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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)

#161

Post by jujube3 »

dietr1ch wrote: post #109
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-…

This just says that they have too much power and society would be better off having a vacancy tax that aimed to reduce abuse by landlords while at the same time ensuring the city doesn't look like post crisis Detroit, which makes it worse for everyone.

The city doesn't want commercial real estate values to collapse either, since buildings are taxed based on their value. If extend and pretend is ending, tax revenues are about to take a nosedive.

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

#162

Post by Grombobulous »

limagnolia wrote: post #158
dietr1ch wrote: post #109

Earlier quoted context omitted.

This just says that they have too much power and society would be better off having a vacancy tax that aimed to reduce abuse by landlords while at the same time ensuring the city doesn't look like post crisis Detroit, which makes it worse for everyone.

Most of the US does, its called property tax. Or in some cases, land value taxes.

That doesn’t work very well in practice because a half vacant commercial property has lower property value than a full one.

There are buildings that seem to purposefully keep commercial space vacant to devalue the building:

https://therealdeal.com/chicago/2021/09/10/trump-gets-anothe...

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

#163

Post by fdgfikgfv »

jfengel wrote: post #137
AnthonyMouse wrote: post #26

Earlier quoted context omitted.

> 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…

This is the same reason in housing market where landlords let their property sit empty instead of accepting lower rent. There is a perception that lower rents attract problem tenants and it’s not worth the headache even if that means losing money.

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

#164

Post by amanaplanacanal »

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?

Is this one of those secrets, like you aren't supposed to ask your coworkers how much they are getting paid?

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

#165

Post by BLKNSLVR »

One element of this that I find interesting is that from the outside it can look somewhat like a decentralised monopoly given that it affects all (or most?) commercial rental properties; it looks like collusion to keep rents high. Where it's actually systemic to how commercial buildings are created in the first place: they do not account for a downturn, or at least a downturn on the scale that Covid wrought.

Store-fronts were already in decline due to 'internet shopping', but Covid probably brought a lot of physical close-down plans forward, such that any likelihood of recovery should be measured in decades or, more realistically, start being written off progressively to minimise a big hit down the track.

The longer extend and pretend lasts, the bigger the hit will be when it that strategy breaks.

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

#166

Post by senordevnyc »

rossdavidh wrote: post #157

Oh my goodness, thank you. My wife had to move her store in 2020 in the midst of lockdown; you'd think rents would have been low, but no. Since then, many of the places that wouldn't lower the rent then, have sat empty ever since. This is in Austin, TX, a town that has had a healthy economy during that entire time. Weirder still, many of them were on the market, theoretically for rent, but if you called them up it tu…

Wait, were they not available at $x, or not available for < $x? Because if it’s the former, then this article doesn’t really explain your experience, right?

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

#167

Post by evo »

senordevnyc wrote: post #166
rossdavidh wrote: post #157

Oh my goodness, thank you. My wife had to move her store in 2020 in the midst of lockdown; you'd think rents would have been low, but no. Since then, many of the places that wouldn't lower the rent then, have sat empty ever since. This is in Austin, TX, a town that has had a healthy economy during that entire time. Weirder still, many of them were on the market, theoretically for rent, but if you called them up it tu…

Wait, were they not available at $x, or not available for < $x? Because if it’s the former, then this article doesn’t really explain your experience, right?

Could be this (from the article): "Another scenario I can think of is that the financial model for the building requires spaces to be filled by “credit tenants,” meaning name-brand businesses of a certain caliber and creditworthiness."

Might not be available unless your name ends in 'tarbucks'.

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

#168

Post by senordevnyc »

larubbio wrote: post #79
bandrami wrote: post #27

Earlier quoted context omitted.

Humans are not Pareto efficient. If my wife and I are at the airport, and the gate agent offers me (and only me) an upgrade on the flight, your logic says I should take it since that's strictly better than both of us flying economy.

This happened on the flight to my honeymoon, and my wife took the upgrade.

I assume you mean your ex-wife? ;)

Jk of course

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

#169

Post by em-bee »

grebc wrote: post #140
em-bee wrote: post #128

Earlier quoted context omitted.

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.

you are missing the point, i don't care if i can buy this or not. i care that the street is attractive to people. if i do have a shop in the street (because i can actually afford it) then i care even more because if the street is not attractive then that is hurting my business.

the problem is not that i can't afford it. the problem is that NOBODY can afford it. free market rules then suggest that the value of that thing goes down and thus the price should go down too if the building owner has any interest in selling that thing.

and here is where the free market idea causes a conflict, because if they don't have an interest to sell then their interest and the city's interests are misaligned and the city should force the building-owner out.

or, you could also argue that the city itself is a market participant, because the city owns the land the shops are built on, and it leases or sells that land with specific expectations, namely that shops are built and rented out. if the renting out does not happen then the city's contract with the builder is violated and the city should have a right to take action.

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

#170

Post by dietr1ch »

limagnolia wrote: post #158
dietr1ch wrote: post #109

Earlier quoted context omitted.

This just says that they have too much power and society would be better off having a vacancy tax that aimed to reduce abuse by landlords while at the same time ensuring the city doesn't look like post crisis Detroit, which makes it worse for everyone.

Most of the US does, its called property tax. Or in some cases, land value taxes.

Not the same because it does not depend on utilisation. Pretty much everywhere you see property taxes, but vacancy taxes are a lot more recent and I guess rare so far.
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