Essays by John McNellis
Buying Time in San Francisco
My recent observation that San Francisco’s office market has lost 60 percent of its value may have been optimistic. In the last month, a quality high-rise at 350 California Street has apparently gone into escrow at a price 75 percent less than its 2020 value. If it closes at its reported $67 million…
Office Meltdown pits Borrowers against Lenders
Writers of self-help books swear grief has five stages—denial, anger, bargaining, depression, acceptance. They could be right. According to JP Morgan Chase, 21% of office building loans across the country have gone bad. The borrowers of these loans were definitely in denial, are likely still angry,…
SVB: Monogamy’s Downside
Silicon Valley Bank’s overnight collapse cold-plunged us into reality, a grim reminder that nothing is more constant than fear and greed. The bank's failure has us all scurrying to protect ourselves. We hold an SVB letter of credit as rent security from a start-up tech tenant, and we have an operating…
Could Turkey’s Disaster Happen Here?
The humanitarian tragedy in Turkey and Syria—50,000 plus deaths and more than a million homeless—was triggered by a 7.8-magnitude earthquake (M7.8). Could it happen here? The earthquake could. San Francisco’s 1906 earthquake was estimated at M7.9 and California’s Cassandras have been predicting another…
Going All-Electric at our Peril
Our electricity went out during that last big storm. The winds had wracked a nearby power pole and a line snapped. PG&E responded well, its crew working through a night of howling rain while we “glamped” at home. Like pioneers, we read by candlelight and went to bed early. Our experience was far from…
Vacant Offices: A Private Solution?
The office market is grim, barreling toward grimmer. According to Newmark, the national vacancy rate in Q3 topped 17.6 percent. Downtown Oakland stands at 21.3 percent, while San Francisco is outpacing the pack at 24.1 percent. With almost no traditional financing available and a bid-ask spread wider…
San Francisco: Falling off the Cable Car?
Like the road to hell, the path to urban decay can be paved with good intentions. San Francisco has plenty of good intentions. Its voters will vote on fourteen separate local ballot measures on November 8th, among them a proposed tax on empty housing. If history is any indicator, two-thirds of these…
Retail on the Rise
The Chicago Cubs went 108 years between World Series victories. It may not be quite that long before retail wins real estate’s World Series, that is, before it becomes the industry’s most desirable asset class. After 16 years in last place, bricks & mortar retail has finally climbed a rung, possibly…
The "Under-demanded" Office Market
The swallows abandoned San Juan Capistrano in the 1990’s. Their home—the historic mission—underwent a renovation, the birds lost their ancestral nests and, despite every effort to lure them back, they have yet to return in meaningful numbers. No less flighty, workers abandoned their office buildings…
Commercial Properties: Time to Hold ‘Em?
Years ago—beset by the Great Recession—one of Tennessee’s finest developers shook his head at his financial statement and drawled, “My net worth’s gone down by half, but my cash flow’s the same.” He wasn’t alone. Commercial real estate nationwide lost around forty percent of its value during those trying…