28 15:06:59

Good question; why. I believe that the USPS has only part of Amazon’s shipping business and that FedEx is the competition. Hard to know if it is a good deal for the Post Office and us their employers.

 
Comment by ibbots
2018-03-28 15:28:25

‘FedEx is the competition’

We get a lot of Amazon deliveries via UPS, the brown truck guys. Never seen a fedex do an Amazon delivery. I did have a friend who had several fedex routes. He said every year fedex just scrapes the route owners a little harder to the point where it is hard to make money on 2 - 3 routes, gotta have like 5 to
ten.

 
Comment by Rental Watch
2018-03-28 16:16:43

I once found myself in a conversation with the national and international CEOs of DHL. They were lamenting their gross profit margins (really low) as compared to the manufacturer of Pringles (really high).

Transportation is really competitive…makes me wonder why Amazon wants to bring it in-house, rather than simply play USPS, UPS and Fed-Ex off one another.

 
Comment by Mafia Blocks
2018-03-28 16:46:25

Last weekend I had a few beers and BS’ed with Boeing CEO in a Seattle bar.

 
Comment by BlueSkye
2018-03-28 17:32:23

How was the beer?

 
Comment by Mafia Blocks
2018-03-28 18:04:58

Beer was great.

 
Comment by OneAgainstMany
2018-03-28 19:44:19

makes me wonder why Amazon wants to bring it in-house

Drones?

 
Comment by oxide
2018-03-29 06:10:49

Not drones… Camperforce and those Uber-like moonlighting deliverers. On my block, someone delivers Amazon in a white Chevy Transit.

 
Comment by OneAgainstMany
2018-03-29 14:51:43

Well, it looks like even Amazon has realized that independent contractors can’t reliably lead to good services. They are ditching the gig worker model as they push for home services:

“Three years ago, Amazon.com Inc. launched a marketplace to connect its customers with handymen, landscapers and housekeepers in their neighborhoods, a direct challenge to the likes of Angie’s List Inc. and Yelp Inc.”

“The offering embraced the independent contractor model, using Amazon’s web store to create a new service from scratch without hiring a single person or buying any lawnmowers, hammers or mops. Instead, it connected contractors using their own vehicles, tools and supplies with new business customers, taking a cut of each job. That same model let Uber Technologies Inc. disrupt the taxi industry without buying cars or hiring drivers.”

“Now Amazon is quietly hiring house cleaners in Seattle as direct employees. The online retailer is swapping the low cost of contract workers for the greater control of employing its own people. Doing so puts it on the hook for things like minimum wage, workers compensation and overtime pay. But it also lets Amazon determine how the workers are trained, which cleaning products they use and how they organize their schedules.”

https://www.bloomberg.com/news/articles/2018-03-28/amazon-takes-fresh-stab-at-16-billion-housekeeping-industry

 
 
 
Comment by liquideye
2018-03-28 13:31:00

Make sure to sign the internet bill of rights (IBOR) petition. We need these companies to have a policy of data collection/tracking that has opting out as the default. Of course most of the vampires will wither away and die as a result. Good riddance.

 
 
Comment by Bay Area Native
2018-03-28 10:45:44

I agree with Trump, they need to level the playing field that is causing mom and pops retail to suffer via the “Amazon Effect”. Amazon and BIG Corps get corporate subsidies that provide a HUGE advantage over the little guys. Our political system rewards these big pocket corporations with loop holes that are nothing less than “Legal bribery”.

Comment by OneAgainstMany
2018-03-28 19:46:37

I heartily agree. I’ve been saying this for a long time. The internet commerce companies need to collect and remit local sales taxes in all jurisdictions. This isn’t because I want to stick it to any e-retailer, quite the opposite. I actually get most of my running shoes online (when you have a 10 1/2 foot, your size is almost never in stock in local brick and mortar joints). Thankfully my state finally started doing this. It’s about time.

 
Comment by drumminj
2018-03-29 07:07:50

they need to level the playing field that is causing mom and pops retail to suffer via the “Amazon Effect”

You could also actively support the mom and pops, rather than just going for the cheapest price.

We all have a choice here. Most just prioritize short-term wins in price without thinking about the longer-term impact.

(That said, yes, there are subsidies and there is lobbying. But Amazon wouldn’t have that money to do that if folks hadn’t chosen them over Mom and Pop)

Comment by oxide
2018-03-29 07:46:39

It’s much more about convenience than price.

For example, there is some underwear I like that I found at Wal-Mart, but I only found it in my size ONCE. At the same time, there was some sheet music that I wanted. Should I trek to Wal-Mart multiple times hoping my undies were stock? And then trek to a half-dozen mom-and pop sheet music stores hoping the sheet music I liked was in stock? Nope, I did two searches on Amazon, put stuff in the virtual cart, and paid once. It all showed up in 4 days.

Even if a mom and pop could compete on price, they can’t compete on convenience. Mom and pops can only compete on big-ticket items or durable goods, where the price difference, and infrequency of purchase, is worth the inconvenience.

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Comment by Mafia Blocks
2018-03-29 08:06:28

Hey Donk

 
Comment by OneAgainstMany
2018-03-29 15:10:38

It’s much more about convenience than price.

Nailed it. I am more than happy to buy local when local competes on price and service. I also think the tax structure should be a level playing field.

 
Comment by Rental Watch
2018-03-29 17:10:05

Although I must say that I’ve been less than impressed with the “convenience” of Amazon recently.

I’ve had more than one occasion where Amazon gave me the whole “if you order now, you can have it tomorrow by 9:00pm” only for them to fail to deliver (on their promise and/or the goods).

Not at all convenient…would have rather driven to get the product.

 
Comment by OneAgainstMany
2018-03-29 19:48:28

Amazon’s customer service is exceptional. Whenever I have had to contact them (and it is extremely rare), they will do literally anything to make the issue right.

Having said that, over the years I have steadily bough fewer and fewer things on Amazon. But that is mainly because I don’t need a lot of physical goods because we’re pretty much stocked up. Lately, the stuff I have been purchasing from Amazon is all digital, like movie rentals. I’ve also purchased educational stuff on Amazon Prime for my little guy to watch, like PBS’s “Word World.”

 
 
 
 
 
Comment by Mortgage Watch
2018-03-28 10:28:22

Alameda, CA Housing Prices Crater 11% YOY On Ballooning Housing Inventory And Plunging Housing Demand

https://www.movoto.com/alameda-ca/market-trends/

 
Comment by hwy50ina49dodge
2018-03-28 10:28:25

As long as their rent$ do knot exceed 59% of their take home pay$, why cut out potential oppoortunitie$$

Eye want my, eye want my, eye want my MTV!

“Facebook provided Plaintiffs with specific lists of groups they could exclude from receiving the ads, including families with children, moms with children of certain ages, women or men, and other categories based on sex or family status.”

https://www.marketwatch.com/story/housing-rights-groups-sue-facebook-for-discrimination-2018-03-27

Comment by oxide
2018-03-29 06:15:31

families with children, moms with children of certain ages, women or men, and other categories based on sex or family status.

So after excluding those groups, I guess the only humans left are transgender teenagers.

 
 
Comment by 2banana
2018-03-28 10:30:38

Just a data point

PSA - Public Storage - the largest storage “company” is a REIT.

++++

The Herald Tribune in Florida. “An overbuilt market casts a shadow on the industry, at least in the short term. Steve and Maureen Wilson took a leap of faith in 1977 when they opened a self-storage business along a now-bustling stretch of Cortez Road. Back then, mom-and-pop operations dominated the industry. The tide changed in the wake of the Great Recession when many storage companies went bankrupt. Today, real estate investment trusts, or REITs, are scooping up independent owners with big money from Wall Street investors.”

Comment by Ben Jones
2018-03-28 10:50:53

The common theme is too much cash chasing yield.

Comment by scdave
2018-03-28 12:09:00

Yep

 
 
Comment by Rental Watch
2018-03-28 11:31:11

The tide changed in the wake of the Great Recession when many storage companies went bankrupt.

My understanding is that storage debt had among the lowest default rate of any real estate asset (even lower with multifamily)…not sure how many bankruptcies there were, but having an abnormally high number seems inconsistent with the low level of defaults.

And so, people now see storage as very safe–it is trading now at yields as low as apartments in many cases.

IMHO, the tide didn’t shift with the great recession, but with the founding of PSA…before that, all self-storage operators were “mom and pops”. Public storage was created to be a professional owner. And now Public Storage has enough market share that they can simply crush the little guy. I recently spoke to a friend (with a few decades of experience in storage)…he warns against trying to operate in direct competition with Public Storage…they won’t hesitate to undercut your rents.

It is interesting to note that 1) Public Storage has relatively little debt for a REIT…they have done most of their financing with preferred equity (I see 13 different preferred securities listed); and 2) the founder of Public Storage, Wayne Hughes, was the founder of American Homes 4 Rent–attempting the same kind of strategy…bringing a large institutional mindset to a historically “mom&pop” industry.

Comment by Ben Jones
2018-03-28 15:57:29

‘bringing a large institutional mindset to a historically “mom&pop” industry’

Yeah, but why did they stop? Should be able to take over the SF rental market. No money in it?

Along those lines, why did the money bags pile into taxis, bed and breakfasts, grilled cheese trucks etc? No money left in curing cancer or flying cars?

Comment by Ben Jones
2018-03-28 16:11:47

‘San Francisco-based ride-hailing company Uber will not renew its permit to test self-driving cars on California public streets, likely spelling the end of the company’s autonomous vehicle foray.’

‘The Verge reports, “the California DMV confirmed that Uber’s authority to test self-driving cars in the state will end March 31st following the decision not to renew its license.”

‘The letter from DMV deputy director Brian G. Soublet reads in part: ‘Uber has indicated that it has suspended its autonomous vehicle testing operations indefinitely in Arizona, California, and Toronto. In addition to this decision to suspend testing throughout the country, Uber has indicated that it will not renew its current permit to test autonomous vehicles in California.’

‘Previously, Uber was one of the most aggressive advocates of self-driving cars, with founder Travis Kalanick declaring the emerging technology critical to the future of the company.’

“The world is going to go autonomous,” Kalanick told Business Insider in 2016. “What would happen if we weren’t a part of that future? If we weren’t part of the autonomy thing? Then the future passes us by, basically, in a very expeditious and efficient way.”

‘But Kalanick is no longer with the company, and Uber’s robot car division was a pile-up of problems even before the Arizona accident.’

https://sf.curbed.com/2018/3/28/17171782/uber-self-driving-california-permit-expire

Oh dear, some yellen bucks just went to money heaven:

‘likely spelling the end of the company’s autonomous vehicle foray’

Just one fatality and poof. Really wasn’t very realistic was it?

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Comment by Rental Watch
2018-03-28 17:37:13

Just one fatality and poof. Really wasn’t very realistic was it?

It’s certainly not realistic if you cobble together a team from people who think redundant systems are silly, and safety should be secondary to speed to market. And now one of their other self-driving execs left.

I suspect Uber will NOT try to develop the technology in-house, but instead license someone else’s system.

Google has already ordered thousands of minivans, and just announced an order of 20k SUVs with their self-driving technology.

Like it or not, once Waymo has 10k+ cars on the road giving rides autonomously, we will pretty quickly (within a few years) get to a point where we have enough data to really determine if self-driving cars are meaningfully safer than people driving.

Then we’ll find out if autonomous vehicles are realistic.

If Google fails in their effort, then I think the self-driving goose is cooked.

 
Comment by OneAgainstMany
2018-03-28 20:11:10

The financial windfall for getting to self-driving is too lucrative to ignore. Even if isn’t complete level 5 self-driving, I predict some form of self-driving will take root. It may only be electric shuttles that function like street cars on set routes, like what we see in Vegas. It maybe self-driving for cargo from point to point. Humans are expensive to pay.

 
Comment by Carl Morris
2018-03-28 20:43:14

Humans are expensive to pay.

Humans are a pain to manage even if they were free.

 
Comment by Professor 🐻
2018-03-28 20:55:48

Sounds like we can safely buy another automobile with the comfort of knowing it won’t be made obsolete any time soon due to self-driving cars.

 
Comment by BlueSkye
2018-03-29 03:46:35

It may only be electric shuttles that function like street cars on set routes…

Then it’s nothing new. Give it a track and call it a train. I’ve ridden on such since 1980 at the ATL airport.

 
Comment by oxide
2018-03-29 09:37:07

Blue, I don’t know if you know the ultimate goal. This is from two days ago:

————————-

Comment by OneAgainstMany
2018-03-27 15:21:26

If Uber/Lyft/Waymo/Tesla/Apple do get to self-driving fleets, then that changes the calculus dramatically. The potential to have houses with no garages because car ownership is now far more expensive than subscribing to a car mobility service is the real end-goal. Remember, cars sit idle 95% of the time, so it’s a very underutilized asset. Tesla’s plan is to allow owners to put their vehicles in a pool and earn money while it is idle.
——————–

To a lib, this the ideal kumbaya sharing economy. They want to take away your guns. And they want to take away your cars, by making car ownership so expensive that you’re forced to lease out your car by the hour. Then you’ll give up your car entirely to the State* and have to hail a self-driving cab all the time. Then they may as well take your garage and driveway too, since you won’t need that. Oh, and did you know that people use their power drill** for only 13 minutes a year, therefore you shouldn’t have one of your own, just sign up with the power-drill app and borrow one when you need it. Same for other “underutilized” items like the lawn mower (you don’t need it because the cheap serfs are mowing your lawn for you), stand mixer, ladder, and the pair of clean boxers in the drawer.*** Most of all, why overpay for a wife? You can just rent her for the 40 seconds a day that you need her (99.95% underutilized).

Soon we’ll own so little stuff of our own that we can all live in minimalist micro-apartments. All we need is a smartphone so that we can spend most of our time arranging how when we’re going to borrow and share all the stuff we need.

——————
*The state being Amazon or Google or Tesla.
**The power drill is used as an example of how the sharing economy will work.
***Assuming you do laundry every two weeks, did you know that a pair of boxers sits idle 93% of the time?

 
Comment by BlueSkye
2018-03-29 11:14:14

LOL. My pocket knife sits idle most of the time too, but I don’t have to borrow one from somebody who doesn’t know how to sharpen it.

I could believe that “The Goal” is to manipulate people to fork over more of their money to the Smart Folks, as always. My goals are different.

 
Comment by OneAgainstMany
2018-03-29 15:36:13

They want to take away your guns. And they want to take away your cars, by making car ownership so expensive that you’re forced to lease out your car by the hour. Then you’ll give up your car entirely to the State* and have to hail a self-driving cab all the time. Then they may as well take your garage and driveway too, since you won’t need that.

This sounds like a great dystopian Black Mirror episode! In all seriousness, I’m not too worried about the state taking away my car (I don’t have one), or my gun (don’t have one either). If people want to have a car, that’s fine. Same with guns. Both should be regulated in my opinion as they have the ability to impinge on the right to life. I want a society where car ownership is optional for all practical purposes. Public transportation doesn’t really do that in most instances except for in very limited circumstances.

One of the things Peter Thiel used to say when he was teaching business school is “tell me something that is true that nobody agrees with you on. If you can do that, then you have the potential for a good business model.” AirBnB obviously works as a business model as they are making a healthy profit with impressive revenue. Whether or not sharing power tools will work as a business model is another question. If I had a drill and I could loan it out to defray/offset the cost of ownership, I might do it. The boxer example is just silly, because that’s gross. But people are already renting out their car (Turo and GetAround).

Streaming video doesn’t preclude owning DVDs or BluRays, but I personally don’t buy any. Going car-less isn’t about making a statement, it’s about just freeing oneself. I just don’t want any more stuff, and cars are a lot of stuff (weren’t you the one saying a few days ago about how you were reading about radically simplifying life?).

It’s not about taking anyone’s choice away, it’s about giving people the choice to opt out of a stranded asset.

 
Comment by Rental Watch
2018-03-29 17:38:47

I’m in favor of more efficient utilization of capital.

I’m in favor of technological advances that save lives as compared to the status quo.

The challenge is how to regulate the development of the technologies that hold such promise.

With respect to self-driving cars, it would be fantastic to reduce the cost of life/property by hundreds of billions per year in the US.

But what cost of life/property is acceptable to reach that goal?

The answer shouldn’t be “none” (because the status quo cost is so high), but that’s a hard pill to swallow if your child is one of those that gets run down on the path of progress.

 
Comment by OneAgainstMany
2018-03-29 19:57:54

But what cost of life/property is acceptable to reach that goal?

I recently read that in order to get public buy-in, self-driving cars will have to be not just 10x safer, but more like 1000x safer than human-driven cars for just the reason you point out. When the algorithm kills the little girl, the wrath will come out in full force. But drunk drivers are killing people every few hours and that’s nothing new.

 
 
Comment by Rental Watch
2018-03-28 17:51:26

Yeah, but why did they stop? Should be able to take over the SF rental market. No money in it?

In my opinion, there isn’t enough money in it for 80-90% of the market cycle. “Mom & Pop” managers of homes do a pretty good job…there isn’t much lift that comes from professional management, AND those “mom & pop”s generally are willing to accept yields that institutions find too low.

During “normal” times I think the institutional SF owners simply operate for cash flow, sell some homes that are somewhat overpriced, and trade via 1031 into homes that are somewhat underpriced. But they won’t generate a lot of cashflow, or rapidly grow their ownership.

However, when distress kicks in, in the future, the institutions will be the ones on the courthouse steps in large numbers. Because that’s when it makes sense to expand–and they’ll be able to attract the capital to do so.

I suspect we’ll see institutional ownership of homes grow in a step function (flat, followed by rapid increases).

I do invest in REITs, but I don’t own any home rental REITs–mainly because I think the institutional ownership is largely offset by the hassle of owning tens of thousands of individual homes.

On the other hand, there can be big lift with institutional ownership of storage (vs mom/pops). With all your fixed costs covered each and every month, bringing occupancy from 85% to 92% is a big increase to the bottom line…and it’s a lot easier to screw up the management of a storage property than a rental home.

(Comments wont nest below this level)
Comment by oxide
2018-03-29 11:07:31

Between seniors death-cleaning, and Millenials and Gen Y going minimalist, I don’t see a robust future for the extra-storage industry.

 
Comment by Rental Watch
2018-03-29 12:12:17

Millenials and Gen Y going minimalist

I’ll believe that when I see it.

 
Comment by OneAgainstMany
2018-03-29 15:38:41

This is a new start-up in my neck of the woods. They are making a play to be the AirBnB of storage:

“Neighbor is another startup with designs on your spare space. Not for letting to guests to bed down in, like Airbnb, but for self-storage. The 2017 founded, Salt Lake City based startup is announcing $2.5 million in seed funding today, raised from Peak Ventures and Pelion Ventures.

The core business idea is to build a trusted marketplace for storage needs by offering people with items on their hands what it bills as a cheaper (and potentially easier) alternative to traditional self-storage solutions — and, on the host side, a platform to earn a little money for not having to do too much (just having space where you can let stuff safely sit).

There’s a social element in that Neighbor is plugging into Facebook’s Graph API and another of its APIs (called All Mutual Friends) so that users who sign in with Facebook can make use of a “store with a friend” feature — which shows which (if any) of their Facebook friends or mutual friends are also hosts or renters on the platform.”

https://techcrunch.com/2018/03/28/neighbor-a-p2p-self-storage-marketplace-bags-2-5m-seed/

I guess if everyone starts deleting their Facebook account, the trust part becomes a little trickier.

 
Comment by Carl Morris
2018-03-29 17:46:51

I think that’s a great idea. Except for when you are unknowingly storing something for someone else that you would normally never allow on your property.

 
Comment by OneAgainstMany
2018-03-29 20:01:00

I think so too. I remember when we were renting an apartment we literally had two extra Rubbermaid totes of stuff that we couldn’t find a space for. The self-storage option was a non-starter because the cheapest rental was like $100/month or something. I’m sure someone on our block would have let us stash our minimal amount of stuff for $20/month, but the ecosystem wasn’t really there to allow for that type of a market discovery. If something like this works, I can see it being a real win-win.

 
 
 
 
Comment by Mafia Blocks
2018-03-28 18:07:20

Housing

Murphy, TX Housing Prices Crater 10% YOY As Dallas Area Floods With New Housing Inventory

https://www.movoto.com/murphy-tx/market-trends/

 
 
Comment by Mortgage Watch
2018-03-28 10:47:13

Portland, OR 97232 Housing Prices Crater 28% YOY As Heroin Epidemic Ravages West Coast Cities

https://www.zillow.com/portland-or-97232/home-values/

*Select price from dropdown menu on first chart

 
Comment by Apartment 401
2018-03-28 11:54:34

Realtors are liars.

Comment by jeff
2018-03-28 19:16:15

Hogg Rosen

 
 
Comment by azdude
2018-03-28 14:47:04

I bought 1 share of amazon today so I can retire someday.

 
Comment by Ben Jones
2018-03-28 14:51:24

‘You want to fill it quickly without reducing your rents because once you reduce your rents, especially with the supply we have to drive those rents back up, so the concessions are an easy way to fill the physical occupancy and then after the concessions wear off maintain where the rents need to be’

And where do rents need to be Hubble? Where you can actually make money? What’s been happening is concessions grow and grow until rents are finally slashed outright, and you still give concessions!

 
Comment by Ben Jones
2018-03-28 14:53:33

‘We have not seen enough new construction or an increase in housing stock of any kind,’ said UCLA Ziman Center for Real Estate Professor Paul Habibi…who is also a builder, landlord and developer’

Wait for it…

‘Downtown has really been a hotbed of development, with domestic developers as well as developers from China and Canada,’ he said. ‘Just look at all of the cranes downtown. Downtown, no doubt, is being saturated by high-end rental and for-sale units.’

Uh, Paul, you just said there hasn’t been an increase. Of any kind.

 
Comment by Mortgage Watch
2018-03-28 14:55:50

Miami, FL 33134 Housing Prices Crater 8% YOY As Housing Values Get Clobbered Nationwide

https://www.zillow.com/miami-fl-33134/home-values/

*Select price from dropdown menu on first chart

 
Comment by Professor 🐻
2018-03-28 20:58:42

Dumb question of the day: Are dark clouds gathering for Tech Stock Meltdown 2.0?

Comment by Professor 🐻
2018-03-28 21:44:51

Business
Amazon sinks as US tech stocks continue to slide
5 hours ago

Technology shares, which helped power the rise of the US stock market last year, are pulling it lower now.

The tech-rich Nasdaq index dropped 0.85% or almost 60 points to 6,949.2 on Wednesday, driven by declines in firms such as Amazon, Tesla and Broadcom.

It continued a multi-week sell-off spurred by calls for tighter regulation of tech firms, competition concerns and questions over autonomous driving.

The S&P 500 lost 0.3% to 2,605 while the Dow was flat at 23,848.4.

Shares see-sawed throughout the day, extending a streak of sharp swings in prices that have rocked markets in recent weeks.

The information technology sector, which includes firms such as Apple, Microsoft and Intel, has fallen more than 6% this month, mostly in the last two weeks.

Comment by azdude
2018-03-29 08:06:52

how long can corporations keep their stock propped up?

 
 
Comment by Carl Morris
2018-03-28 21:56:44

Gathering? I thought I was hearing scattered drops on the windows already.

 
 
Comment by jeff
2018-03-29 00:18:23

Little help

A house for sale at Budhanilkantha Kathmandu! Price: Rs 200,000,000

Address: Budhanilkantha City: Kathmandu Land size: 50 aana Status:
Active

A house made on 3 ropani 2 aana land for sale at… More Info

http://nepalhomesearch.com/page-home-for-sale-in-kathmandu-nepal-77.html

 
Comment by Professor 🐻
2018-03-29 06:41:50

Is today when the Plunge Protection Team will reconvene to save Mr Market from his March swoon?

Comment by azdude
2018-03-29 08:35:27

who in their right frickn mind would pay 1500 bucks for amzn?

 
 
Comment by Taxpayers
2018-03-29 08:50:19

Government spending increased at a 3 percent rate, revised from a 2.9 percent gain on higher state and local outlays

re taxes going up

 
Comment by Mortgage Watch
2018-03-29 09:58:00

Cupertino, CA Housing Prices Crater 10% YOY As Bay Area Tech Wreck Gains Speed

https://www.movoto.com/cupertino-ca/market-trends/

 
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