In this Yahoo Finance report from today (3/24/2023), they talk about how the bank crisis is not a good thing for commercial real estate, in general, because that sector has had so many changes and stresses since the pandemic began, The whole work-from-home movement has pulled lots of workers out of offices, and that is after years of the Retail Apocalypse opening up thousands of retail stores, as ecommerce surged in popularity, and then the sharp and quick rise in interest rates.
As someone who has been blogging about a major economic downturn that looked to be coming for about 4 -5 years now (like here), commercial real estate is another area I believe will go through a huge transition phase, as we continue to move out of the remaining Industrial Age institutions and business models, and into Information Age models.
I've written much more on this underlying idea here and here. Whether my working concept, that I call The Big Transition (an extension of Alvin Toffler's concept, TheThird Wave from 1980,) is the best take on things can be argued, but in any case, it appears that there will be major, and massive changes in the uses of commercial real estate in the next 10 years or more. This will be on top of lots of changes that have already take place, like the adaptive reuse of old grocery stores for fitness centers, dead malls for shipping centers and medical offices, and many other ongoing reuses of commercial properties.
More on my Big Picture of how I see the 2020's playing out can be found in my online "book/blog thing," written in 2019-2020 called Welcome to Dystopia: The Future is Now. In it I explain the three theories of other thinkers that I believe best describe where things are going, and my take on, and extension of those ideas into more recent years. In any case the bank crisis is abou tthe last thing the commercial real estate world needed right now. We'll see how things play out.
Just saw another article fromYahoo Finance today (3/24/2023). "Banks are sitting on $1.7 trillion in unrealized losses." Uh... that's not good. The article goes on to say that of the $17 trillion in banks deposits in the U.S., $7 trillion are not covered by FDIC insurance.
First of all, I looked up the term "Bankpocalypse" yesterday, just as a joke. There were 665 results. Today there were 340 results. It appears someone is scrubbing the term from Google Search results. For real. To put that in perspective, my first name is Steve, and I googled "Stevepocalypse," which is absurd, and not likely to very popular, unless you hate all guys named Steve. There were 1,030 results. Three times as many as Bankpocalypse. Hmmmmm...
First Republic Bank- Despite a $30 billion cash infusion last week, deposited in the bank by several major banks, for 120 days, the bank's stock continued to tank today. It closed at $12.18, down more than $20 from last week, and down 89.4% from it's March 8, 2023 price of $115. So they are still struggling to straighten out things, and restore confidence in depositors.
Western Bancorp- Their stock is about where it was last Friday, closing at $18.12, down about 6% from March 8th, and down from about $25 at the beginning of 2023.
Pac West Bancorp- Their stock is also about where it was last Friday at market close, down about 61.8% since March 8, 2023. The stock went from $26.68 on the 8th to 10.12 today.
To put these regional bank stocks in perspective, Wells Fargo stock, one of the Big 5 banks, is down 19.6% since March 6th, 2023. Banks at all levels have taken a hit. J.P. Morgan, Goldman Sachs, and CitiGroup are all still down a fair amount, 10% or more, as well, since March 6th.
The $494.9 billion dollars loaned to the banks of the U.S. last week seems to have helped the stock market today, but not the banks as much as I would have expected.
Blogger's Note- The Next Day- 3/21/2023- There's some crazy blurb on the CNBC site saying First Repbublic stock is up 50%. This morning the stock rose from $12 and change to $16 and change right now. The stock chart still looks like a cliff, and New Republic's stock is still down 90% in the last year. Here's the chart.
Blogger's note- 3/23/2023- According to this CNBC article today, more than $70 billion more has been loaned to banks in the last couple days. Some through the new BTFP program, and more to the closed down banks. That puts the total to bailout well over half a trillion dollars within two weeks of the beginning of the bank crisis. The stock market indicies were up today, with major banks down some, and First Republic stock holding steady now.
Many years ago, around 2009 or so, Ray's MTB mountain bike park had a video contest called "Odd Couple," named after this 70's TV show. The idea was for a mountain bike rider to team up with a BMX rider, and a video person, and make a video at Ray's. I'm not sure who won, but this was my favorite video, BMXer Taj Mihelich and MTBer Jeff Lenowski. This, and an earlier video of Props Road Fools BMXers going to Ray's MTB, helped spark my idea for building a multi-sport/arts complex some day. The idea evolved in the years since.
This new blog seems to be attracting a different group of readers, right from the start, much to my surprise. That wasn't my intention. The original plan (which always gets changed) was to do this blog without really promoting it, and "collect" a bunch of ideas on how people have, and are now, repurposing old, abandoned, and empty buildings. I wanted to slowly dig into the ideas already out there, and start learning more about this subject over a period of time. Then I'd figure out if I wanted to take it further, in one direction or another.
Then Silvergate Bank collapsed, and then the larger, Silicon Valley Bank collapsed, and there were runs on several more banks, and the current banking crisis erupted. This blog seemed the perfect place to chronicle some of the key points, with links to videos and articles, as that was happening. Then this blog started getting some views. Somebody is checking it out, and keeps checking it out. So now it's become a more serious part of my current writing, along with my main personal blog, Steve Emig: The White Bear.
My older readers know my background, but I think I need to explain my life a bit here for any new readers. I moved around a lot as a kid, my dad was a draftsman/engineer, and my mom was a housewife, usually into some craft trend, like ceramics. We bounced around Ohio until I finished 8th grade, in 1980. Back then the small towns and cities of the Midwest were still thriving. People often worked the same factory job their whole life, taking the family on a vacation to Lake Erie, or maybe Florida, every summer. But for a variety of reasons, my parents kept moving, nearly every year, with me and my little sister, Cheri, in tow.
The factory buyouts and shutdowns that decimated U.S. manufacturing were just beginning in 1980. Word got around that Plymouth Locomotive Works was up for sale. My dad worked there, and sent out some resume's, soon landing a new job. We moved to New Mexico for a year, a big culture shock for a Midwest kid. I hated the heat, but loved the wide open spaces of the West. Then we moved to Boise, Idaho, in 1981. I managed to go to the same high school, Boise High, all three years, though we lived in two houses and a mobile home during that time. In the trailer park outside Boise, my junior year of high school, I got into BMX riding. I began to race BMX, then got into the brand new sport of BMX freestyle, then called trick riding. BMX bike riding became the theme of my life.
A year after I graduated high school, and couldn't afford college, my family moved to San Jose, California, led by my dad's new job. I started a zine, a little self-published booklet, about BMX freestyle, to meet the riders of the Bay Area. That zine landed me a job atWizard Publications, home of BMX Action and FREESTYLIN' magazines, in Southern California, in the summer of 1986. At age 20, without taking a single college course, I was suddenly proofreading two worldwide magazines, though I was mostly an assistant to the other editors and our photographer. The idea of going to college went out the window, and I became a part of the BMX and skateboard industries through the heyday of the late 1980's boom in those sports.
One weekend when there was a big freestyle contest, and a girl my friend and I met at a trade show invited a bunch of us freestylers to a party in Palos Verdes. Her family had a good sized guest house behind their house. The yard went beyond, to a cliff overlooking the Pacific ocean. As we hung out and partied, and eventually all crashed out on the couches and floor, I had this idea. "Man, it would be cool to have a big house, with a guest house, and a halfpipe and some other ramps in the backyard some day. Then people from all over the country, and the world, could hang out at my place when they were in Southern California.
As I fell asleep on the floor of the guesthouse that night, that idea was in my head. It was just a cool daydream to think about for years after that. I wound up roommates in several houses and apartments with pro BMXers, and we had travelers staying on our couches and floors much of the time, from across the U.S., and several parts ot he world. That was my life as a BMX freestyler in the long recession of the early 1990's. I didn't do that much traveling, but I met riders in our weird little sport from at least 6 or 8 countries, and much of the U.S., when they stayed with us to save money while traveling.
I was too shy to get my own business going, though I managed to self-produce a BMX video ni 1990, and produce and edit a few other videos for small BMX companies. BMX and skateboarding largely died off, except for the hardcore riders, in the early 1990's. During the 90's, I wandered through a series of odd jobs, read 200 or more books, and lived and rode my bike, into the early 2000's. After an injury, I left my "Hollywood" lighting tech job, and wound up a taxi driver in the Huntington Beach area. It was cool for a year, then technology changed the business, and things went downhill. After the dispatch computer replaced the old CB radios, I worked seven days a week, 12-16 hours most days, and just barely scraped by. I gained 150 pounds, didn't have time to ride my bike, and ultimately wound up in homeless, in really poor health, in 2007. I spent a year on the streets of Orange County, California, trying different ideas to get my life going again.
Meanwhile, my family kept moving around. Ultimately my parents, and my sister, wound up in central North Carolina. In November of 2008, as the economy crashed, I accepted their longstanding offer of plane ride to North Carolina, and stayed in my parents' tiny apartment. Initially I planned to stay through the Christmas holidays, then head back to California. I couldn't find any work, not even a cashier job at a gas station, or work in a restaurant. I got stuck in NC, and I got severely depressed.
Bored out of my skull, but with 24/7 access to the internet for the first time, I started blogging about my life as a BMX industry guy, and hardcore, if mediocre, rider in the 1980's and early 1990's. That helped reconnect me with many of my old BMX friends online. But I still was living in a tiny town in NC, in my parents' apartment, at 43 years old, with no job and no income. I finally found work driving a taxi in nearby Winston-Salem, a once rich tobacco city, struggling to rebuild after their factories shut down years earlier, like dozens of other American cities.
Around that time, I first heard of a book called The Rise of the Creative Class, by professor Richard Florida. His Creative Class concept, and the notion of tech companies locating in cities that already had thriving art and music scenes, "Creative Scenes," as I call them now, made perfect sense to me. I was a part of several different BMX freestyle scenes in the 80's, and saw how a handful of people could launch a new idea in an area, introducing it to more people. I had also seen the whole arc of the a Creative Class city actually happen, in Huntington Beach, California. While Richard Florida was trying to figure out why tech companies clustered in certain cities, as a Professor at Carnegie Mellon, I was living in a city that was playing out the Creative Class arc he was chronicling and later writing about.
In the Huntington Beach area, the Creative Class wasn't young tech start-ups, it was surfers, then skateboarders, punkers, BMXers, snowboarders, motocross riders, and later MMA fighters, that formed a culture like no other. There was this vibrant collection of highly creative, pretty weird, action sports people, and that area became the first action sports major hub of the world. While it wasn't a tech focused scene, it was the same dyanmics, a Creative Class city and region.
The H.B. area busniess start-ups turned into businesses like Surfline, Victory westsuits, Robert August surfboards, Jack's Surf Shop, Huntington Surf & Sport, Vision Skateboards, Sims Snowboards, Schmitt Stix Skateboards, Quicksilver, Etnies shoes, GT Bikes, Volcom clothes, S&M Bikes, and even the night club, Club Rubber, among many other action sports related businesses. Huntington Beach, was still the "dirty beach city" in the 1980's, there were oil pumps all over downtown, a remant of the 1920 oil rush there. Newport Beach, just to the south, was the "cool city," at the time.
H.B. was where there was still pretty cheap rent right by an 8 mile long stretch of undeveloped beach. There were always waves, not great waves, but decent waves. That's what made Huntington Beach "Surf City," from the Jan & Dean song way back in the 1960's. Surfers make movies, and us skateboarders and BMXers and snowboarders began to make videos in the early 1990's. Those videos made Huntington Beach famous around the world, to other surfers, skaters, and BMXers and other action sports people. That hype eventually spread to other groups, making Huntington Beach known aorund the world. The economic development world still hasn't figured this out yet. Action sports people are a great hype machine for a city, without even trying, since making lots of videos is a huge part of the culture, expecially these days.
Huntington Beach attracted talented action sports people, who are highly creative by nature. That made the city more attractive to other people as the years passed. In the early 2000's, after many years of a hardcore action sports culture, Yuppies, including a lot of tech workers from nearby Irvine, moved in. Now Huntington Beach is more of a South Beach, an upscale beach city with a ton of shopping in the old downtown area. But there are still decent waves, and lots of surfers. The rent is just five times as high now. But I lived their when the freaks and the weirdos ruled the scene.
I knew, from experience, how small scenes of highly creative people attracted more creative people, and that kept going, in some places. Eventually, a growing Creative Scene can evolve into a scene of all kinds of interwoven Creative Scenes, art, music, web design, YouTubers, action sports, and small entrepreneurs, and other creative pursuits. They intermingle, and continually bounce off each other's energy and ideas.
When you get some entrepreneurs into the mix, then you get a bunch of small businesses growing and emerging, as well. That was the kind of culture many tech workers wanted to live in, as Richard Florida's research showed. In the 2000's, after the success of The Rise of the Creative Class book, and Florida's active lecturing on the concept, dozens of American cities were trying to attract those Creative Class workers. More important, in the civic leaders minds, was to attract tech start-ups, to jumpstart their local economies again. Winston-Salem, along with nearby Greenboro and Highpoint, were trying to attract those people and those entrepreneurs. So were about 100 other cities around the U.S..
Meanwhile, I was driving a taxi. Most of a taxi driver's day involves sitting in the car, in a good shady spot if it's hot, waiting for taxi calls. One of my favorite hang out spots was in the parking lot of an abandoned building at 1901 Mooney Street, in Winston. A small patch of woods provided a big shady area to park the taxi in the hot Carolina sun. I was right above Hanes Mall, on a little bluff, and also close to Forsyth Hospital, and many businesses and some hotels. Because the old warehouse was abandoned, the backside of the building was all mine, most of the time. A few local workers would drive there and eat lunch in their cars. I was living in my taxi, so I actually slept in that out of the way parking lot many, many nights.
As the hours ticked by, I would daydream about being able to buy and rehab the old warehouse, and turn it into a BMX, mountain bike, skateboard park, with an indoor rock climbing area as well. That old idea was a cool daydream to pass the time. I imagined building a multi-sport action sports park, that also had some art studios as well. In the suffocating, ultra-conservative culture of North Carolina, I knew a place like that would soon become famous in the region to other action sports people. I also knew that action sports people make videos. A sports park, like I imagined, would put a city like Winston-Salem on the map, on YouTube and social media, the way Ray's MTB has in Cleveland. It would be a new kind of hub for creative action sports people, as well as artists, and video producers. A small creative scene like I imagined would help draw more creative and talented people to an area not known for them.
Winston-Salem already had a cool little, but vibrant, art scene, on Trade Street, downtown. But North Carolina, and The South, in general, had hardly any action sports scenes. Yeah, Dave Mirra and Ryan Nyquist were from the Greenville area, but that was an exception, not the rule. The small, local, surfing, skateboarding, BMX, and other action sports scenes, which are all over California, didn't really exist in NC.
What the leaders of North Carolina, and all convervative (small "c") parts of the country don't understand is how much culture really matters. Not high falutin' aristocrat culture, but creative culture, a place where the weirdos of the area can safely be weird, and try all sorts of new ideas. If there's a place where a pocket of creative weirdos can thrive, and be their weird selves, word gets around. Soon other people, other types of Creative Scenes, often set up shop, building the over all scene of Creative Scenes. I'd seen BMX freestyle go from a couple dozen little pockets of goofy bike riders across the U.S., into a worldwide sport in 40 years. Nobody planned that. There was no BMX Illuminati strategically planning to take over the world on "little kid's bikes." It happened organically, as we just naturally, and tirelessly, promoted our weird sport, because it was fun.
The same happened in skateboarding, snowboarding, mountain biking, and all the other action sports. In those groups, there are also lots of artists, designers, video producers, and photographers. That is one part of the Creative Class that any thriving city in today's world needs. But no one wanted to hear that back in 2010. Most civic leaders still don't want ot hear this, as their cities and towns die on the vine.
So my whole interest in what's now known as "Adaptive Reuse" of buildings, came from sitting in my taxi in Winston-Salem, next to an abandoned warehouse, daydreaming about what I wanted to do to make that building thrive again, in my own way. That building did get rebuilt, and put back into use. It became a medical facility, I beleive, and is now listed as a baseball training business on Google Maps.
Now, it's 13 years later, and I'm back in Southern California, living, if not thriving. There are action sports and arts scenes all over this huge metro area. An action sport park would be cool, but it wouldn't have the same local impact here as it would have in a struggling small or mid-sized town in a less populated part of the U.S.. And it would be really expensive to find a place big enough to do it, here. Not impossible, but expensive. At this point, I really want a decent sized indutrial or retail building that I could live and work in, which could house a mini ramp and an art studio. Something like that. That's the current dream.
So that's where my personal interest in Adaptive Reuse came from. But it's now merging with my geeky, futurist side. I know were in for some more really, really, turbulent economic times. Even here in expensive, crowded, Southern California, there are empty offices and retail storefronts all over the place. The banks are now hitting the beginning of the Bankpocalypse, a major shift in how banking happens for businesses and individuals. Commerical real estate is beginning to crash, and there will be a lot more empty buildings in the next few years. So I'm using this blog to dig into this whole idea of adaptive reuse. I want to learn the basics, to see what's happening in commerical real estate in general. I also want to look at all the different types of building repurposing that other people have done, from the huge projects with dead malls, and old factories, to the small one or two person projects. So that's the basic idea and thinking at the beginning of this blog. We'll see where it takes me, and all of you, as it progresses. Thanks for reading.
For those of us weird economic-type geeks, we've been looking for landmarks in the road into this recession, depression, or whatever this turns out to be.
Latest news- noon PDT, 3/19/2023- Zurich-based investment bank UBS has made a deal to buy failing investment bank Credit Suisse, in Switzerland, reportedly for about a billion U.S. dollars. This will help stem the fear of bank failure contagion in Europe, and around the world. Here's the Reuters news report on the deal, from a little over an hour ago.
So here's how I compare this the 2023 Bank Crisis "landmarks" to the 2008 Great Recession:
Bear Stearns/March 2008- 2023 version- Collapse of Silvergate bank about 10 days ago- This "crypto friendly" bank out of San Diego was allowed ot collapse, possibly to send a message to the banking world to stay away from crypto.
Lehman Brothers collapse/September 2008- 2023 version- Silicon Valley Bank collapse- SVB was shut down a week ago, after a two day bank run, and taken over by the FDIC. This was followed in a couple of days by the collapse FDIC takeover of Signature Bank, another "crypto friendly" bank. The FDIC, U.S. Treasury deptartment, and The Fed (Federal Reserve) joined forces to say that depositors will get their money back, and later agreed to pay back those who had uninsured accounts (over $250K per account). Somewhere between 85% and 95% of SVB deposits were not insured. Bank stock shareholders and bond holders expected to lose money, but may get something from the sale proceeds.
AIG problems/Sept. 2008- 2023 Version- First Republic Bank- Days after Lehman Brothers was allowed to collapse in 2008, AIG, a large investment bank, was bailed out, citing a systemic risk to the whole banking system. This is where the "too big to fail" idea was born, or at least popularized. After Silicon Valley Bank and Signature banks were allowed ot collapse a week ago, the top 5 large U.S, banks, and a few second tier big banks, all pitched in, $30 billion total, to deposit in New Republic Bank for 120 days, to help stabilize it. which was also seeing withdrawals and a huge collapse in the stock price.
In the last week, the banks of the United States borrowed 464.9 billion dollars (see article in last post), plus the $30 billion that was loaned to First Republic by the other banks. That's just under a half a TRILLION dollars in loans to try and restore faith in the U.S. banking system.
I think now we will see many more banks, smaller regional banks, that are struggling, and when they reach a crisis point, they will be bought out by larger banks. This makes the overall system less stable in the long run. But that's how things work.
I found the perfect song to go with this post... Can't go wrong with the Red Hot Chili Peppers and "Give it away now." That's what The Fed and the U.S. government is doing for the banks.
According to this article from the U.K. newspaper/news site, The Guardian, U.S. banks have borrowed $300 billion from the Federal Reserve, to shore up their books, and cover the rising number of withdrawals. $143 bllion of that was loaned to the holding companies of Silicon Valley Bank and Signature Bank, to cover the money owed to depositors. The Fed did not disclose which banks got the rest of the money.
In addition to that money, another $153 billion was loaned through the traditional Fed Discount Window, and another $11.9 billion was loaned out in the new program, just set up last Sunday, to allow banks to borrow against assets to cover outflows to depositors. These amounts total $464.9 billion in loans, just in this first week of the banking crisis.
In addition to all those loans from The Fed, several large banks also loaned a total of $30 billion to First Republic Bank, whose stock dropped precipitously on the fears of contagion in the banking system. That puts the total amount loaned out, in about a week, at $494.9 billion, to keep the banking system afloat.
In Europe, it's been widely reported that $54 billion of loans went to Credit Suisse, to shore up that bank.
Here's Ray himself, in a short interview about the story of how he started riding a mountain bike, cleaned up his own life, and then started building an indoor mountain bike park.
Housed in an abandoned factory in Cleveland, Ohio, the idea began in 2004, and Ray's MTB has been growing and evolving ever since. Ray describes it as a sort of a "Field of Dreams" story, referring to the 1989 movie starring Kevin Costner. Ray had the idea, started building it, kept building it, and years later sold the place to Trek, and then later built a second park in Milwaukee. That second park closed, but the original Ray's MTB is still going strong, drawing mountain bike riders, and some BMXers from around the country.
It's one man's dream, that became a community, and not scalable from a major corporate standpoint. But that doesn't matter, here's one of those rust belt factories that closed down in the 1980's or 1990's, that is now a legendary action sports iconic spot, in the unlikely city of Cleveland, Ohio. Personally, I think there's a lot to be learned by the success of Ray's MTB in the world of adaptive reuse, and finding new purposes for old buildings.
According to this report by The Real Deal, the total amount of CMBS bonds created has dropped by 85% from a year ago. Los Angeles and Orange County have loans on 400+ commerical properties maturing this year (2023), meaning new financing a much high interest rates for property owners. This short article, from Feb 22, 2023, says that new commerical real estate deals (big enough to require CMBS financing, I'm assuming) has basically ground to a halt. This report was three weeks ago, before the collapses of Silvergate, Silicon Valley Bank, Signature bank, and the current floundering of Credit Suisse in Europe. I think it's safe to safe there will not be many large building deals happening anytime soon.
This is why I've been drawn to blog on this subject. I'm not an expert, I am quite the opposite. I spent over ten years on the East Coast, driving past post-apocalyptic looking factories, warehouses, and other large empty buildings. The there's the well known rise in dead malls, and the Retail Apocalypse, which has closed down way over 20,000 retail chain stores in recent years.
I keep wondering how we can put some of these facilities to a better, profitable, and productive use in the years ahead. My reason for writing this blog is to dig into this whole issue of finding new uses for old and abandoned properties. I'm not going to look just at the mega-deals open to the super wealthy, but also to the possible rehabilitation of all kinds of offices, retail storefronts, industrial buildings, homes, and other properties that are now empty, or soon to be empty, around the country. This is a HUGE trend throughout the U.S., and probably many other countries. So I'm going to look at what different people have already done to repurpose buildings, the Big Picture (economy, recession, where we're headed), and see what other potential ideas I may come up with, to make good use of empty and unused buildings of all kinds. That's the basic plan to get this blog started... after getting sidetracked with the bank collapses.
