What has happened is that demand for office space has dropped dramatically.
The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential.
Then these properties will more likely find tenants.
E.g. you can't say a failed startup is a ponzi scheme because it loses a bunch of money. A ponzi scheme is a very specific type of fraud.
Like you would think the asset buyers would have an incentive to stop holding the loans and the whole thing would collapse, but because the buyer are investing with other peoples money they are also incentivized to keep the cycle going. The people whose money is eventually going to be lost have no way to stop this because the money is either in a pension fund or they aren’t knowledgeable enough to understand the issue
This is collective behaviour. If you discover you’re in a Ponzi scheme, it’s in your interest to get your money out first.
You can either cut your losses and not get your money back (if you're an ethical operator), of you can actively or passively allow other people topit in their money so you can get yours out first. There are similarities where rational vested actors want the charade to continue for a little while longer - the more money you put in, the longer your commitment to the mirage is.
I agree this isn't a scheme, as it wasn't done out of maliciousness, but it share so much property with it (including who will have to hold the bag) that I kinda like the image.
the Ponzi in Ponzi scheme refers to a specific person, and the scheme in Ponzi scheme refers to the specific scheme that specific person executed
That would be very expensive. To be able to afford that, the prices need to crash seriously hard.
But every other vested interest is aligned with the developer handouts. Eg, construction, government for more taxes, unions, office REITs that want less competition, big finance who want the CMBS problem to go away. Even the mortgage industry would profit more from selling tons of new condos vs fewer more expensive resales.
Because it’s credit built on credit. It’s not an intentional Ponzi scheme (maybe).
> The proper market reaction is to spend the money to convert these office spaces to some other use, perhaps residential.
It’ll be prohibitively expensive for most properties to convert them to residential. They might as well be demolished for their land value.