Redditor explains why commercial property sits vacant instead of reducing rent
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Re: Redditor explains why commercial property sits vacant instead of reducing rent
#2but .. this has been going on for years in NY. Rossmann video checking out commercial spaces he was considering full year ago https://www.youtube.com/watch?v=Fk5o6cbq_Qs all but one are still vacant. He sometimes shows stores he tried renting 7 years ago, and they are still empty.
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#3but .. this has been going on for years in NY. Rossmann video checking out commercial spaces he was considering full year ago https://www.youtube.com/watch?v=Fk5o6cbq_Qs all but one are still vacant. He sometimes shows stores he tried renting 7 years ago, and they are still empty.
I believe this is why the renewed interest (last paragraph):
> That said, Covid is changing everything. I can honestly say I’ve seen 10x more modifications in the last 3mo than I saw my entire career including the great financial crisis. There is a HUGE flurry of activity happing in the commercial finance sector that nobody outside of the industry is talking about.
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#4[deleted]
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#5but .. this has been going on for years in NY. Rossmann video checking out commercial spaces he was considering full year ago https://www.youtube.com/watch?v=Fk5o6cbq_Qs all but one are still vacant. He sometimes shows stores he tried renting 7 years ago, and they are still empty.
Maybe this is an ongoing game for commercial real estate speculators. Get a loan, try to get tenants, if you can't get people to pay full-price, default after a few years?
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#6Add a vacancy tax into the mix and see what happens.
Also, seems as though the structural issues need to be updated on the 'owners' of said mortages.
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#7Ok, forget re-writing old loans. Why do banks continue to write new loan with terms that incentivize their debtors to turn down free money? That must hurt the default rate.
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#8Ok, forget re-writing old loans. Why do banks continue to write new loan with terms that incentivize their debtors to turn down free money? That must hurt the default rate.
[deleted]
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#9but .. this has been going on for years in NY. Rossmann video checking out commercial spaces he was considering full year ago https://www.youtube.com/watch?v=Fk5o6cbq_Qs all but one are still vacant. He sometimes shows stores he tried renting 7 years ago, and they are still empty.
Maybe this is an ongoing game for commercial real estate speculators. Get a loan, try to get tenants, if you can't get people to pay full-price, default after a few years?
Why do the bankers play along?
Answer: because they pawn the loan off on naive investors who trust the bankers to not be scamming them. Naive investors don't care because they are money managers for a pension or something.
Re: Redditor explains why commercial property sits vacant instead of reducing rent
#10Ok, forget re-writing old loans. Why do banks continue to write new loan with terms that incentivize their debtors to turn down free money? That must hurt the default rate.
The problem might be recursive. If the shortfall is tacked onto the back end of the loan (plus interest), so long as the tenant is solvent it isn't problematic for the bank. If the client takes a write-down, though, the bank takes a write-down, and they may need to think about reserve ratios and regulation.
I suppose the bank isn't primarily interested in the loan being paid on time, they just want it paid some time. (Not sure, a delay might even be good for their business model?)
The bank is definitely interested in problems of solvency, and the tenant is interested in minimising cost, but kicking the can down the road might be the easiest option for them. Maybe a competitive creditor could break that impasse though. Threat of insolvency certainly would.