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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)

#181

Post by em-bee »

userulluipeste wrote: post #177
em-bee wrote: post #78

Earlier quoted context omitted.

another possible remedy would be to find ways to change the conditions of the loan so that building owners can continue to pay off their loan at better rates that match the income they can make from rent.

Then you'll most likely get moral hazard. That is, rather of people acting in their own limits, as responsible business parties, they would instead be encouraged this way to make deals which they know won't be able to carry through, then after getting this metaphorical foot in the door, they'll expect "to change the conditions of the loan", i.e. beneficial intervention on their behalf (and a kind of bait-and-switch).

how is that a moral hazard if the consequence is that we avoid shops staying empty? because that's the goal from the city's perspective.

and isn't investing into a property that they then fail to rent out in a profitable manner also already a failure to act within their own limits?

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

#182

Post by em-bee »

grebc wrote: post #175
em-bee wrote: post #169

Earlier quoted context omitted.

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 th…

Yes I understand your point - you are just a commentator with no actual interest in the matter hand. Not an owner, not a tenant, just some random stranger strolling on the street thinking other people should do something because you think it's the greater good. Now you're proposing a different ownership model completely or that a government/city should be able to force a legal owner out of their legally owned propert…

i am considering what i am proposing. but i can't do that alone. throwing my ideas out there and having them critiqued with counterarguments is the point. if you just say i have no clue and my ideas are bad and i should reconsider then i am not going to learn anything. i can only reconsider if i get new input about what's wrong with my idea.

basically you act like the error in my idea should be obvious, and i should be able to figure that out by myself. well, no, because if i could, i already would have. i don't write stuff without thinking about it. it may look like that to you, but only because you seem to know something that i don't. please share.

and what do you mean by no actual interest? have i not explained my interest? do you think the interests of the people living in the city are irrelevant? only owners and tenants count? well, most certainly not. but if you do not accept that the city and its inhabitants should have an interest in this matter then our problem is that we have a fundamental disagreement in our worldview.

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

#183

Post by dietr1ch »

jujube3 wrote: post #161
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.

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.

The city is better off having its citizens participate more in the economy and paying taxes through it than staying home or not starting business because rent is too high.

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

#184

Post by bombcar »

mlsu wrote: post #150
grebc wrote: post #145

Earlier quoted context omitted.

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.

Have you heard the story of Boeing and the "cost-plus" contracts? Digging a hole and filling it in can be quite profitable!

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

#185

Post by bombcar »

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…

I recommend getting out there and getting involved - it's surprisingly easy to end up talking to the actual owners of these buildings, and they're more often than not just a guy and not some weird conglomerate REIT and they'll make a deal but they'll also tell you what and why - listen!

Capital is weird.

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

#186

Post by inigyou »

dietr1ch wrote: post #183
jujube3 wrote: post #161

Earlier quoted context omitted.

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.

The city is better off having its citizens participate more in the economy and paying taxes through it than staying home or not starting business because rent is too high.

Not necessarily. That's what's best for the city as in a geographical area where people live. What's best for the city as in an organisation with bureaucrats and finances is probably whatever increases revenues.

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

#187

Post by inigyou »

trukledeitz wrote: post #68

Has anyone here considered the cost of capital reserves required by the bank for holding this loan? Commercial loans used to be a 100% capital holding requirement, while HVCRE (High Volatility Commercial Real Estate) Loans carry 150% capital holding. So if a bank loans a building owner 100% of a 20 million dollar facility and it meets HVCRE requirements, the bank has to keep 30 million of capital in reserve for the c…

aren't we in a zero reserves era?

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

#188

Post by inigyou »

teddyh wrote: post #93
alper wrote: post #82

I'm in Berlin where there's a glut of offices which are all sitting empty. I'm living next to a top line historic renovation/office space and it took them 8-9 years to complete the renovation at probably an astronomical cost and now it's been sitting empty for a year or so. This financial model is also the main reason why it's so hard to convert these buildings to residential. Somebody has to eat the markdown.

The ICC? https://en.wikipedia.org/wiki/Internationales_Congress_Centr... >

I was thinking Am Tacheles but who knows

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

#189

Post by inigyou »

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 failing to look beyond the effects of one individual transaction. No snowflake feels responsible for the avalanche.

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

#190

Post by inigyou »

grebc wrote: post #141
fl4regun wrote: post #129

Earlier quoted context omitted.

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.

There's something wrong with the structure of the market if people are holding assets they don't need that others could make better use of.
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