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Why do commercial spaces sit vacant? (2025)

freerange.city

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Re: Why do commercial spaces sit vacant? (2025)

#131

Post by grebc »

doctorpangloss wrote: post #88
alper wrote: post #34

Earlier quoted context omitted.

The whole goal is not to write off the value of the property which you have to do if you rent it for less money than initially planned. That's not that difficult to understand is it?

Nobody said commercial real estate was risk free free money in some abstract financial product, other than the doofus who wrote this long "note." The hard fact is these are real buildings in real places that aren't really fungible at all. So it seems kind of ridiculous that CRE investors should be insulated from every possible externality. Obviously the right thing to do is to tax vacant properties, and then we shall…

What you’re proposing is a brand new tax just because you don’t like people who play by the rules as written.

Well done. Way to encourage people to not do things.

Re: Why do commercial spaces sit vacant? (2025)

#132

Post by jamilton »

bluGill wrote: post #113
pif wrote: post #45

Say what you want, but a law that lets you pretend that the value of a building is based on what you ask, rather than what you can actually obtain, is a stupid law.

What is a better option? Before your answer, remember it sometimes really is the case that the economy is down and in two years things will recover and everything will rent out again. Your answer needs to smooth that out.

Rolling average including vacant months as $0? And if that isn't smooth enough, add some smoothing factor, count vacant months as 10% of the last paid value, or maybe the first vacant month as 50% with further months decaying. Or some other fancy accounting that makes more sense than the current method.

Re: Why do commercial spaces sit vacant? (2025)

#133

Post by grebc »

nitwit005 wrote: post #104
makeitdouble wrote: post #16

Earlier quoted context omitted.

Here the bank cares less about annual income than future income. Keeping it vacant only impact current income, lowering rent impacts future forecasts.

But that just means the bank is creating deliberately delusional forecasts. I can build a building that charges a billion dollars a month rent, and sits completely empty. A forecast suggestion I'll be making hundreds of billions with no renters is clearly silly.

You’re paying the loan, go for it son.

Re: Why do commercial spaces sit vacant? (2025)

#134

Post by grebc »

AnthonyMouse wrote: post #110
grebc wrote: post #69

Earlier quoted context omitted.

Commercial borrowers have to pay for a valuation report by a bank approved valuer.

Then why does anybody care if they rent out some of the units for a lower rent?

You keep asking the same question and the answer is the same in all these.

You don’t like it. We get it.

No one is doing anything illegal. If the bank thought a customer couldn’t pay, they’d get foreclosed, end of story.

Re: Why do commercial spaces sit vacant? (2025)

#135

Post by nitwit005 »

grebc wrote: post #133
nitwit005 wrote: post #104

Earlier quoted context omitted.

But that just means the bank is creating deliberately delusional forecasts. I can build a building that charges a billion dollars a month rent, and sits completely empty. A forecast suggestion I'll be making hundreds of billions with no renters is clearly silly.

You’re paying the loan, go for it son.

I commented about the logic of the bank's forecasting. Your response doesn't make sense in that context.

Re: Why do commercial spaces sit vacant? (2025)

#136

Post by grebc »

PaulHoule wrote: post #115
grebc wrote: post #69

Earlier quoted context omitted.

Commercial borrowers have to pay for a valuation report by a bank approved valuer.

... who therefore agree with the assumptions of this broken system.

Broken how? The owner/bank are fulfilling their obligations. You just don’t like the outcome.

Re: Why do commercial spaces sit vacant? (2025)

#137

Post by jfengel »

AnthonyMouse wrote: post #26
makeitdouble wrote: post #16

Earlier quoted context omitted.

Here the bank cares less about annual income than future income. Keeping it vacant only impact current income, lowering rent impacts future forecasts.

> Keeping it vacant only impact current income, lowering rent impacts future forecasts. Does it though? Suppose you can't find a tenant right now because the market is soft but is predicted to improve in a few years. If you leave the unit vacant, you lose money right now. If you rent it out with e.g. a 3-year lease, you make more for the next 3 years than you would with a vacancy, and if the market price has increase…

A three year lease locks in the lower revenue. If the market recovers tomorrow you can have the full price for nearly as long.

But I'm not convinced the risk-reward calculation fully explains it. You can see plenty of places where they know full well it's not going to rent at the price they're asking. I think there are other factors, including not letting your other high-lease tenants think that they're now occupying a low-rent establishment.

Your jewelry store would rather not suddenly be next to a cheapo nail salon. And if you've got a third property to lease, the high-fashion brand looking at it will see the nail salon and move on.

Re: Why do commercial spaces sit vacant? (2025)

#138

Post by grebc »

flotzam wrote: post #18
roenxi wrote: post #9

Earlier quoted context omitted.

It is worth noting that the reason they are pretending is almost certainly because of regulatory demands - if it were just between the bank and the owner they'd agree to do what is in both of their best interests - rent the space out at market rates. If there is a market-based 3rd party involved they will figure out that the bank is playing games and start acting whether or not the bank officially recognises the loss…

Ah. That makes sense. Maybe the polite fiction would clash too obviously with accounting standards once the (de facto) lowered rent payments roll in: https://news.ycombinator.com/item?id=48567769 Could the situation be improved then if financial regulators started treating both versions ("temporary" vacancy / "temporarily" lowered rent) equally? Tolerate both or crack down on both.

Banks maintain the capital/liquidity ratio’s they’re told they have too.

People are actually advocating for looser lending requirements, which I’m perfectly fine with but the result might not be what they expect either.

Re: Why do commercial spaces sit vacant? (2025)

#139

Post by canucker2016 »

makeitdouble wrote: post #65
schlipity wrote: post #42

Earlier quoted context omitted.

You should take it and then switch seats with your wife. Happy wife, happy life.

> Happy wife, happy life. Why wouldn't that happy cycle work with the husband ?

In the USA, women initiate divorce proceedings ~70% of the time. see https://www.bbc.com/worklife/article/20220511-why-women-file...

Re: Why do commercial spaces sit vacant? (2025)

#140

Post by grebc »

em-bee wrote: post #128
grebc wrote: post #123

Earlier quoted context omitted.

You’re correct in that you don’t want to transact . Everything else is your own opinion, which of course is fine.

if my business doesn't make enough profit then i literally can't. that's not an opinion or a choice. that's a fact of life. and if noone is willing to pay that much rent whether they could afford it or not, then the rent is not market-rate. that's not an opinion. that's how market-rate is defined. it is what the market is willing to pay.

That’s the free market in action. You can’t afford something, so you don’t buy it.
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