🛠️ Offices become apartments

Tuesday, November 7, 2023 by Snacks
NYC’s Flatiron Building: soon to be condos (Sergi Reboredo/Getty Images)

NYC’s Flatiron Building: soon to be condos (Sergi Reboredo/Getty Images)

NYC’s Flatiron Building: soon to be condos (Sergi Reboredo/Getty Images)

NYC’s Flatiron Building: soon to be condos (Sergi Reboredo/Getty Images)

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Yesterday’s Market Moves
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Hey Snackers,

Researchers said that rats can visualize places they’ve visited, suggesting the rodents have an imagination. But we already knew that from Remy in “Ratatouille.”

Stocks barely ticked up yesterday after the S&P 500 closed out its best week of the year. Investors have eyes on Fed Chair Powell’s speech tomorrow for any hints about rate policy.


1. Biden wants to help convert empty offices into apartments to ease the housing shortage

Literal work-life balance… US office vacancies are at a 30-year high, and a nationwide housing shortage is creating an affordability crisis. Now a number of cities are hoping to kill two real-estate birds with one stone by converting empty offices into apartments. The White House and local gov’ts are trying to incentivize the conversions and revive America’s downtowns.

  • Boosters on: Last month the Biden admin announced a plan to accelerate office-to-apartment conversions that includes $35B in loans. Officials in CA, NYC, and Chicago are racing to provide subsidies and faster project approvals.

  • Empty swivel chairs: Despite forceful RTO pushes, office-vacancy rates aren’t cracking. NY warned that its 19% vacancy probably won’t fall till 2026. WeWork's bankruptcy, announced last night, is yet another blow to commercial real estate.

  • Slow going: Fewer than 1% (3.6K) of all apt units built last year were created from office conversions. And only 217 US conversion projects are under construction right now.

Converting ain’t easy… You can’t just throw a California King in the break room. Given pricey construction loans, demolition costs, and the logistical nightmare of moving material in urban traffic, office-to-apt conversions are financially feasible in only six cities where high rents can cover costs (including NYC and SF). Local zoning laws and neighbors are additional hurdles. Turning Gotham’s Flatiron into luxury apartments is expected to take three years. Still, the housing shortage has led to bans on short-term rentals (see: NYC’s Airbnb restrictions), while 1B sq ft of US office space sits empty.


Killing two birds with one stone is possible… but might take a few throws. Office-to-housing conversions require complex planning and collaboration. But other conversion types could be cheaper (and easier): transforming 10% of America’s strip retail space (which often has fewer floors and is in less dense areas) could yield 700K+ units.

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2. Live Nation produces a record quarter on the Tay-Bey tour szn, setting a high bar

The Tay-Bey quarter… Live Nation had its strongest quarterly performance ever and is on pace for a record year after hit tours from Taylor Swift and Beyoncé. The Ticketmaster owner crushed expectations with 32% sales growth. The bulk of Live Nation’s $$ comes from producing concerts (think: promotion, operations) and selling merch. In addition to the nearly $7B it raked in from the concerts biz, Live Nation made $833M from ticketing. It’s come a long way:

  • 100 to zero, real quick: As we hunkered down at home in 2020, Live Nation saw its sales plunge 84% from 2019.

  • Reopening rush: In mid-2021, Live Nation started seeing the effects of pent-up demand for concerts as bookings for 2022 shows soared.

  • Boom times: That enthusiasm backlog is still fueling the concert industry, letting Live Nation charge higher ticket prices without losing volumes.

Far-from-cruel summer… Live Nation has sold a record 140M tickets so far this year, already topping last year’s total. Consumers are splurging on pricier concert tix and attending more shows, but they’re also spending more at venues. As fans loaded up on BeyHive hoodies and Eras Tour tees, Live Nation’s “per-fan profitability” had a double-digit jump last quarter. Other big tours included Harry Styles, Lizzo, Blackpink, and Bruce Springsteen, but Tay-Bey alone generated billions in revenue for the industry.


“Funflation” may be peaking… Consumers have been shelling out for experiences, and now the cost of everything from Disney park visits to NFL games and concerts has soared. Funflation was fueled by trillions in excess pandemic savings (recall: stimmy checks, low interest rates), but now the extra $$ Americans saved during the pandemic is almost gone. When experiential spending cools, it could create tough yearly comparisons for fun-focused companies.

What else we’re Snackin’

  • Novid: BioNTech cut its annual sales forecast by $1B as demand fell for its Covid vax (cocreated with Pfizer). Pharma cos are adjusting postpandemic: Moderna reported a Q3 loss as unused vax doses piled up.

  • Dinosorry: Tyson recalled nearly 30K pounds of dino-shaped chicken nuggets that it says may contain metal. A recent surge in food recalls could be a result of improved detection methods for foreign matter.

  • Swipe: Bumble founder Whitney Wolfe Herd is stepping down as CEO after nearly a decade. Slack boss Lidiane Jones will take Wolfe Herd’s place at a time when dating apps like Tinder are losing paying users.

  • Fraught: Shipping demand has fallen as people order less stuff. Maritime shipping titan Maersk is laying off 3.5K workers and FedEx is encouraging air-cargo pilots to fly for American Airlines.

  • Stranger: Elon Musk’s xAI launched an AI chatbot dubbed “Grok.” Musk has criticized OpenAI’s ChatGPT, saying he’d put together a team to make a “less biased” competitor.

Snack Fact of the Day

Nearly half of Gen Z has intentionally purchased a dupe (aka: knockoff) of a premium product


  • US trade deficit

  • Earnings expected from Celsius, Devon Energy, Lucid, Occidental Petroleum, Rivian, Planet Fitness, and Uber

Authors of this Snacks own shares of: Disney, Match, Moderna, and Uber

*Advertiser's disclosures: There are important risks associated with transacting in any of the Cboe Company products discussed here. Before engaging in any transactions in those products, it is important for market participants to carefully review the disclosures and disclaimers contained at https://www.cboe.com/us_disclaimers.

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Correction: In Monday’s Snacks, we misstated that we expected US nonfarm payrolls and the unemployment rate this coming Friday. Those reports actually came out last Friday, November 3. We regret the error.

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