Goldman Sachs report finds prices in hard-hit areas still need to fall at least 30% more
- Office prices need to drop 50% for housing conversion projects to work, says Goldman
- Prices in hard-hit areas like San Francisco, Boston, Los Angeles, and Seattle need to fall at least 30% more
- 4% of office buildings could be candidates for conversion into housing
- Office-vacancy rate expected to climb to 18% in 2033
- Nonviable buildings still not cheap enough to cover conversion and financing costs
- Developers in San Francisco, Boston, Los Angeles, and Seattle need building prices to fall over 30% more
- White House initiative aims to spur conversion projects for affordable housing near transit hubs
- Mortgage rates remain elevated from pandemic lows
According to a new Goldman Sachs report, office prices need to drop about 50% for developers to feasibly convert them into housing. The report also states that even in hard-hit areas like San Francisco, Boston, Los Angeles, and Seattle, prices still need to fall at least 30% more. Currently, only 4% of office buildings are considered viable candidates for conversion. The office-vacancy rate is expected to rise to 18% in 2033, further increasing the potential for development. However, the cost of conversion and financing is still not covered by the prices of nonviable buildings. Developers in San Francisco, Boston, Los Angeles, and Seattle would need building prices to fall over 30% more for conversions to make financial sense. The White House has initiated a program to support conversion projects for affordable housing near transit hubs, but mortgage rates remain elevated from pandemic lows.
Factuality Level: 2
Factuality Justification: The article contains irrelevant information about the length of the feature, unnecessary details about the technology used, and repetitive information about office building prices falling. It lacks depth and analysis on the topic, and the information provided is not well-supported or thoroughly researched.
Noise Level: 3
Noise Justification: The article provides a detailed analysis of the challenges and opportunities in converting office buildings into housing. It includes data and insights from a Goldman Sachs report, discussing specific criteria for identifying nonviable office buildings and the financial implications of conversion projects. The article also mentions government initiatives and grants aimed at spurring affordable housing projects. Overall, the article stays on topic, supports its claims with evidence, and offers actionable insights for developers and policymakers.
Financial Relevance: Yes
Financial Markets Impacted: Real estate and housing developers
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Rating Justification: The article discusses the potential for converting office buildings into housing due to the impact of the pandemic. This could have implications for real estate and housing developers, as well as the affordability crisis in housing. However, there is no mention of any extreme events or their impact.
Public Companies: Goldman Sachs (GS), JPMorgan Chase (JPM)
Key People: Jan Hatzius (Team Leader of Economic Researchers at Goldman Sachs)
Reported publicly:
www.marketwatch.com 
