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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)

#221

Post by prepend »

throwburn202605 wrote: post #192
BrenBarn wrote: post #153

Earlier quoted context omitted.

> That can crash the rental market. At this point I think that's exactly what we need in a lot of places.

I was told capitalism made for efficient use of resources.(inb4 oh you sweet summer child) If the land isnt being used efficiently the owning entity should fail and a new productive use made. Whether thats tearing it down for the public to get better use of the land; rerouting roads, community swimming pool, park etc. Replacing with a more economic building; factory, stadium, appartments (zoning not withstanding). Or…

It’s more efficient than other market allocation methods. But it’s not perfectly efficient.

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

#222

Post by Nemi »

fl4regun wrote: post #89
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…

it's because the expected future income is based on what current tenants are paying, extrapolated to the number of units in the building, ignoring vacancies. I get what you are saying, it should be based on total rental income from the building - full stop - but that isn't how it is done, and this is the result. Simply stated, if you rent a new unit for 25% lower, then the value of the building just dropped 25%. If y…

Prices are set at the margins

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

#223

Post by Nemi »

grebc wrote: post #138
flotzam wrote: post #18

Earlier quoted context omitted.

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.

I agree. I see a lot of comments alluding to the 'regulations' being bad. They are there for a reason. To keep errant bankers from loaning out too much money and creating an even more fragile system.

People have to realize that banking as a business is inherently broken. It is about lending long and borrowing short, which is very risky. Deposits are used to provide funds to lend long, but deposits can be 'called' at any time. The loans cannot.

But banking is also critical for a properly functioning society. It is in the government's (the people's) best interest to have a robust banking system in place. How to reconcile the risk with the benefit? By heavily regulating it.

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

#224

Post by lokar »

evo wrote: post #167
senordevnyc wrote: post #166

Earlier quoted context omitted.

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'.

Yep. The owner assigns much higher value to leasing to a large national chain. They often hold out for one, refusing to lease to more risky businesses.

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

#225

Post by ryanmcbride »

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.

You really thought you ate with this huh

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

#226

Post by Sohcahtoa82 »

pweaver wrote: post #144
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…

> Landlords will frequently try to rent out unused space to temporary tenants like popups

and Spirit Halloween.

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

#227

Post by [deleted] »

prepend wrote: post #220
Grombobulous wrote: post #162

Earlier quoted context omitted.

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...

Property tax isn’t based on vacancy rate, it’s based on property value. The article writes a bit about property value being based on rents. So a completely rented building pays the same property tax as an empty building with no renters.

[deleted]

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

#228

Post by Sohcahtoa82 »

weli wrote: post #4

It all comes back to fractional reserve banking. It is the root of all evil in our financial system. If Rothbard could only see the current state of affairs...

How do you imagine people would get car loans and mortgages without fractional reserve banking? Where do banks get the money to loan out to people if they're not using the deposits from other members of the bank?

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

#229

Post by prepend »

gonzalohm wrote: post #216
goodpoint wrote: post #212

Earlier quoted context omitted.

> That can crash the rental market ...as if it was a bad thing.

It's bad for one person only, the landlord, which happens to control the rent price

It’s also a bad thing for future investment as building new units becomes riskier.

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

#230

Post by prepend »

Is this something there’s a federal lever for by forcing commercial loans to mark to market? So if I go to refi my $20M building and nothing is actually rented for 5 years, I can’t use list price and need to use market price for rent.

Or could be a shareholder lawsuit for banks as they are putting out riskier loans than the rate reflects?

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