What an asshole.
WOW this exchange.
@BretBaier tried to give Abdul El-Sayed a chance to finally explain the 2012 letter in support of the Muslim Brotherhood and Abdul awkwardly tries to speak over him.
This flailing defensiveness is why we’re on week 3 on this issue.
Chamath says the riots in France are domestic terrorism: “You need to respond to these people with an incredibly heavy hand.”
"It's heartbreaking to see what's happening. Let's just be very clear. I think that these people are absolute criminals. They're all terrorists and they should all be arrested."
"I think that this shows sort of like what is at the end of all of this "empathy" that all of these governments have been espousing. It's just a disguised way of promoting urban chaos."
"I don't know how a police officer thinks it makes any sense for him to be deployed into this melee to do what effectively, like protect a Christian Dior store in the 7th arrondissement of Paris. Like it is so stupid."
"So these folks have created the tinderbox and the conditions for this to happen. And they've done it because they won't even acknowledge what this is."
"Even when Macron went on state television, he tried to talk about this in terms of the suffering that these people must have. When you look at these pictures, these are not people that are suffering."
"These are people who are enacting chaos and violence and terrorism, domestic terrorism. And I think you need to respond to these people with an incredibly heavy hand. And then you need to fix the much broader problem."
Ben Horowitz told a story on All-In about buying bandwidth on a three-year contract at $1,500 a megabit in 1999, then watching it fall to $50 by 2001. Now it's the reverse: he said data center space keeps going up because the labor is hard to find and the politics make it hard to build. I think about that every time I weigh a long lease against waiting for the market. Locking in feels safe until the world moves the other way, and it's humbling how rarely any of us can tell which way that will be.
Something Chamath said on @theallinpod has been sitting with me all week. If the 10-year walks up to 5.5 or 6%, he said, "any business model that thrives on a financing spread" gets run over, no matter how good the underlying asset is.
He was talking about AI companies, but that sentence describes most of real estate, including the kind I own. We buy something, borrow against it, and live on the gap between what it earns and what the debt costs. When the gap is wide you feel smart. When it narrows, nothing about the building changed, but everything about the deal did.
I don't know where rates go from here, and I've stopped pretending I do. What I keep trying to remind myself is that the building isn't the risk. The financing is. That's an uncomfortable thing to admit when you love the asset.
David Sacks said on All-In that the hard part of AI is atoms, and "local communities are not racing to give out new entitlements." I think small bay has its own version of that. The demand shows up long before the approvals do, and I don't think we count what the wait costs.
Chamath said on @theallinpod this week that the real moat in AI might be owning "the land, the power and the shell." I keep coming back to that. Those are the same three things that have always mattered in industrial, and it's a little humbling to see.
I've been going back and forth on fixed versus floating for weeks, and a piece in The CRE Report finally put real numbers on what's been nagging me. On a $10M building with a $6.25M loan, they compared a bank fixed quote at 6.90% with a debt fund floating at SOFR plus 325, and over three years the floating loan cost about $236,000 more if rates stay where they are. A big chunk of that gap comes from the rate cap, almost $100,000 at closing and another $65,000 to replace it.
What bugs me is how many owners took floating in 2021 and 2022 because the coverage looked better on paper. It still does, 1.40x versus 1.19x, and I understand the temptation. But in small bay, where the margin for error can be a tenant or two, I'd rather know my payment and live with thinner coverage. I could be wrong if the 10-year finally breaks lower, and part of me still wants to bet on that. I just don't think I'd sleep well doing it.
$6 PSF is less than it costs to put a new roof on most warehouses.
Yeah, basis matters, but use matters more. The market doesn't owe any building a tenant.
It's still WILD that Denver's iconic 785k sq ft Energy Center office complex sold for $5 million - an INSANE $6 per sq ft
The Denver office market is truly facing an apocalypse...
The two towers last sold for $176M in 2013 - a shocking 97% COLLAPSE in value
The complex consists of two skyscrapers standing 28 and 29 stories tall in the heart of Downtown Denver
The buyer is moving toward a major office-to-residential conversion b/c of low office demand
We are truly living in unprecedented times
Stay tuned and follow for more updates on the office market meltdown
Small Bay Alpha retweeted
Premise:
Incentives drive all human behavior.
The corollary:
How to destroy a country:
A vast social security and support system that serves as a magnet for those who would rather not work.
An open immigration policy that does not screen immigrants to determine their ability and willingness to provide for themselves and their families.
An open immigration policy that does not screen for political and/or religious ideologies that are a threat to the country.
Economic incentives large enough to incentivize immigrants on the state dole to have large numbers of children, but insufficient for educated and economically productive mothers to be able to quit to raise a family.
The declining fertility of the most educated and productive women due to their delay to begin a family as a result of their desire and/or need to advance their careers, among other reasons, to live a life they deem consistent with their educational achievements and/or to repay their student debts.
Amnesty programs that give citizenship and voting power to illegal immigrants without consideration of their economic productivity or their threat to the country due to their religious or political ideologies.
The changing demographics and increased population due to the above factors.
The state responding to protests by increasing social support.
The continued failure to punish and hold accountable violent and looting rioters.
Government managed by a massive and growing unelected bureaucracy.
Government fraud, waste, and abuse contributed to ballooning budgets.
Anti-business legislation that makes it difficult for businesses to compete in a global marketplace being disrupted by AI, including restrictions on firing even poorly performing employees.
Overly burdensome, globally uncompetitive, corporate taxation.
Continuous increases in personal taxes to raise funds to provide for the rapidly growing welfare state.
The substantial majority of the tax burden levied on a small percentage of the population.
A growing percentage of the electorate paying no taxes and receiving welfare.
The introduction or threat of a wealth tax including the taxation of unrealized gains, i.e., taxes on paper wealth.
The flight of the most productive business builders and highest taxpayers to lower tax countries with lesser security concerns.
A growing percentage of the electorate voting for candidates that support increased welfare and laws favorable to, and/or that match the cultural and ideological needs and desires of a growing unproductive immigrant population.
The rapid rise in anti-semitism and inadequate efforts to address this hatred.
Increased borrowing by the state to fund the growing social burden.
Higher sovereign interest rates due to all of the above.
The resulting need to reduce expenditures to make the math work.
Increasingly violent protests that make life less livable for the productive and law abiding citizens leading to their accelerated departure.
And so on…
Small bay is the most crowded building type in real estate, and most people have no idea.
In one tenant sample I looked at, 14 different industries share the same kind of box. Contractors, distributors, labs, food makers, auto shops, defense suppliers, even government.
They do not pay the same. Defense users pay roughly 70% more per foot than logistics tenants. Life science and government pay up too.
My bet: the high payers set the price. As old buildings get redeveloped and nobody builds new ones, the plumber and the parts distributor end up bidding against a defense supplier with a federal contract. That's a rent story for 2027, not a vacancy story.
Same box, very different rent checks. The trades are the canaries here. When a defense or lab user can pay up for the same space, the old tenant mix gets repriced fast.
Curious if others are seeing this in their markets. @Bisnow @KonradPutzier
If the trend holds, the AI of 2031 will finish in an afternoon what takes a team a year today.
We're not ready for that. Our schools, our org charts, and even our leases assume work takes time.
That assumption is about to break.
Defense contractors are building secure rooms in the same light industrial boxes the trades rely on.
Add data users and redevelopment, and the plumber is bidding against the Pentagon.
My call: small bay vacancy stays tight and rents keep climbing through 2027.
Real estate bookkeeping is the same few hundred transactions every month: rent coming in, CAM charges, utilities, and a handful of vendors. That's exactly what agents handle well.
I think the traditional accounting department is going to be a relic sooner than people expect. You'll still want one sharp person who signs off and owns the numbers, but the team of five reconciling spreadsheets is going away.
I’ve replaced all of my real estate bookkeeping with an AI agent that we built internally.
Simply put, it’s more accurate, faster, and significantly cheaper than our previous bookkeeping firm. No way I’ll go back.
Haven’t handed it the tax returns yet, but it’s not because I don’t think it’s capable.
It’s because I’m not knowledgeable enough to oversee it.
That’s going to change next year.
Not saying we’re eliminating 3rd party accounting completely, but we are certainly shifting to a new paradigm.
Every few months a pickleball operator calls about one of my buildings, and I get why owners say yes. A 20,000-foot space gets filled in one shot, and the leasing report looks great.
But most of these operators are young businesses with thin credit, asking for a 10-year lease and a big build-out you pay for. If the courts don't fill up, you're stuck chasing rent from a tenant you can't easily replace and, equally disruptive and costly, a tenant that's difficult to remove.
If I were buying, I'd put a cap rate on that income 200 to 300 basis points wider than rent from a mix of regular industrial users. On $300K of rent, that's the difference between a $4.8M building and a $3.4M one.
Filling the space is the easy part. The quality of the income is what sets the value.
Pickleball company files for bankruptcy as founder acknowledges business mistake: 'I own it' trib.al/jh9FwCd
Here's a stat that surprised me. Buildings under 50,000 square feet are about 31% of all industrial space in the country, but only about 7% of what's being built right now.
Measured against what already exists, the big boxes are getting roughly nine times the new supply that small bays are.
Meanwhile the small stuff runs about half the vacancy of the bigger buildings and sells for more per foot. People want it, and almost nobody is building it.
Everyone's watching chip prices.
I'm watching transformers.
Up 9% the entire 2010s.
Up 86% since 2020.
You can't open a data center, a factory, or a shop without one.
Any building that already has power just got a lot harder to replace.
I've always used a simple rule for infill: a million people within ten miles. So I ran every ZIP code in thirty big metros through that test, and also checked whether each one has a real cluster of small contractors, builders, auto shops and trade-supply houses.
New York and Los Angeles came out far ahead, while growth darlings like Austin, Nashville and Tampa didn't have a single ZIP that passed both.
What the chart doesn't show is that supply in some of the best of these submarkets is actually shrinking. Northern Virginia is the clearest example I know of. Around Dulles and Chantilly, older flex and industrial buildings are being torn down or converted into data centers, and one recent broker report says more than 6 million square feet across the region is slated for demolition or conversion.
You see a version of the same thing near O'Hare, where data center developers are paying several times what those sites used to trade for.
Once that space is gone it almost never comes back, and that's a big part of the small bay thesis.















