Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 2: Tracy, So, you know, we had that conversation the other
Speaker 2: day with rich Hill Cohenan Steers, and you sort of
Speaker 2: put like a maybe not too gloomy gloss on.
Speaker 1: The commerci not too gloomy gloss, not too gloomy gloss.
Speaker 2: It's a good one, uh like not great, but like
Speaker 2: maybe like not terrible. That like price discovery is happening.
Speaker 2: It's not great, but it's salvageable. There's still room for
Speaker 2: extending and pretending it's not the end of the world. Like,
Speaker 2: you know, not great, but not terrible.
Speaker 1: Yeah, And I think to some extent, we've seen that
Speaker 1: out in markets in recent months. Right, So there were
Speaker 1: all these stories about the looming maturity wall. Yeah, a
Speaker 1: lot of those loans, a lot of those bonds have
Speaker 1: been refinanced, a lot of companies are surviving, a lot
Speaker 1: of building owners or real estate developers seem to be
Speaker 1: surviving under the new conditions. But I guess the wild
Speaker 1: card in a lot of this is still what happens
Speaker 1: with interest rates.
Speaker 2: Here's what I don't get though, Like, at least when
Speaker 2: we're talking about office and when we're talking about office
Speaker 2: real estate in big cities, the vacancy rates keep going up.
Speaker 2: And I sort of thought that would stop, because you know,
Speaker 2: especially in the middle of last year, you saw a
Speaker 2: number of pushes where companies like, no, we're serious, it's
Speaker 2: return to the office time, guys, And so I was like, oh, okay,
Speaker 2: like that was it, this was the turning point. And
Speaker 2: yet I think by like at least top line metrics,
Speaker 2: if you just sort of look at offices and the
Speaker 2: empty ones, things continue to deteriorate.
Speaker 1: Office buildings are still empty in places like New York
Speaker 1: and San Francisco. This is very true, but I think
Speaker 1: really ate, like people still want to live here residential
Speaker 1: real estate. I mean, I think those vacancies are pretty low.
Speaker 1: So there is this like there's this tension where people
Speaker 1: still want to come to the city, it feels like,
Speaker 1: or at least move here, but they don't want to
Speaker 1: go into the office, which fair enough I sympathize.
Speaker 2: So just a full disclosure or you know, my own
Speaker 2: stake in this story, which is that last year I
Speaker 2: bought an apartment in Manhattan. So I am really invested
Speaker 2: in the idea that Manhattan continues to be a thriving,
Speaker 2: going concern with people on the streets, looking around, moving about.
Speaker 2: I feel like that's you know, it's good. It feels
Speaker 2: good for safety, things like that. I really need this
Speaker 2: whole thing to hang together.
Speaker 1: And I'm on the opposite side of this trade, I
Speaker 1: think where I have no Manhattan ownership. I rent, I
Speaker 1: would like the rent to go down actually, and I
Speaker 1: have a house out in the country. So yeah, we'll.
Speaker 2: Debate between the two of us. Tracy, we're perfectly.
Speaker 1: Well well hedged.
Speaker 2: Yeah, that's right, we're perfect He well. Anyway, so we
Speaker 2: had that conversation with rich Hill last week and he
Speaker 2: mentioned he said, oh, there's this NYU professor who was
Speaker 2: one super gloomy about the urban doom loop real estate apocalypse,
Speaker 2: and he even he's changed his tone. And then when
Speaker 2: he said that, I thought two things. It's like, hey,
Speaker 2: I know that guy. Yeah, he's even been to some
Speaker 2: odd logeed trivia nights. And b I didn't realize he
Speaker 2: had changed his tone. I didn't even know if that's true.
Speaker 2: Got stateated on air. I hope it's true, because I
Speaker 2: want things to be factual on the podcast. So it's
Speaker 2: like if we should actually we should talk to we
Speaker 2: should talk to that NYU professor.
Speaker 1: I like that our fact checks have become sources of content.
Speaker 1: Now it's just another episode to see if what someone
Speaker 1: already said is actually correct.
Speaker 2: We could have just done a fact check, or we
Speaker 2: just put it out there and then if it's wrong
Speaker 2: then we get it, we get it debunked on a
Speaker 2: future episode.
Speaker 1: All right, let's find it out if it's wrong or not.
Speaker 2: Well, I'm very excited. We're going to be speaking with
Speaker 2: Arbid Gupta. He's an associate professor of Finance at NYU
Speaker 2: Stern and back in twenty twenty two, he was the
Speaker 2: co author of a paper work from Home and the Office,
Speaker 2: Real Estate Apocalypse. Of course, there's all this fear of
Speaker 2: doom loops. People don't go into the office. Then the
Speaker 2: local businesses that depended on that foot traffic, like Delhi's
Speaker 2: and salad bars and restaurants go out of business, and
Speaker 2: then people don't like being in the city even more,
Speaker 2: and then they move out to the middle of nowhere
Speaker 2: like you. And then suddenly the whole thing falls apart, Arbet,
Speaker 2: thank you so much for coming in, Thanks so much
Speaker 2: for having me. Let's just start with like the basic
Speaker 2: fact check question, are you as gloomy or do you
Speaker 2: have the same fears of an office real estate apocalypse
Speaker 2: as you did in late twenty twenty two.
Speaker 3: Great, So, taking a step back, my co author Teams
Speaker 3: and I, so that includes stan One Neiberg who was
Speaker 3: at Columbia, as well as RNDA Methol who was at
Speaker 3: unc first began with a research paper that was looking
Speaker 3: at the urban flight and residential real estate. So we
Speaker 3: were comparing the price of real estate in the center
Speaker 3: of cities against the price of residential real estate in
Speaker 3: the suburbs. And we found is that over the course
Speaker 3: of the pandemic, the price of suburban real estate, so
Speaker 3: places like where Tracy lives have gone up from.
Speaker 2: Maga's really like ex surban but yes, keep going.
Speaker 3: No, it's really those far far exurban places, places that
Speaker 3: weren't even really considered commutable, that actually went up in
Speaker 3: value the most relative to real estate in the center
Speaker 3: of the city, places like where Joe lives, right, And
Speaker 3: so we find that that spread is corresponding to a
Speaker 3: rent gradient or a price gradient really narrowed, and in fact,
Speaker 3: that narrowing has continued even through twenty twenty three. So
Speaker 3: urban real estate continues to lose value relative to suburban
Speaker 3: and far exurban residential real estate. We find that that
Speaker 3: pattern is really driven by remote work. So it's people
Speaker 3: that are willing to move further and further away from
Speaker 3: the city and are less willing to pay for urban
Speaker 3: amenities and proximity to urban work locations. That's kind of
Speaker 3: driving this spatial arbitrage across markets.
Speaker 1: How do you square that spatial arbitrage idea or that
Speaker 1: price discrepancy urban versus non urban prices with the sense
Speaker 1: that I mean, it certainly feels reading the headlines, and again,
Speaker 1: Joe and I might be slightly biased here because we
Speaker 1: work in financial journalism adjacent to the financial industry, but
Speaker 1: it feels like there is a drive to get people
Speaker 1: back into the office.
Speaker 3: Absolutely, and I think this really varies across cities and
Speaker 3: across industries. Right, so when you look at the entire country,
Speaker 3: there's really no good indication that people are more likely
Speaker 3: to come into the office. Whether you're looking at surveys
Speaker 3: that kind of ask people, how often are you coming
Speaker 3: to the office or not, or surveys that ask firms
Speaker 3: what are your policies or not. But one trend that
Speaker 3: is pretty noticeable is it's a lot of the largest
Speaker 3: companies that kind of make up the headlines, firms like
Speaker 3: Goldman Sacks, they're very vocal about their back to office plans.
Speaker 3: And you see across some industries, particularly industries like finance,
Speaker 3: they are a little bit more inclined to get workers
Speaker 3: into the office. So it's really kind of hard to
Speaker 3: see a nationwide trend, but it is there in certain
Speaker 3: industries or firms.
Speaker 2: So is the doom looping, like, is it spiraling or
Speaker 2: has anything arrested it?
Speaker 3: Right? So we looked at this aspect of urban flight,
Speaker 3: and so across many cities like New York or San Francisco,
Speaker 3: you see a population loss of about six to eight
Speaker 3: percent that happened over the course of the pandemic, and
Speaker 3: this population loss has sort of stabilized. So San Francisco
Speaker 3: gained a small amount of population last year. New York
Speaker 3: continued to lose population, but at a smaller rate than
Speaker 3: previous years, and that kind of motivated us to look
Speaker 3: into what are the implications for commercial office buildings and
Speaker 3: this concept of the of the doom loop. So in
Speaker 3: our paper that came out a couple of years ago,
Speaker 3: we estimated that New York City office real estate would
Speaker 3: be down in value about forty to fifty percent. And
Speaker 3: this can lead to two possible spillovers, right. So one
Speaker 3: is the impact on financial institutions and banks in particular
Speaker 3: that are holding a lot of the debt associated with
Speaker 3: office buildings. So that's a financial doom loop risk.
Speaker 1: Right.
Speaker 3: So as the value of these properties declines, loans attached
Speaker 3: these properties might enter into full and we're seeing default
Speaker 3: rates now about six to seven percent. That might trigger
Speaker 3: foreclosures to stress sales that then amplify back and feed
Speaker 3: into further real estate price to clients. We're seeing the
Speaker 3: beginnings of this play out, but modification efforts have sort
Speaker 3: of stemmed this tide for now. The other externality or
Speaker 3: spillover effect comes onto cities, right, And so that's this
Speaker 3: urban doom blup idea that you're going to see a
Speaker 3: cycle driven by remote work leading to office vacancy losses,
Speaker 3: loss and property value that then hits city budgets. City
Speaker 3: governments therefore lose money and are forced because of balanced
Speaker 3: budget requirements to either raised taxes or cut services, and
Speaker 3: people don't like either of those, and so they might
Speaker 3: respond by leaving the city in greater numbers, which might
Speaker 3: then further amplify those losses. And so we're seeing, i think,
Speaker 3: is sort of the first wave of those events happen
Speaker 3: with the population loss, the loss and value for commercial
Speaker 3: real estate. And it's really now kind of in the
Speaker 3: hands of policymakers to kind of decide how they choose
Speaker 3: to respond to those treads, right, whether they're going to
Speaker 3: respond to these losses by trying to kind of raise taxes,
Speaker 3: cut spending, or trying to improve the quality of life
Speaker 3: and amenities in urbine areas.
Speaker 1: So you're the forty percent estimate. So the idea that
Speaker 1: long run office valuations are forty percent below their pre
Speaker 1: pandemic levels per your paper, that was kind of assuming
Speaker 1: that everything pretty much stays the same. Is that right?
Speaker 3: So we are trying to figure out how persistent remote
Speaker 3: work is going to be, Right, So we're acknowledging the
Speaker 3: possibility that these firms might be successful in bringing people
Speaker 3: back into the office, and we're trying to estimate how
Speaker 3: likely is that going to happen. We ultimately back that
Speaker 3: number out by looking at publicly traded stock prices. So
Speaker 3: the idea is we sort of solve acid pricing model
Speaker 3: that has a key parameter being how likely are firms
Speaker 3: to be successful in bringing people back to the office.
Speaker 3: And basically the only way we can kind of match
Speaker 3: publicly traded read prices so stocks like Brenado, essel Green
Speaker 3: is by getting a parameter an estimate for how persistent
Speaker 3: remote work is likely to be. It's going to be
Speaker 3: pretty high. So we're basically estimating how likely is it
Speaker 3: that we're going to stay in this remote work equilibrium,
Speaker 3: and we sort of estimate that it's a pretty high likelihood.
Speaker 3: So this world sort of seems to be persistent for now.
Speaker 2: Yeah, it is striking. So prior to the pandemic, shares
Speaker 2: of Vernado were about seventy dollars a year. In the
Speaker 2: middle of twenty twenty three, they hit as low as
Speaker 2: twelve seventy nine and they've rebounded, but they're only back
Speaker 2: up to just under thirty dollars, so still about basically
Speaker 2: cut in half versus pre pandemic levels, and I think
Speaker 2: sl Green looks pretty similar.
Speaker 3: Yeah, and the other major pricing indicator to look at
Speaker 3: is the CMBX series. Right. So, back in the financial crisis,
Speaker 3: a lot of short traders were looking at the ABX series,
Speaker 3: which was tracking credit to fault swaps on the price
Speaker 3: of non agency mortgage backed securities. So the CMBX index
Speaker 3: similarly tracks the value of CMBs deals, which are backed
Speaker 3: by bundles of large numbers of commercial real estate mortgages,
Speaker 3: and these bundles vary in how much office they have.
Speaker 3: But what we're seeing is a value loss in the
Speaker 3: CMBX index, which might vary from between fifteen and twenty
Speaker 3: five percent for a triple b CNBX references in DEX.
Speaker 3: So that basically means that market participants expect there to
Speaker 3: be some value loss in these depths accuritizations backed by
Speaker 3: commercial real estate.
Speaker 1: Since you mentioned the ABX, and now I have all
Speaker 1: these subprime memories flooding back. But part of the problem there,
Speaker 1: or part of the reason the losses were a lot
Speaker 1: higher than a lot of people expected, was because we
Speaker 1: estimated the correlation wrong. Right, mortgages when they started going bad,
Speaker 1: it wasn't just isolated incidents. It ended up being across
Speaker 1: the country. What do you see in terms of correlation
Speaker 1: or relationship when it comes to vacant office buildings. Do
Speaker 1: you see like if one office building doesn't have a
Speaker 1: lot of business inside it or a lot of renters,
Speaker 1: does that impact the ones around it?
Speaker 3: So there probably is this correlation risk within office and
Speaker 3: maybe other adjacent asset classes like urban retail. And the
Speaker 3: reason for that is if an office building is vacant,
Speaker 3: if people aren't going there, well, that just makes it
Speaker 3: a less attractive destination, even for other people within the
Speaker 3: same office district. So a good example of this might
Speaker 3: be DC. So DC actually has a really high remote
Speaker 3: working rate, in part because a lot of federal government
Speaker 3: employees have fairly generous remote working policies, and so that
Speaker 3: means that a lot of different office buildings in the
Speaker 3: DC market are all experiencing high vacancy at the same time.
Speaker 3: That does have some spill or effects to other corners
Speaker 3: of commercial real estate. So if I'm looking at retail
Speaker 3: in DC or in some markets like San Francisco, even
Speaker 3: hospitality hotels or impacted as well, but it is confined
Speaker 3: more to those specific asset classes and doesn't necessarily spill
Speaker 3: over to all of commercial real estate, which, as we
Speaker 3: both know, is a very large, heterogenious universe, a lot
Speaker 3: of different asset tymes.
Speaker 2: I remember we used to talk sometimes like on TV
Speaker 2: to Emerging markets manager and it's like, oh, it's very
Speaker 2: important to remember not all em is a monolith. And
Speaker 2: now I feel like all CIRE discussions similar thing. You
Speaker 2: must get in there that CIRI is not a monolith.
Speaker 2: It includes many different categories. The key maybe dichotomy or
Speaker 2: question as you sort of set it out, is do
Speaker 2: cities respond to population flight by raising taxes which might
Speaker 2: accelerate population flight, or cutting spending which might do the
Speaker 2: same thing, or do they find some way of actually
Speaker 2: reversing that trend and making people not want to move out?
Speaker 2: Like what are they doing so far?
Speaker 3: So I think the important thing to keep in mind
Speaker 3: is the really long lags built into all of this, Right,
Speaker 3: So the office leases are really long term in nature,
Speaker 3: and so even to this point, many firms haven't had
Speaker 3: to make an active space decision yet because they're still
Speaker 3: inherited at least from before the pandemic. Then you have
Speaker 3: the mortgages on these assets that are also really long
Speaker 3: term in nature, and so you haven't had to hit
Speaker 3: a refinancing point yet. For these owners. And then finally
Speaker 3: you have the property tax assessment cycle, which is also
Speaker 3: really long, so it takes a really long time for
Speaker 3: cities to necessarily recognize a loss in property value in
Speaker 3: their tax re seats. Right, So a lot of cities
Speaker 3: haven't yet really faced this fiscal reckoning yet. It's really
Speaker 3: more of the long term that they're going to be
Speaker 3: potentially facing lower property tax re seats coming from lower
Speaker 3: property tax revenue from these commercial office buildings, coming from
Speaker 3: lower income taxes from people that have left, as well
Speaker 3: as lower sales taxes from less spending that's happening in
Speaker 3: urban districts. So most cities haven't really had to face
Speaker 3: the impacts of this yet. They've also benefited from one
Speaker 3: time federal relief funds. But in the future, a lot
Speaker 3: of cities are projecting future deficits, and part of that
Speaker 3: just reflects conservative accounting on the part of city governments,
Speaker 3: so they're sort of accounting for the possible ability that
Speaker 3: revenues in the future may just kind of come in slower.
Speaker 3: So it's not yet clear whether these deficits will materialize
Speaker 3: in the future. But what we can say is when
Speaker 3: we look back in the past, the conservative forecasts on
Speaker 3: revenues wound up being exceeded because cities actually wound up
Speaker 3: getting a lot more money than they expected in property taxes.
Speaker 3: So a lot of these core assets, like office buildings,
Speaker 3: we're really providing cities with a lot of additional revenue
Speaker 3: in the past ten to fifteen years, and so they
Speaker 3: may not be in a position to get the same
Speaker 3: amount of revenue from those office buildings, which then force
Speaker 3: the cities to do a variety of different things to
Speaker 3: try to make sure that they remain attractive, vibrant places
Speaker 3: to be. So one big response cities are trying to
Speaker 3: do is conversions. Right, so if you can take this
Speaker 3: structurally obsolescent, you know, stranded asset office real estate class
Speaker 3: and turn it into housing or some other use case. Housing,
Speaker 3: of course is great because everyone wants more housing in
Speaker 3: dense urban areas. That is a great way to kind
Speaker 3: of fill up the city, fill up the subway systems.
Speaker 3: Those subway systems are also kind of experiencing declines and
Speaker 3: ridership as well, and so that's something a lot of
Speaker 3: cities are looking actively at. In addition to just converting
Speaker 3: additional office space or just changing regulation around housing. More broadly,
Speaker 3: so we can build more housing in cities.
Speaker 1: This reminds me actually, one thing that often comes up
Speaker 1: in these urban doom loop discussions is the example of
Speaker 1: New York in the nineteen seventies, nineteen eighties, or even
Speaker 1: after two thousand and one and nine to eleven, and
Speaker 1: the idea that well, there there was a sort of
Speaker 1: discussion about New York is in a long run decline
Speaker 1: and it's going to be impossible for it to get out,
Speaker 1: and yet it did in one way or another. How
Speaker 1: did it manage to achieve that? And what does that
Speaker 1: say about the current policy trajectory.
Speaker 3: So when we coined that term in our paper, we
Speaker 3: really weren't thinking about this the industrialization shock which hit
Speaker 3: a lot of rust belt cities, right and so you
Speaker 3: saw cities like Detroit or Saint Louis Louis about fifty
Speaker 3: or sixty percent of their population over that time as
Speaker 3: they kind of lost that center industry which was holding
Speaker 3: up their entire ecosystem. For cities like New York, it
Speaker 3: also was a pretty bad shock. So the city lost
Speaker 3: something like a million manufacturing jobs that were previously located
Speaker 3: right in the heart of the city. So we had
Speaker 3: this big surplus of real estate associated with these industrial
Speaker 3: logistics uses that had to get redeployed towards other things.
Speaker 3: And ultimately we found here in York that you could
Speaker 3: take these buildings and convert them to retail housing and
Speaker 3: support a lot of office buildings. So a lot of
Speaker 3: white collar work came to New York in the aftermath
Speaker 3: of that deindustrialization period, so some cities were able to
Speaker 3: ultimately prove to be more resilient. We also see across
Speaker 3: cities that meds and eds were a really big factor.
Speaker 3: So having hospitals and educational institutions were a great way
Speaker 3: for economies to kind of pivot and create new job
Speaker 3: centers of growth in order to take over the previous
Speaker 3: blue collar work that would have been going on in cities.
Speaker 3: And so some of those cities, again, particularly like New York,
Speaker 3: were able to kind of redeploy and change their economic
Speaker 3: environment in response.
Speaker 2: We are recording this merch twenty fifth, twenty twenty four.
Speaker 2: So on March fifth, twenty twenty four, how are you feeling.
Speaker 2: Let's start with New York specifically, because that's all care about. No,
Speaker 2: it's not all I care about, just ninety percent. How
Speaker 2: are you feeling about New York right now.
Speaker 3: So I think New York has a lot of great
Speaker 3: advantages going for it. So it begins with the diversified
Speaker 3: industrial base, right so, in comparison to a lot of
Speaker 3: these West Coast cities, in comparison to city like San
Speaker 3: Francisco right now has something like a thirty seven percent
Speaker 3: office vacancy rate. At those rates, if you had the
Speaker 3: fastest office absorption in history, you would still need seven
Speaker 3: or eight years just to fill the existing vacant office space.
Speaker 3: If you are filling San Francisco office at the average
Speaker 3: rate of absorption over the last twenty years, you need
Speaker 3: something like fifteen or more years to actually fill all
Speaker 3: of that office space. So there's just a huge vacancy
Speaker 3: problem in a lot of these West Coast tech center
Speaker 3: centity cities. In comparison, New York just has a broad
Speaker 3: diversity of different industrial uses, and you have a lot
Speaker 3: of firms like big law or financial firms that do
Speaker 3: seem to be more able to get workers into the office.
Speaker 3: In addition, you have a lot of great consumption amenities,
Speaker 3: so people love being in New York for all sorts
Speaker 3: of different reasons. That's going to mean that New York
Speaker 3: is in the position to reinvent itself as more of
Speaker 3: a consumption city rather than a production city. And then finally,
Speaker 3: there's another great buffer that New York City has, which is,
Speaker 3: if you're looking at office rents that are let's say
Speaker 3: seventy dollars or eighty dollars a square foot, you have
Speaker 3: the space to cut that rent down and get to
Speaker 3: a point where you're able to find some other tenant
Speaker 3: willing to come into that space. Now, office owners, for
Speaker 3: variety reasons we can get into, are reluctant to lower
Speaker 3: the rent to that point. But there is space to
Speaker 3: lower the rent and still be able to operate that
Speaker 3: building financially. In comparison, you have a lot of other cities,
Speaker 3: for example, some other Roust Belt cities, where there's not
Speaker 3: necessarily that same level of space to cut the office
Speaker 3: rent without really eating into the ability to operate that
Speaker 3: building successfully.
Speaker 1: This was going to be exactly my next question. So
Speaker 1: what is the catalyst for office owners or building owners
Speaker 1: to finally reduce rents, because presumably that's when you get
Speaker 1: the sort of healing process, the creative destruction. I guess
Speaker 1: that allows new types of businesses to come into the
Speaker 1: city and maybe start redefining some of these urban areas.
Speaker 3: I think in many cases it's really going to require
Speaker 3: a change in ownership of the building, right because why
Speaker 3: you're building owners reluctant to lower the rents of their
Speaker 3: existing buildings. Well, I think there are variety of reasons,
Speaker 3: but some of the reasons I've heard include one, there's
Speaker 3: this real options problem, so you don't want to lock
Speaker 3: in a tenant for the long term at a lower rent.
Speaker 3: You kind of want to wait and find the right tenant. Second,
Speaker 3: you hear about issues related to debt covenants on their mortgages,
Speaker 3: so the owners of debt may have restrictions in place
Speaker 3: that prevent that owner from reducing the rent. And then
Speaker 3: finally you hear about issues related to strategic vacancy, So
Speaker 3: owners of buildings may be reluctant to lower rents because
Speaker 3: that sends a signal to other tenants or signals to appraisals.
Speaker 3: And there are mortgage holders that may impact their future
Speaker 3: financing prospects. So one way to kind of deal with
Speaker 3: these things is really for that building to go through
Speaker 3: foreclosure or fire sale, change ownership, and that new owner
Speaker 3: is going to be able to or just a building
Speaker 3: at a much lower cost basis that cost spaces helps
Speaker 3: them either a convert the building into an apartment or
Speaker 3: other use find ways of investing in that building to
Speaker 3: really try to compete for that trophy a plus real
Speaker 3: estate space, or just take the building and lower the
Speaker 3: rent and find a way of remaining profitable at a
Speaker 3: lower rent point.
Speaker 2: So you've mentioned and you've written a fair amount about
Speaker 2: office Torezi conversions, and we've talked about it on this
Speaker 2: show a handful of times. Definitely one of these things.
Speaker 2: It sounds good, it seems expensive, it seems slow. I
Speaker 2: can never really tell, even if everyone got their ducks
Speaker 2: in an order, whether it would move the dial enough
Speaker 2: to meaningfully a ease some of the housing strains or
Speaker 2: be sort of fill in some of this empty space.
Speaker 2: What is your work saying right now? Is this happening
Speaker 2: on any scalers. This just a thing people tweet and
Speaker 2: write papers about.
Speaker 3: So we did write a paper on this and have
Speaker 3: tweeted about it as well. So we've contributed to the
Speaker 3: last few components. At least. What we find in our
Speaker 3: work is again joint with Steinwin Norberg and another quatht
Speaker 3: Candy Martinez is that there is a prospect for physically
Speaker 3: converting about ten to fifteen percent of the nation's office stock,
Speaker 3: and that would produce something like four hundred thousand apartments,
Speaker 3: where our annual average apartment production is something like two
Speaker 3: hundred and sixty thousand a year. So it's a reasonally
Speaker 3: large prospect relative to the size of annual production, but
Speaker 3: it's still a pretty small overall part of the you know,
Speaker 3: the entire office ecosystem. Across cities. We do see some
Speaker 3: cities that are exploring it more aggressively than others. Cleveland,
Speaker 3: Actor is a city that seems to be engaging in
Speaker 3: these office to raise the conversions a little bit more.
Speaker 2: So, would you say, explore this is what I'm trying
Speaker 2: to get. Is there like in New York or maybe
Speaker 2: even Cleveland, like is this actually happening.
Speaker 3: Yeah, it seems like these conversions are happening. You know,
Speaker 3: here in the Financial District, we converted you know, somewhere
Speaker 3: in the order of tens of thousands of apartment units
Speaker 3: out of former office building. So that's something that happened,
Speaker 3: particularly after nine to eleven, and it is happening now.
Speaker 3: It seems like at an increasing rate across a lot
Speaker 3: of cities.
Speaker 1: So you mentioned timelines earlier and the idea that this
Speaker 1: dynamic is really operating on a lag and so it
Speaker 1: might not seem that the doom loop is upon us
Speaker 1: right now, but a lot of those rents or leases
Speaker 1: have yet to be renegotiated, and so it might just
Speaker 1: take longer than a lot of people anticipated. Maybe we
Speaker 1: could reframe the question as like, when would you expect
Speaker 1: this to play out, Like what is the approximate timeline
Speaker 1: that you're sort of envisioning at this stage.
Speaker 3: So I think there are two important things to keep
Speaker 3: in mind with this urban doom loop concept. First is
Speaker 3: that it's sort of a cycle, not necessarily a prediction
Speaker 3: of something that will happen, right, So we kind of
Speaker 3: talked about how aspects of these dynamics have happened in
Speaker 3: the past, and I think it's an open question whether
Speaker 3: we're going to see this element of urban downward spiral
Speaker 3: happen in the future. If it were to happen, I
Speaker 3: would sort of expect it to really materialize as you
Speaker 3: see this federal stimulus dry up and the impact of
Speaker 3: these property losses start to accumulate for cities so as
Speaker 3: one benchmark, York City had a relatively severe recession in
Speaker 3: the early nineties. We had a big problem commercial real
Speaker 3: estate back then, so we had a lot of failures
Speaker 3: of banks with the SNL crisis, big losses for commercial
Speaker 3: real estate back then, and it actually took a really
Speaker 3: long time until the late nineties for New York City
Speaker 3: to see the losses from those commercial real estate property
Speaker 3: tax losses materialize, at which point the city had already
Speaker 3: experienced a growth cycle because of the dot com bubble.
Speaker 3: So the forecast, I think is in the next few
Speaker 3: years you're going to potentially see the impact of these
Speaker 3: property tax losses combined with the drying up of co
Speaker 3: ed funds, and that's going to be the moment of
Speaker 3: greatest stress for cities. I think. The other thing to
Speaker 3: keep in mind is that in parallel with the urban
Speaker 3: doom loop, you have the suburban boom loop, which is
Speaker 3: the phenomenon going on in suburban areas. As more people
Speaker 3: move to these areas, you're seeing more amenities pop up,
Speaker 3: and these make them more desirable locations, enabling a positive
Speaker 3: flywheel of economic activity. So remote work in aggregate is
Speaker 3: probably a good thing for the economy, it just has
Speaker 3: these concentrated pattern of winners and losers.
Speaker 2: The suburbs are getting so good, No, I really believe that.
Speaker 2: Like I may have mentioned it recently on an episode,
Speaker 2: but I was like halfway between Austin and San Antonio recently,
Speaker 2: which is now basically just one giant, contiguous suburb, and
Speaker 2: like the sheer number of like new different kinds of
Speaker 2: restaurants that are opening up out there and different concepts
Speaker 2: and stuff, like, it's so wild, it's so good, Like
Speaker 2: there's so much good stuff out there. So the New
Speaker 2: York City has already seeing budget strands.
Speaker 3: Right, Yeah, So there was a big back and forth
Speaker 3: about some cuts to things like libraries, and then I
Speaker 3: think the Controller has estimated that in the coming years
Speaker 3: were going to see out budget gaps, you know, something
Speaker 3: like eight nine percent of the city's budget in future years.
Speaker 3: So I think it hasn't really yet materialized for the
Speaker 3: city because revenues I think ultimately came in higher than expected,
Speaker 3: enabling us to avoid some of those cuts to things
Speaker 3: like libraries. There's the prospect of future cuts on the
Speaker 3: horizon as we're forced with the prospect of increasing expenditures
Speaker 3: down the road. And thinking about what will be the
Speaker 3: revenue sources to pay for.
Speaker 1: It, how good the suburbs are getting to which all
Speaker 1: I can say is you're dooming, Joe, and I'm booming.
Speaker 1: But actually this brings me to another thing that I
Speaker 1: wanted to ask you about. And this comes up again
Speaker 1: a lot in these conversations, but the idea of perhaps
Speaker 1: making it easier to build, deregulating or rezoning or whatever
Speaker 1: you want to call it. And there is an argument
Speaker 1: that one of the reasons you've seen a lot of people,
Speaker 1: a lot of businesses move to places in the sun
Speaker 1: Belt is because it's easier to build there. There's more room,
Speaker 1: it's cheaper in many ways, or at least it used
Speaker 1: to be relatively cheap versus places like New York. Could
Speaker 1: you talk about that sort of regulatory aspect of all
Speaker 1: of this. Are there levers that the city could pull
Speaker 1: to make New York an easier city in which to
Speaker 1: construct new buildings or repurpose old buildings.
Speaker 3: Absolutely so. The lowest hanging fruit, I think is the
Speaker 3: far cap here in the city. So we have a
Speaker 3: limit for multi family buildings, they can only have an
Speaker 3: far of twelve, so that basically means for every So
Speaker 3: it's the ratio of all the usable space in a building,
Speaker 3: divided by the plot size. So if I have a
Speaker 3: one square foot I can create twelve more square feet
Speaker 3: of livable space on top of that, but no more
Speaker 3: whereas in fact, that ratio is higher for office buildings.
Speaker 3: And this is actually a big barrier for conversions, because
Speaker 3: if I take a large office building and convert that
Speaker 3: into apartments, I may only be able to use a
Speaker 3: portion of that building for residential use, and I have
Speaker 3: to leave the other floor is empty. This is also
Speaker 3: why those giants super tall buildings kind of south of
Speaker 3: Central Park are so skinny. They're sort of trying to
Speaker 3: meet these regulatory requirements on density. So that thing is
Speaker 3: the easiest fix, and policymakers are looking at that one
Speaker 3: right now. More broadly, we have a lot of restrictions
Speaker 3: on the ability to build in the city, and even
Speaker 3: here in New York, we have some neighborhoods that are
Speaker 3: still zoned for essentially single family homes. You're not allowed
Speaker 3: to build a multi family building, or if you are,
Speaker 3: they're really strong density requirements. So I think there are
Speaker 3: a host of regulatory shifts that cities can do to
Speaker 3: make it easier to build, which will then narrow that
Speaker 3: cost of living advantage between urban cities and the Sun Belt.
Speaker 2: I hadn't realized that about the sort of regulatory rationale
Speaker 2: for the skinny buildings.
Speaker 1: So the.
Speaker 2: Smaller the plot on the ground, the more you're allowed
Speaker 2: to go up.
Speaker 3: It's more that you're taking a certain plot of land,
Speaker 3: and if you want to sort of have a better view,
Speaker 3: you kind of have to make the building a little
Speaker 3: bit skinnier, and sometimes you have to leave some of
Speaker 3: those floors in the middle unoccupied in order to really
Speaker 3: take advantage of the high benefits.
Speaker 2: On San Francisco, as you mentioned, like under a reasonable
Speaker 2: normal assumption about new office leasing, I think you said
Speaker 2: thirty seven years would take to fill that hole or
Speaker 2: something like that.
Speaker 3: I think at an average rate, I think it's more
Speaker 3: than fifteen.
Speaker 2: What happens to a city with that big of a deficit? Like,
Speaker 2: is this like a series? Like you know, there's a
Speaker 2: lot of excitement because basically every smart AI person in
Speaker 2: the world pretty much lives in San Francisco, is my understanding?
Speaker 2: Like in your view, is this a sort of deep
Speaker 2: structure impediment to the viability of the city and the
Speaker 2: city's budget going forward.
Speaker 3: I think it's certainly a big problem. So the cities
Speaker 3: own estimates I think suggest that they've lost something like
Speaker 3: half a billion dollars due to remote work, and in
Speaker 3: the future they're looking at a lot of property tax reassessments.
Speaker 3: So basically a lot of people that own office buildings
Speaker 3: are appealing their property taxes, are arguing that their building
Speaker 3: is worth a lot less now that you have all
Speaker 3: these vacancies, and so it's definitely a source of stress
Speaker 3: I think for the city's budget. I think this is
Speaker 3: really amplified by some San Francisco, California specific issues. Right,
Speaker 3: so you have Proposition thirteen, which means that you're not
Speaker 3: able to raise taxes as much on residential real estate,
Speaker 3: so that puts more of the burden on other sources
Speaker 3: of taxation. They also have these things like business gross
Speaker 3: receips and things like that, which are additional taxes levied
Speaker 3: on businesses in the area. So firms ate that and
Speaker 3: don't like having to pay these additional costs. And then
Speaker 3: in addition, I think you have the kind of spatial
Speaker 3: development of the city. So going back to the seventies
Speaker 3: and eighties, there was basically this deal whereby the city
Speaker 3: agreed to adap so of most of the residential neighborhoods
Speaker 3: in exchange for a very concentrated building of commercial riding
Speaker 3: in the downtown area. And this allowed the residents of
Speaker 3: San Francisco to kind of live in these small, nice,
Speaker 3: quaint little homes, preserving their neighborhood character.
Speaker 2: They're nice.
Speaker 1: Well, so these are the ones with the like Victorian
Speaker 1: woodwork and.
Speaker 3: Stuff right right exactly, which people hate it at the
Speaker 3: time but grew to sort of love and see as
Speaker 3: kind of historic parts of their character.
Speaker 1: I was.
Speaker 2: I visited a friend a few years ago who lives
Speaker 2: in like not one of the nice like Victorian homes,
Speaker 2: but just like a sort of like little nice neighborhood
Speaker 2: with a wedget single family housing. And he's like a
Speaker 2: big MBI guy, and it's like, Oh, I love your neighborhood.
Speaker 2: It's so nice. And he's like, Joe, you can't you
Speaker 2: can't say that I hate it. You said the wrong thing,
Speaker 2: but anyway, keep going.
Speaker 3: Absolutely, so, the trade off was you're going to have
Speaker 3: this down zoning of the rest of the city in
Speaker 3: exchange with this very concentrated development happening in downtown, and
Speaker 3: the problem is that that left the city really unprepared
Speaker 3: when the pandemic hit because you had all these people
Speaker 3: commuting from really long distances to try to get to
Speaker 3: that downtown core because they really couldn't find or afford
Speaker 3: any housing nearby. And that's one of the reasons why
Speaker 3: people were so excited by remote work, because it allowed
Speaker 3: them to take advantage of the ability to move to
Speaker 3: Austin or wherever else and get a lower cost of
Speaker 3: living in order to continue working in the same place
Speaker 3: they were before. So you have just massive mismatch between
Speaker 3: the jobs and the people, and so that has to
Speaker 3: be corrected one way or the other. Either you move
Speaker 3: the jobs now to where the people are, to move
Speaker 3: the jobs over to Austin or wherever they are now,
Speaker 3: or you find ways of bringing more people back into
Speaker 3: San Francisco and that'll actually fill back up the transit
Speaker 3: system to fill back up those downtown office.
Speaker 1: Course, so people don't just want to live in cities
Speaker 1: because there's work there, although clearly that's one aspect of it.
Speaker 1: You know, at least in recent decades, going to a
Speaker 1: place like New York, that's where all the jobs are
Speaker 1: and where you need to be in order to make
Speaker 1: a certain type of living. But there are people who
Speaker 1: will move to a city just because they want to
Speaker 1: be part of a city. They want that vibrant experience,
Speaker 1: they want to be close to other human beings, they
Speaker 1: want to have options for restaurants and going out and
Speaker 1: experience everything that a city like New York has to offer.
Speaker 1: Is there a world where maybe cities get divorced from
Speaker 1: or slightly more separated from the economic opportunities.
Speaker 3: I think so that will be essentially a world in
Speaker 3: which cities are really defined by those consumption opportunities, right
Speaker 3: by their dating markets rather than their labor markets. Right,
Speaker 3: and people, we're doomed.
Speaker 2: Sorry, I haven't heard anything.
Speaker 3: Good about them. And people, you know, you know, what
Speaker 3: we see in the data is a lot of people
Speaker 3: are working remotely, even in Manhattan. Right. So clearly a
Speaker 3: lot of people, when given the choice, will still choose
Speaker 3: to live in these large cities. I think the challenge
Speaker 3: is establishing the quality of life and cost of housing
Speaker 3: to enable people to do that. So, for example, the
Speaker 3: Citizens Budget Commission has been serving people over time, and
Speaker 3: they find that in New York far few people rate
Speaker 3: their quality of life as being high compared to what
Speaker 3: they're rating it before the pandemic, So they're important concerns
Speaker 3: about the quality of life people are experiencing in urban
Speaker 3: areas now. They also found that people actually liked their
Speaker 3: neighborhood more than the city, kind of the same way
Speaker 3: that people rate their personal financial situation a lot better
Speaker 3: than the national one. So there's maybe some issue of
Speaker 3: negative urban vibes that are kind of impacting people's decision
Speaker 3: making here. But I think definitely something around trying to
Speaker 3: make sure that cities can remain these vibrant, exciting places
Speaker 3: is really a great way to make sure that they
Speaker 3: continue to live there even when they have options and
Speaker 3: can choose to live elsewhere.
Speaker 2: It's such an interesting phenomenon about like everyone's own situation
Speaker 2: is not as bad as they perceive everyone else's. Like
Speaker 2: I think you see the same thing, and like people
Speaker 2: talk about their representatives too, like it's like, oh, my center,
Speaker 2: my rep is all right, but it's not like, but
Speaker 2: Congress is terrible.
Speaker 1: It's like the Dunning Krueger effects, right, Like everyone just
Speaker 1: assumes they're doing better than everyone else.
Speaker 2: I like my neighborhood, but yeah, I guess maybe everyone
Speaker 2: likes their neighborhood too, but you know, on this point,
Speaker 2: so it's like there is this dimension that is not
Speaker 2: just about numbers, and it sort of gets to the
Speaker 2: quality of life effect. And you know, recently, for example,
Speaker 2: there is the headline about Governor hokel deploying the National
Speaker 2: Guard to the subway and obviously there's a lot of
Speaker 2: anxiety about safety on the subways these days. And like,
Speaker 2: you know, in my neighborhood, which I like, there are
Speaker 2: certainly many public vices that one sees as I walk here,
Speaker 2: take my kids to the park, or take them to school,
Speaker 2: et cetera. And some of these things aren't really just
Speaker 2: money things that can be solved with spending or taxes.
Speaker 2: There's a certain amount of political will or political consensus
Speaker 2: about the degree to which, you know, we crack down
Speaker 2: on you know, illegal weed shops and stuff like that.
Speaker 2: How much is the future of some of these cities
Speaker 2: going to be determined by the ability to get political
Speaker 2: consensus for some things that aren't just sort of dollars
Speaker 2: and cents questions.
Speaker 3: I think that's really important because I think the pandemic
Speaker 3: was this whole desocialization period in which we were just
Speaker 3: not near each other as much, and that sort of
Speaker 3: broke down a lot of social norms, right, and you
Speaker 3: think about how new people are entering the city, they're
Speaker 3: sort of seeing people behave as they currently are and
Speaker 3: just assuming Okay, well, these are the social norms in
Speaker 3: the city. So it's really important, I think, to maintain
Speaker 3: sort of pro social behavior. So just to take one
Speaker 3: example that you raised, the subways, So I think overall
Speaker 3: crime in the subway is down slightly compared to before
Speaker 3: the pandemic, But if you look at felony assaults, so
Speaker 3: people actually experiencing and being victims of crime in subways,
Speaker 3: that's actually up pretty substantially from what it was before
Speaker 3: the pandemic. And again back in that CBC survey, they
Speaker 3: found that people basically rate the safety of the subway
Speaker 3: during the daytime the same as they rated the safety
Speaker 3: of the subway at nighttime before the pandemic. So there's
Speaker 3: been a huge shift in the perception of crime and
Speaker 3: safety on subways, and I think part of that is
Speaker 3: driven by remote work, because you have fewer people taking
Speaker 3: the subway, so that's fewer eyes on the street, less sociable,
Speaker 3: you know, kind of enforcement coming from other people, and
Speaker 3: that sort of drives more anti social behavior in ways
Speaker 3: that can compound on themselves unless it's addressed by you know,
Speaker 3: for example, putting more police officers in the subway or
Speaker 3: sort of changing the social norms in other ways.
Speaker 1: So you're obviously at NYU. I'm curious if you're able
Speaker 1: to talk about it. Do city officials ever ask you
Speaker 1: for advice or ask for additional information on your research.
Speaker 3: We've i think talked to a number of city officials
Speaker 3: from across the country, particularly on the office problem, you know,
Speaker 3: thinking about conversions and things like that. I would say
Speaker 3: that this whole research has definitely resonated far more than
Speaker 3: any research I've done previously or probably will do in
Speaker 3: the future. But I'm hopeful that it's a sort of
Speaker 3: wake up call for city and local governments to think
Speaker 3: about what do they need to do after the pandemic
Speaker 3: in order to really continue to make sure that their
Speaker 3: cities are really exciting envirobrant places to be Out.
Speaker 2: Of curiosity, just because you mentioned more what has been
Speaker 2: the general gist of your work prior.
Speaker 3: To this, So I do a lot of work related
Speaker 3: to financial crisis, So thinking about all those subprime mortgages
Speaker 3: and defaults and things like that. I also do research
Speaker 3: now thinking about housing regulations and costs right, and how
Speaker 3: we can use AI to better extract information from these
Speaker 3: zoning codes and better figure out ways of making housing
Speaker 3: cheaper real quickly.
Speaker 2: On that A, I think, I think you did a
Speaker 2: recent research paper using AI to do something about regulations
Speaker 2: and codes. What did you what's your experience we got
Speaker 2: to get in an AI question on that.
Speaker 3: So I think it's a great use case actually because
Speaker 3: we have, you know, across the country, every municipality has
Speaker 3: a very long, complicated document hundreds of pages long that
Speaker 3: outlines all of their regulations, you know, these density requirements,
Speaker 3: a lot of size restrictions, so on and so forth,
Speaker 3: and people really haven't dug through and read all of
Speaker 3: these documents to really categorize and figure out what is
Speaker 3: inside them. And so that turns out to be a
Speaker 3: great application where we can basically get chat GPT to
Speaker 3: do it and thereby create a data set of housing
Speaker 3: regulations across the country. So I think that's something we
Speaker 3: can really ramp up kind of across municipal government regulations
Speaker 3: to better understand the rules out there.
Speaker 1: We should charge servers rent. That's the solution, like charge
Speaker 1: the bots rent and property taxes and this will solve
Speaker 1: the issue.
Speaker 2: I mean, data center cre is like the hottest area
Speaker 2: in the world.
Speaker 1: Yeah, I know, so higher taxes there we go.
Speaker 2: That what office to data center conversions I think is
Speaker 2: the move rather than office to REZI, office office to
Speaker 2: AI conversions. I like that idea. Arpi Gupta, Associate Professor
Speaker 2: of Finance at NYU, thank you so much for coming on.
Speaker 2: Great to find the chat.
Speaker 3: Thanks so much for having me.
Speaker 2: Tracy. So, I guess my takeaway is maybe it's still
Speaker 2: coming like I don't know, maybe like the coast is
Speaker 2: not totally clear yet.
Speaker 1: Well, I take the point that in all of commercial
Speaker 1: real estate, it feels like it is operating on this
Speaker 1: incredibly lengthy lag time and it takes a long time
Speaker 1: for Lisa's to get renegotiated. A lot of property owners
Speaker 1: don't want to have lower rents for the reason that
Speaker 1: are Pit discussed. But the other thing I would say is, like,
Speaker 1: coming away from that conversation, I kind of feel like
Speaker 1: there's two possible pathways, like two extreme pathways. One is
Speaker 1: the doom loop scenario that ar Pit described and the
Speaker 1: other one is the sort of like redevelopment of the
Speaker 1: urban environment where offices do get turned into new residential units,
Speaker 1: and maybe as rents are lower, there are new types
Speaker 1: of businesses that come in. It's that consumption economy rather
Speaker 1: than this is the place that you go to work idea.
Speaker 1: If everything went perfectly, if policymakers like pursued that path,
Speaker 1: that could be a relatively amazing outcome. I do not
Speaker 1: always have one hundred percent confidence that policymakers are going
Speaker 1: to be sort of visionaries when it comes to redefining
Speaker 1: huge urban cities, but it's kind of a nice lot totally.
Speaker 2: There are three things there that struck me.
Speaker 3: So.
Speaker 2: First of all, disinclination to lower rents. It is like
Speaker 2: one of these great examples of accounting affecting the real world. Right,
Speaker 2: So it's like something that exists on a spreadsheet somewhere
Speaker 2: creates a reason to not find that market clearing price
Speaker 2: for rent. And maybe the moment will come when the
Speaker 2: new businesses that like the cheaper rent can come in,
Speaker 2: And I think that's something interesting to watch. Two. I
Speaker 2: liked the way Arpet put it and respond to your
Speaker 2: question about you know people maybe people come to the
Speaker 2: cities for the dating markets instead of the labor markets,
Speaker 2: and that's sort of grim. But I think, like it's
Speaker 2: interesting if you think, like about things like Tinder or
Speaker 2: door dash or some of these apps, and like how
Speaker 2: much better they probably are in the cities rather than
Speaker 2: out on the sticks you to wipe and see the
Speaker 2: same three restaurants are the same, you know, six people,
Speaker 2: same three people, and that on that these technologies that
Speaker 2: we think of as potentially diffusing could actually encourage physical concentration.
Speaker 2: And then third, you know, one thing I think about,
Speaker 2: and we talked recently about the megacity that the UAE
Speaker 2: might build in northern Egypt, is like this idea of
Speaker 2: like cities divorced from production generally, and I sort of
Speaker 2: think that's like the thesis of some of these megacities
Speaker 2: in the Middle East is like the main thing they're
Speaker 2: selling is not some industry that exists in the city.
Speaker 2: It's the main thing is they're selling a nice quality
Speaker 2: of life, a quality of life and lower taxes and
Speaker 2: low taxes and low crime, et cetera. And then like
Speaker 2: the idea that the production has to happen there is
Speaker 2: like sort of not particularly necessary.
Speaker 1: That's a really good way of putting it. The one
Speaker 1: other thing I'd say is so obviously the big cities
Speaker 1: could develop themselves into like consumerist or human connection capitals
Speaker 1: of the world, I guess, but you could also see
Speaker 1: smaller cities, smaller towns, suburban areas start to build up
Speaker 1: their own like nightlife and restaurant options, sort of what
Speaker 1: you were talking about earlier, Like, and we have seen
Speaker 1: some places outside of New York. I think there was
Speaker 1: a really good Bloomberg article on a small town in Connecticut.
Speaker 1: Am I I'm talking my own book now, but there
Speaker 1: was a nice story about, you know, relatively small town
Speaker 1: in Connecticut that had seen a lot of people move
Speaker 1: away from New York. They don't want to do the
Speaker 1: commute into the city anymore, and so their downtown area
Speaker 1: is booming. Now that's relative for a smaller town, but
Speaker 1: they have new restaurants opening up, they have new shops,
Speaker 1: they have offices being built there. So you could see
Speaker 1: these sort of like smaller versions I guess of cities
Speaker 1: kind of develop across America, where it is to your
Speaker 1: point about the megacities in the UAE and the Middle East,
Speaker 1: where it is much more about that quality of life.
Speaker 2: Tracy, I have a favor to ask. Can you go
Speaker 2: to town planning meetings and be ultra nimby so that
Speaker 2: people can't move out of the city? And you know, like,
Speaker 2: this is how we could exploit our natural hedge together,
Speaker 2: which is you fight to preserve your quality of life
Speaker 2: out in the middle of nowhere so that people have
Speaker 2: to stay in New York and keep rents and foot
Speaker 2: traffic up here.
Speaker 1: I think that would be a very dangerous thing for
Speaker 1: me to do personally, all right, I respect, but we
Speaker 1: can talk about it.
Speaker 2: Jall right, it sounds good.
Speaker 1: Shall we leave it there?
Speaker 2: Let's leave it there, all right.
Speaker 1: This has been another episode of the Oudlots podcast. I'm
Speaker 1: Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart.
Speaker 2: Follow our guest Arpadgupta. He's at Arpitrage. Follow our producers
Speaker 2: Carmen Rodriguez at Carmen armand dash El Bennett at Dashbot,
Speaker 2: Kelbrooks at Kelbrooks. Thank you to our producer Moses On.
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