Why do commercial spaces sit vacant? (2025) • Hacker News Board

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

#141

Post by grebc » Wed, Jun 17, 2026, 9:30 PM UTC

fl4regun wrote: post #129

grebc wrote: post #124

Earlier quoted context omitted.

Commercial property is only unique in number on a street location factor. Plenty of the same type of commercial properties exist right next to each other, happily too.

in order to join that market you have to buy at the inflated prices on the market, since current owners refuse to sell for a loss, there's nothing you can do as an individual to make this cheaper unless you already own the land. Location still matters, as it does for residential, proximity to employees, or customers is important. Zoning restricts what land can do what. There's many reasons why this isn't a "free mark…

The people advocating for change in this situation likely advocated for all the impediments you’re providing as to reasons why it’s not supposedly a free market.

Someone bought an asset they could afford to hold in bad times. End of story.

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

#142

Post by mlsu » Wed, Jun 17, 2026, 9:30 PM UTC

bombcar wrote: post #97

grebc wrote: post #72

Earlier quoted context omitted.

Banks care that you pay their loan first and foremost, how you do that as the borrower is up to you. They care about the regulatory requirements in so far as you either meet it, or you don’t at the time of writing a loan. And maybe you get a yearly review. Also people are looking at this in a very isolated view. Just because a building is vacant doesn’t mean the owner has no other option than just lower the rent. Typ…

That's the missing link on these - the owner is making payments either way - the bank is getting their money. They don't want to disrupt the flow or trigger contract clauses, so they cover the missing cashflow from elsewhere.

They are extending loans though. In a normal market, requesting an extension when the bank knows you're underwater should set off some risk alarm bells and trigger a denial. The "normal person" intuition about how loans work is correct here: if I try to refi my house when it's underwater and I've lost my income, the bank denies the refi. That incentivizes me to do what it takes to make the bank whole, or, make the appropriate decision to leave my house and let someone else who can afford it take over payments.

When everyone, the regulator, the operator, and the bank, are whistling a tune, when the whole sector is fucked, everyone has a big problem. How big? About as big as hundreds of buildings in the downtown of every major city sitting half-empty!

That's a pretty big problem. Maybe not as large as 08 but definitely structural. We're all paying indirectly for this office space to sit empty, instead of being able to use it.

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

#143

Post by grebc » Wed, Jun 17, 2026, 9:31 PM UTC

nitwit005 wrote: post #95

grebc wrote: post #64

Earlier quoted context omitted.

Comments below. There’s no actual problem here to be solved. If people feel they have better uses for a property they should put their money where their mouth is.

How, specifically? If they refuse to acknowledge the building is worth less than they expected, they aren't going to sell it to you at a price where you can make money either.

Have you ever considered that your opinion, that it’s worth less, is incorrect?

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

#144

Post by pweaver » Wed, Jun 17, 2026, 9:34 PM UTC

jwarden wrote: post #12

This explanation seems very implausible to me. By lowering the rent by X%, and therefore reducing annual revenue by X%, you admit the building is worth X% less. But by leaving the building X% vacant, also reducing the annual income stream by X%, you and the bank can somehow pretend the building is worth what it would be if full? I doubt owners and banks actually believe this. Is there some policy that forces this?

What is being missed is that most commercial leases are much longer term than residential leases. Businesses will want to renovate the space and sign a 10 or 20 year lease. So if you lower the rent by 30% you will really be reducing the income of the building over the long term and face those consequences when refinancing. Landlords will frequently try to rent out unused space to temporary tenants like popups or non profits that they can move in without renovation and kick our on shorter notice to generate some cash-flow and keep the storefront occupied.

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

#145

Post by grebc » Wed, Jun 17, 2026, 9:37 PM UTC

mlsu wrote: post #142

bombcar wrote: post #97

Earlier quoted context omitted.

That's the missing link on these - the owner is making payments either way - the bank is getting their money. They don't want to disrupt the flow or trigger contract clauses, so they cover the missing cashflow from elsewhere.

They are extending loans though. In a normal market, requesting an extension when the bank knows you're underwater should set off some risk alarm bells and trigger a denial. The "normal person" intuition about how loans work is correct here: if I try to refi my house when it's underwater and I've lost my income, the bank denies the refi. That incentivizes me to do what it takes to make the bank whole, or, make the ap…

You don’t have knowledge into the borrowers capacity to pay based on a single vacancy.

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

#146

Post by LoganDark » Wed, Jun 17, 2026, 9:57 PM UTC

Animats wrote: post #100

Article is from 2025, and "extend and pretend" is coming unglued.[1] Extend and pretend was big around 2024.[2] The other side of this is that landlords hate to reduce rent to rent vacant spaces because their paying tenants will demand rent reductions or move. That can crash the rental market. A building half rented at rent X is more profitable than a building fully rented at rent 0.5 X. [1] https://propmodo.com/the-…

> The other side of this is that landlords hate to reduce rent to rent vacant spaces because their paying tenants will demand rent reductions or move.

Since when have tenants known each other's rents?

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

#147

Post by scraptor » Wed, Jun 17, 2026, 9:57 PM UTC

grebc wrote: post #131

doctorpangloss wrote: post #88

Earlier quoted context omitted.

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.

The specific proposal is not great but changing the rules is in fact the correct solution of the current rules lead to systematically bad outcomes.

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

#148

Post by solomonb » Wed, Jun 17, 2026, 10:07 PM UTC

LoganDark wrote: post #146

Animats wrote: post #100

Article is from 2025, and "extend and pretend" is coming unglued.[1] Extend and pretend was big around 2024.[2] The other side of this is that landlords hate to reduce rent to rent vacant spaces because their paying tenants will demand rent reductions or move. That can crash the rental market. A building half rented at rent X is more profitable than a building fully rented at rent 0.5 X. [1] https://propmodo.com/the-…

> The other side of this is that landlords hate to reduce rent to rent vacant spaces because their paying tenants will demand rent reductions or move. Since when have tenants known each other's rents?

The current tenants will see the listing for the vacant unit.

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

#149

Post by quickthrowman » Wed, Jun 17, 2026, 10:17 PM UTC

weli wrote: post #20

pjc50 wrote: post #11

Earlier quoted context omitted.

This is a crank opinion that is somehow everywhere. The building is real, it's not fractional.

The bank lended more money than it has in reserves allowing for speculation and extra inflation of perceived value of an asset

[dead]

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

#150

Post by mlsu » Wed, Jun 17, 2026, 10:17 PM UTC

grebc wrote: post #145

mlsu wrote: post #142

Earlier quoted context omitted.

They are extending loans though. In a normal market, requesting an extension when the bank knows you're underwater should set off some risk alarm bells and trigger a denial. The "normal person" intuition about how loans work is correct here: if I try to refi my house when it's underwater and I've lost my income, the bank denies the refi. That incentivizes me to do what it takes to make the bank whole, or, make the ap…

You don’t have knowledge into the borrowers capacity to pay based on a single vacancy.

I have the capacity to pay someone to dig a hole and fill it in. Would that be a wise use of my resources?

We're talking about the whole sector here, not one borrower. Huge swathes of commercial real estate are sitting empty, that's a big ongoing problem for everyone whether the loans are being serviced or not.