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How Manhattan Became a Rich Ghost Town

theatlantic.com

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Re: How Manhattan Became a Rich Ghost Town

#51

Post by bluGill »

blindwatchmaker wrote: post #34
ardit33 wrote: post #18

I live in manhattan and I feel this story is a bit exaggerated, or at least I don't see the author's reality. (Him quoting a Real Estate firm, which is interested in activity, doesn't give credence to the data). The turnaround of restaurants and bars here is amazingly fast. When one fails, another one springs up. The same street will have very different storefronts each year. I once asked a restaurant owner, on how i…

> The turnaround of restaurants and bars here is amazingly fast. When one fails, another one springs up. The same street will have very different storefronts each year. Is that supposed to be a positive thing? Sounds pretty unstable and a terrible detriment to developing an actual neighbourhood.

So long as there is someplace to eat it is a good thing: you get more variety without having to go far. The neighborhood doesn't need any specific restaurant or bar, it just needs some

Re: How Manhattan Became a Rich Ghost Town

#52

Post by mtanski »

Takizawa wrote: post #23
chasing wrote: post #15

Earlier quoted context omitted.

I think this is sort of happening in NYC: The center of gravity is sort of moving to Brooklyn since it's cheaper, there's more space, it's more interesting, etc. And depending where you are, Manhattan is still very accessible. Obviously the key NYC tourist targets aren't moving, but anecdotally I am seeing an uptick of tourists in my 'hood. For what it's worth.

Interesting that you mention the shift of the center of gravity. I would add that there are multiple competing shifts. Flushing, for example, has now become a viable, small city within New York City.

There's tons of towns within towns in NYC. I will not name them here. Everyone please go visit Manhattan.

Re: How Manhattan Became a Rich Ghost Town

#53

Post by mswiss »

mschuetz wrote: post #20
roenxi wrote: post #3

Is there some legal issue at play here that the article isn't drawing attention to? Why is it a better idea to leave a property vacant than to have a short-term tenant?

Looking at Vienna, it feels like the value of real-estate grows faster than what you'd earn by renting. E.g. you'd probably earn 3,000€ netto per year from a 200,000€ property, but it's value also rises by 4,000€ in the same time frame. Why renting it out for a little cash, and probably having to pay a landlord to manage it, when you're already earning more than that by simply sitting on it. I've just made some numbe…

yeah but in order to get access to that money you'd have to sell or cash out refi, or take a loan against the property.

So your kind of making money but if prices go down your in a much trickier spot.

Re: How Manhattan Became a Rich Ghost Town

#54

Post by notyourday »

vidanay wrote: post #9
roenxi wrote: post #3

Is there some legal issue at play here that the article isn't drawing attention to? Why is it a better idea to leave a property vacant than to have a short-term tenant?

I'd say it's like a gambler's addiction. They want to hold the property open because "Someday is going to call me and say they need 30,000 sq ft of retail space by next Tuesday, and I can't afford to lose that deal because there's a Halloween store using 500 sq ft this week and a Christmas tree shop in the parking lot next month"

If a commercial space is owned by the landlord free and clear, then the landlords have zero incentive to rent it to collect smaller than desired revenue unless property taxes are so high that the landlord must lease the space to at least cover the property taxes. If course that means that the rents skyrocket for all properties as the property taxes now eat majority of the rent.

If the landlord has a fairly regular commercial mortgage, it is probably IO + balloon in 10-15 years. The landlord's bet is that the property would appreciate enough that the landlord can refinance it for the next IO + balloon, kicking the can down the road for another 8-10 years. Pretty much no one operates commercial buildings with the idea of paying off the loans on them, which is why as long as the real estate continues to go up in a long term it is makes sense not to engage with small time tenants. The only time landlord has to engage with small time tenants is if appreciation of the property won't create enough equity to refinance the balloon payment.

Re: How Manhattan Became a Rich Ghost Town

#55

Post by johnmyleswhite »

aylmao wrote: post #40
sarabande wrote: post #2

It seems to me like in big cities, as this article describes what eventually will happen is the rich will buy up the property because nobody else can afford it, service workers won't be able to actually live within a reasonable distance in order to work there, and the city will exist mainly for 1) wealthy professionals, 2) people who use real estate to park their money, and 3) tourists. Regular working-class folk dis…

A look at the financial district in NYC reveals this. During the day the place is very active, but during the night the whole thing dies out.

But the Financial District was much emptier at night historically than it is now, so I'm not sure this is closely linked to the article's claims.

Re: How Manhattan Became a Rich Ghost Town

#56

Post by Retric »

djrogers wrote: post #33
Itaxpica wrote: post #21

Earlier quoted context omitted.

Landlords can take tax write-offs for empty properties, so they’re incentivized to sit on empty storefronts until the perfect long-term lease comes along rather than rent to a less ideal shorter-term tenant.

A tax write off is going to be worth, at best, ~35% of the value gained from actually leasing the property. That makes it considerably worse to hold on to.

Waiting is a risk that may pay off, so that 35% write off still changes the math.

Suppose you are going to make a coin flip bet. On heads you win 1$ cents tails you win 0$. That's worth ~50 cents. Now, suddenly on tails you get 35 cents. By reducing the downside risk it's more worth it to make the bet (67.5 cents).

Re: How Manhattan Became a Rich Ghost Town

#57

Post by aboodman »

blindwatchmaker wrote: post #34
ardit33 wrote: post #18

I live in manhattan and I feel this story is a bit exaggerated, or at least I don't see the author's reality. (Him quoting a Real Estate firm, which is interested in activity, doesn't give credence to the data). The turnaround of restaurants and bars here is amazingly fast. When one fails, another one springs up. The same street will have very different storefronts each year. I once asked a restaurant owner, on how i…

> The turnaround of restaurants and bars here is amazingly fast. When one fails, another one springs up. The same street will have very different storefronts each year. Is that supposed to be a positive thing? Sounds pretty unstable and a terrible detriment to developing an actual neighbourhood.

I lived there for years and loved it. It makes for an incredibly vibrant neighborhood feel. Everytime you go for a walk there's someplace new to stop.

Yes, lots of places don't make it, but lots of places do make it and stick around for awhile.

Re: How Manhattan Became a Rich Ghost Town

#59

Post by brenschluss »

notyourday wrote: post #50
roenxi wrote: post #3

Is there some legal issue at play here that the article isn't drawing attention to? Why is it a better idea to leave a property vacant than to have a short-term tenant?

Owning commercial real estate allows one to depreciate it regardless of it collecting rent or not. It is not possible to close this loophole because 322 Prince St, LLC does not have to rent the space to Joe's Boutique for $7,000 a month rather than Starbucks for $17,000 a month - it can rent that space to "JP772 Holding, Inc" out of Nevada for $10/day which would be owned by the members of 322 Price St, LLC which wou…

I thought that technically the LL then owes the IRS in imputed income? (Income based on market-rate rental values)?

Re: How Manhattan Became a Rich Ghost Town

#60

Post by empath75 »

I think it’s more of a result of absentee landlords building a real estate portfolio that they don’t really give a fuck about as building managers. They’re flipping these buildings just like houses were being flipped before the financial crisis. Having renters in there just complicates things.

There’s a metro stop out here in northern Virginia that has a beautiful office building on top of it designed by a top architect and it’s _empty_. For at least a year now. And they’re building two more office buildings in the same location. They’re probably just all going to end up being managed by WeWork.

The whole thing reeks of a bubble to me.

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