It’s very clear there is no commercial property investors here, nor commercial borrowers.
Why do commercial spaces sit vacant? (2025)
31–40 of 258 posts
Re: Why do commercial spaces sit vacant? (2025)
#32Earlier quoted context omitted.
How do you asses the value? You use the x last transactions. No transactions, no data, the last value remains.
"Last value" is pretty meaningless when it's stale though. Suppose there is a building that was built in 1970, last rented out in 1975 and then bought by a company that has used it as their own offices until now. The last transaction was in 1975, what's the value if they apply for a mortgage today? Surely they have some formula to use for this based on e.g. other buildings in the area. Moreover, "failure to find a te…
> "Last value" is pretty meaningless when it's stale though.
For who and in what way though? Every entity involved wants to keep the price high, except the renter/new buyer, so with that in mind, "Last Value" seems optimal for achieving that.
Maybe it's different in the US, but in Spain there is a ton of properties that sit completely empty and unused, even since earlier than 2008, just because the owners don't think the value is enough to sell yet, and they wouldn't earn enough renting it out, so everyone (except renters/new buyers) seems to prefer it just sits empty for decades.
Re: Why do commercial spaces sit vacant? (2025)
#33I actually think there's a business to be had here. As described, the landlord can't offer a traditional lease for the actual value of the space. However, the landlord could offer essentially day rentals without creating a lease. There are systems for this already, such as Peerspace and their ilk, which I've used for small events. I believe these don't trigger the foreclosure clauses. I think that a property manageme…
I can't comment on that specific structure, but pop-up shops are one method that in the UK councils will often help vacant buildings with for exactly this reason, with the upside that they may convert into permanent tenants.
Re: Why do commercial spaces sit vacant? (2025)
#34This 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?
The whole goal is not to write off the value of the property which you have to do if you rent it for less money than initially planned. That's not that difficult to understand is it?
Re: Why do commercial spaces sit vacant? (2025)
#35(2025).
> The obvious thing cities could try is to put more pressure on building operators to fill their spaces, but the building operators are already under a ton of pressure — they’re losing a bunch of money! So, cities could do something like put a vacant storefront tax and… make them lose even more money? If that “worked,” the mechanism would be to force a lot of commercial property to default, which could put a lot of new space on the market at lower prices, which should lower the commercial rent. But it would also hurt the banks a lot, which has a history of leading to bad consequences and subsequent bailouts.
I agree that this is the obvious remedy. I don't know if it's exactly the right answer, but it's the natural place to start the conversation, and I think it's at least in the ballpark of the right solution. It's the city (and bigger) government's job to create policies that incentivize the right behaviors for the benefit of the community. There clearly has been an oversight here, if extremely valuable commercial properties are literally just sitting unused for no good reason. In my opinion we'd all be better off if the market did correct itself, at least getting us all on the same page about what these properties are actually worth, rather than the current situation.
The city stepping in also helps put the fuckup back in the right place, in the hands of the property owners and lenders who seem to have made these bad bets, rather than externalized to the residents and business owners of the city, who haven't done anything wrong. The article suggests that this leads to "bad consequences" and even bank bailouts, but I'm pretty unconvinced that the problem is widespread enough that the federal government would literally need to start bailing out banks. From what I've seen, it's really bad in a few specific metro areas and not so much in others.
Re: Why do commercial spaces sit vacant? (2025)
#36It’s very clear there is no commercial property investors here, nor commercial borrowers.
Care to enlighten us?
Re: Why do commercial spaces sit vacant? (2025)
#37The "problem" is that we let people claim the "rent" is X for certain people and "Y" for other people--both at the same time. Just stop that. The "solution" is that you should have to pay tax on what you claim the rent is after a small grace period (Less than 24 months certainly. Probably less than 12 or at least prorated starting before that.). If your financial agreement requires and claims that the rent is $5000,…
If the property is devalued, the property taxes lower accordingly. Portland, Oregon has been facing this problem recently. The devaluations caused the tax revenues for the city to drop, which in turn has caused budget issues. For example, "Big Pink" is an office tower in downtown Portland. It's last sale was for about $370 million. Out of desperation in a saturated market, the owners sold it last year for about $45 m…
As citizen I might prefer downturn of values. At least in medium term. Yes there is lot less tax income. But on other hand lowering values would mean lower rents which would mean lower overheads and potentially cheaper prices or more business being viable.
Re: Why do commercial spaces sit vacant? (2025)
#38Here is the problem: > Half empty, the building is only generating $500k per year in net income instead of $1M. > Let’s imagine the owner lowers the rent by 30% to fill the building. > Now, reality has proven the operator can only make $700k per year. No. When the building sat half empty, reality had already proven that it could not generate what they thought it could. This is the insane fallacy driving this whole th…
> a larger number of people than we thought are participating in the same delusion
Congratulations, you have just described high finance.
Re: Why do commercial spaces sit vacant? (2025)
#39This 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?
Think of it that way - until you haven't climbed on the scale, you haven't gained weight, even if your pants are bursting at the seams.
Re: Why do commercial spaces sit vacant? (2025)
#40There is also the practice of "deferred interest paid in kind", where vacancy is considered temporary, and the bank agrees that the interest for the term of vacancy will be paid at loan maturity. Not sure how/if it applies to multi-tenant buildings, but plenty of them aren't multi-tenant.