Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why do commercial spaces sit vacant? (2025)

freerange.city

Post reply on HN
Print view View original

231–240 of 258 posts

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

#231

Post by flurben »

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.

I used to think the same thing, until recently.

Where I live (NC, USA) there was a big issue where commercial property owners have been able to reduce their property tax assessments, not on the basis of 'comparable sales' (like everyone else), but on the basis of the income derived from the property.

I can't say how widespread this practice actually is, but it's not unheard of. Apparently property tax rules are going to vary widely by jurisdiction, which country / which state or province / etc.

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

#232

Post by amenhotep »

AnthonyMouse wrote: post #116
fl4regun wrote: post #89

Earlier quoted context omitted.

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…

> but that isn't how it is done, and this is the result. And the result is dumb, which is the point. The bank should stop doing that if they don't want to cause problems for themselves. Review again how this works. The landlord put in $4M and the bank $16M on what was supposed to be a $20M building. They can't find enough tenants, which means in real life it's only worth $14M and the incumbent system is for everybody…

That's the trick, isn't it, though? Rationally it's especially a problem if it happens all at once, but realistically if your bank has an awful quarter then you're at fault whereas if every bank has an awful quarter then no one's at fault, it's a systemic issue, chances are you get to collect a bail out and keep going. It's a sort of prisoner's dilemma, a critical mass of banks needs to defect and each individual bank's incentive is to cooperate.

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

#233

Post by dredmorbius »

advisedwang wrote: post #98
joshka wrote: post #14

Sounds like fraud with extra steps.

Who is being defrauded? Who even is the fraudster? The operator of the building is losing money, so clearly they're not making a gain from anyone

Somewhere in this chain are parties who are able to claim assets or collateral with values far in excess of actual market worth. To me that smells like the creditors are defrauding their counterparties.

The defrauded parties might include secondary lenders (to the property mortgage holders), regulators to whom financial instruments and solvency are being misrepresented, tenants who are paying higher-than-market rents, potential tenants who are denied market-rate rents on existing space, and arguably communities in which business and commercial opportunities are depressed due to the denial of access to real estate at market terms.

The operator of the building isn't the key point to fraud, as their interest (reducing rent to attract tenants) is actively thwarted by their creditors. The element of fraud is misrepresentation of true market value / income potential by projecting partial tenancy at elevated rates as if it were full tenancy, rather than the actual income stream at full occupancy (allowing for a nominal vacancy rate) at actually-supportable lease rates.

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

#234

Post by BrenBarn »

bluGill wrote: post #218
BrenBarn wrote: post #203

Earlier quoted context omitted.

Smooth it out for who? If the answer is "the person who owns a $20 million building" then my answer is "I don't care".

Not caring is why we are in this place where rent doesn't go down. Now, maybe it is really is not your problem, but be aware that it is a problem for someone and in turn, you can raise your costs if you are shopping at those businesses. If financials doesn't pencil out, then either the business closes or they raise prices.

> Not caring is why we are in this place where rent doesn't go down.

Not sure what you mean. What I mean is that I am fine with policies that effectively force the building owner to lower the rent (if their net worth is high enough) even if it means they take a loss, because I am fine with forcing people with lots of money to take losses. So the rent will go down.

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

#235

Post by dredmorbius »

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).

I'm not sure what the full elements of this are, but in a somewhat similar situation (Georgian Land Rents), an approach often proposed is that taxes be made on the stated value of the land, subject to the provision that the taxing authority may opt instead to buy the property at that value. It's possible for a landowner to lowball value, but they risk losing the property, at a below-market rate, if they do so.

(The taxing authority might hold the property itself, or turn around and sell it to a third party, at market rates.)

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

#236

Post by grebc »

AnthonyMouse wrote: post #210
grebc wrote: post #134

Earlier quoted context omitted.

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.

It's not a matter of whether I like it. It's a question of why the bank, unless required to do so by some kind of absurd perverse regulatory incentive, would do something which is not only harming others but also increasing the default risk for the bank by reducing the income of a borrower who, if they can't make the payments, will cause the bank to have to write off millions of dollars by foreclosing on an underwate…

Harming others is a stretch.

You’re also assuming every vacancy has this pigeon holed financial setup. A LOT of commercial property is freehold.

I’m honestly at a bit of a loss that people feel they can tell others what to do with their property because it’s vacant. That’s not how society works, and it won’t change to that either.

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

#237

Post by grebc »

PaulHoule wrote: post #217
BrenBarn wrote: post #213

Earlier quoted context omitted.

Not sure what you mean. The goal is a good society. Allowing certain individuals to keep certain things they currently have was never any part of my goal. (I can't speak for others in the thread of course.)

I picture the banks and the landlords would do better in the long term too if the shops were full. This is not Bluesky leftist "let's take Jeff Bezos' yacht so we can all have 15 minutes of health insurance" but rather "let's have more businesses in this town that can put capital to work, create jobs, create wealth and the kind of consumer choice that Ralph Nader and Ludwig von Mises both agreed on."

You’re free to buy said vacant property/ies and lease them out at rates or your choosing.

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

#238

Post by grebc »

inigyou wrote: post #215
grebc wrote: post #197

Earlier quoted context omitted.

As stated earlier: it’s a free market and you’re free to make an offer of sale or lease to utilise the space.

It's actually not a free market.

Regulations apply to all markets. Crying you can’t afford something doesn’t mean it’s not free.

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

#239

Post by onetokeoverthe »

em-bee wrote: post #182
grebc wrote: post #175

Earlier quoted context omitted.

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…

[dead]
Post reply on HN