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

241–250 of 258 posts

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

#241

Post by naijaboiler »

flurben wrote: post #231
prepend wrote: post #220

Earlier quoted context omitted.

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…

There’s one thing you can guarantee in America. If it puts the interests of high income people vs everyday income people, the policies favoring the rich will almost always win out.

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

#242

Post by userulluipeste »

dredmorbius wrote: post #235
userulluipeste wrote: post #177

Earlier quoted context omitted.

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 t…

This seems an ingenious rule to address conflicting interests indeed. However, I don't see it applicable to many taxable goods, unfortunately. Some goods, although of high value, require operating costs even and (more importantly) expertise in order for that value to be maintained and realized. For example, a hotel is an active asset that incurs operational costs and therefore its potential acquisition prospect may be shunned by anyone not in the hospitality industry, but still, a taxing authority can make some arrangement for another actor to operate the asset on its behalf. (This I think is in fact how the rule was been thought to work, for things like arable land, where the acquired land could be sold or leased to another peasant.) This is not as easy when the need for expertise comes into play, like it would with a research lab, for example, because the research lab may be one of its kind.

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

#244

Post by userulluipeste »

em-bee wrote: post #181
userulluipeste wrote: post #177

Earlier quoted context omitted.

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?

"how is that a moral hazard if the consequence is that we avoid shops staying empty"

The shops staying empty is one problem. The call for bailing out or helping in any way the creditors that took loans in bad faith by relying on that kind of help (to prop them up along the way) is another problem. I very much want to address the first problem, but not by enacting perverse incentive inducing rules. A better solution (in my view), which I think was mentioned in other comments, was to disallow tax reductions for unused spaces, and maybe even rise them above the tax level for what that space is when rented. In this case the landlord may be incentivized to find ways to make their spaces (at least) look busy (if not be busy with something of real value), which may be what the cities and community think of as an improvement.

"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?"

Yes, it is "already a failure", and it was the reason behind my initial objection. The bad decisions should meet their bad consequences. A "remedy" "to find ways to change the conditions of the loan so that building owners can continue to pay off their loan" sounds to me like a measure to shield decision makers from facing their failures. It is also, in the context of imminent failure, a call for someone else to hold the bag, which is in itself unfair.

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

#245

Post by nmfisher »

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?

> I doubt owners and banks actually believe this.

I worked for a commercial property company before, and yes this is exactly how it works, and yes it's just as stupid as it sounds.

Margin Call nailed it perfectly:

"It's just money. It's made up. Pieces of papers with pictures on it so we don't have to kill each other just to get something to eat".

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

#246

Post by NoMoreNicksLeft »

AnthonyMouse wrote: post #118
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-…

> A building half rented at rent X is more profitable than a building fully rented at rent 0.5 X. That's assuming rents would decrease by half, and also that it's still half occupied. A building half rented at X isn't more profitable than a building fully rented at 0.7 X. A building 25% rented at X isn't more profitable than a building fully rented at 0.5 X.

If the space is commercial, it's more valuable for the tenants. More traffic, more random sales opportunities. If half-occupied, it looks like a ghetto, and they only get deliberate traffic.

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

#247

Post by dredmorbius »

userulluipeste wrote: post #242
dredmorbius wrote: post #235

Earlier quoted context omitted.

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 t…

This seems an ingenious rule to address conflicting interests indeed. However, I don't see it applicable to many taxable goods, unfortunately. Some goods, although of high value, require operating costs even and (more importantly) expertise in order for that value to be maintained and realized. For example, a hotel is an active asset that incurs operational costs and therefore its potential acquisition prospect may b…

Keep in mind that we're talking, in general here about typical commercial retail: storefronts, restaurant space, small markets, possibly office or light industrial space. Not highly-specialised large-scale hospitality, scientific labs, heavy industry, etc. Yes, those exist, yes, there are vacancies, but *the typical case is going to be pretty quotidian. Don't let the perfect be the enemy of the sufficient.

For what it's worth, one of the specialised use-cases probably more likely to be encountered is large-volume food retail, a/k/a supermarkets or grocers. These have distinctive footprints, refrigeration, stocking capabilities, and the like. A few years ago the failure of a large regional grocery brand in the US resulted in numerous commercial vacancies of precisely this nature. There was some controversy when the successor to the chain held on to many of those parcels for years. There were still numerous vacancies at three years after final closing, several locations were demolished entirely, and the last property wasn't repurposed until six years after the original chain had failed. This despite pressure and desire to provide grocery services in the area. As the successor company was also a grocery chain (with operations in the area), stalling transfer of the properties was effectively a way of hamstringing their competition. The space wasn't easily converted to other uses (this happens, Sports Basement at the former Presidio PX in San Francisco is an example, a former A&P supermarket in NYC converted to a community center another), and food retailers hoping to expand had few other options. Notably, despite exploding vacancies in non-food retail, former strip-malls and shopping centres can't easily convert other retail space to groceries.

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

#248

Post by voakbasda »

naijaboiler wrote: post #241
flurben wrote: post #231

Earlier quoted context omitted.

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…

There’s one thing you can guarantee in America. If it puts the interests of high income people vs everyday income people, the policies favoring the rich will almost always win out.

And as long as money = speech, this will never change.

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

#249

Post by grebc »

inigyou wrote: post #240
grebc wrote: post #238

Earlier quoted context omitted.

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

If it was free everyone could afford it.

I meant free as in free market but yes continue the incoherence.

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

#250

Post by em-bee »

userulluipeste wrote: post #244
em-bee wrote: post #181

Earlier quoted context omitted.

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?

"how is that a moral hazard if the consequence is that we avoid shops staying empty" The shops staying empty is one problem. The call for bailing out or helping in any way the creditors that took loans in bad faith by relying on that kind of help (to prop them up along the way) is another problem. I very much want to address the first problem, but not by enacting perverse incentive inducing rules. A better solution (…

thank you, i understand that, but we also need to consider the benefit/downside for the community. i believe it is a mistake to try to punish bad actors when the consequence is that everybody else suffers too. it depends on how many bad actors there are in practice. it's better to allow a small number of bad actors than to implement rules that hinder the majority of good actors. so what is the right approach may depend on the situation locally.
Post reply on HN