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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)

#61

Post by weli »

Ekaros wrote: post #43
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...

You do not even need fractional banking for this. Same thing could happen without it. Someone lends money and is unable to pay it back. Both sides pretend that things will eventually go well. As at least on paper they have not lost anything until prices are realised.

Without fractional banking the bank needs to be way more cautious when appraising an asset and be more conservative with the future gains estimation. Decreasing speculation and inflation of value.

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

#62

Post by grebc »

Schiendelman wrote: post #53
grebc wrote: post #3

Earlier quoted context omitted.

I own a commercial property, I wouldn’t want to have day to day rentals. I don’t enjoy dealing with property management or the fees they charge.

Tell me more - is your commercial property vacant? I'm a landlord myself, and the calculus gets very different when you have a long term vacancy.

Tenanted.

I know regardless of the vacancy I would not consider day rates, I’d eat the loss and deal with the cashflow via other means. Consider what sort of fit out would be necessary for what’s lets be honest is being suggested - hot desking - compared to a standard office: lots of IT systems necessary, lots of additional security, lots more cleaning, and likely lots more repairs for wear & tear which probably isn’t recoverable easily.

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

#63

Post by makeitdouble »

AnthonyMouse wrote: post #26
makeitdouble wrote: post #16

Earlier quoted context omitted.

Here the bank cares less about annual income than future income. Keeping it vacant only impact current income, lowering rent impacts future forecasts.

> 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…

> 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.

You'd need perfect information to make a contractual decision on that, and it still has lasting effects.

For instance imagine renting your floors to Pornhub for these 3 years on the cheap because the market it low. Assuming you made the right calculation and demand recovers 3 years later, you'll have to first kick out the company (= months spent restoring it), then try to convince the insurance company that eyes at your building that they should pay a hiked price to move into Pornhub's previous floors.

And that's assuming you haven't completely blown it where the market actually recovers within 6 months for reasons nobody anticipated.

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

#64

Post by grebc »

dazc wrote: post #36
grebc wrote: post #31

It’s very clear there is no commercial property investors here, nor commercial borrowers.

Care to enlighten us?

Comments below.

There’s no actual problem here to be solved. If people feel they have better uses for a property they should put their money where their mouth is.

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

#65

Post by makeitdouble »

schlipity wrote: post #42
bandrami wrote: post #27

Earlier quoted context omitted.

Humans are not Pareto efficient. If my wife and I are at the airport, and the gate agent offers me (and only me) an upgrade on the flight, your logic says I should take it since that's strictly better than both of us flying economy.

You should take it and then switch seats with your wife. Happy wife, happy life.

> Happy wife, happy life.

Why wouldn't that happy cycle work with the husband ?

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

#66

Post by Schiendelman »

grebc wrote: post #62
Schiendelman wrote: post #53

Earlier quoted context omitted.

Tell me more - is your commercial property vacant? I'm a landlord myself, and the calculus gets very different when you have a long term vacancy.

Tenanted. I know regardless of the vacancy I would not consider day rates, I’d eat the loss and deal with the cashflow via other means. Consider what sort of fit out would be necessary for what’s lets be honest is being suggested - hot desking - compared to a standard office: lots of IT systems necessary, lots of additional security, lots more cleaning, and likely lots more repairs for wear & tear which probably isn’…

I'm not suggesting hotdesking at all; you may have seen someone else's comments suggesting they thought that! My best example (provided in my original comment) was Peerspace, but there are many others like that. Zero infrastructural investment past giving someone a key (or setting up an HID reader and such).

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

#67

Post by grebc »

AnthonyMouse wrote: post #26
makeitdouble wrote: post #16

Earlier quoted context omitted.

Here the bank cares less about annual income than future income. Keeping it vacant only impact current income, lowering rent impacts future forecasts.

> 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…

How you think about it is different to how the multiple different players think about it.

If you’re levered up to the eyeballs you don’t want your bank reviewing your file.

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

#68

Post by trukledeitz »

Has anyone here considered the cost of capital reserves required by the bank for holding this loan? Commercial loans used to be a 100% capital holding requirement, while HVCRE (High Volatility Commercial Real Estate) Loans carry 150% capital holding. So if a bank loans a building owner 100% of a 20 million dollar facility and it meets HVCRE requirements, the bank has to keep 30 million of capital in reserve for the chance of default. Even if the loan receives enough buyer downpayment or for some other reason becomes normal Commercial loan the bank has to hold 20 million in reserve capital for the loan. So you have to net the incentive of the cost of the capital held in reserve against the interest payment on the bank's balance sheet as an economic forcing against continuing to float the loan forever...

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

#69

Post by grebc »

AnthonyMouse wrote: post #48
embedding-shape wrote: post #32

Earlier quoted context omitted.

> "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…

> For who and in what way though? For anyone who wants an accurate accounting. Suppose the building is supposed to be worth $20M, has an existing $10M mortgage and is actually only worth $10M. The landlord comes to you and wants to borrow another $5M against the building. Pretty important to the lender at this point that they're not overvaluing it, right? Or the same if they go to a different bank trying to refinance…

Commercial borrowers have to pay for a valuation report by a bank approved valuer.

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

#70

Post by grebc »

Schiendelman wrote: post #66
grebc wrote: post #62

Earlier quoted context omitted.

Tenanted. I know regardless of the vacancy I would not consider day rates, I’d eat the loss and deal with the cashflow via other means. Consider what sort of fit out would be necessary for what’s lets be honest is being suggested - hot desking - compared to a standard office: lots of IT systems necessary, lots of additional security, lots more cleaning, and likely lots more repairs for wear & tear which probably isn’…

I'm not suggesting hotdesking at all; you may have seen someone else's comments suggesting they thought that! My best example (provided in my original comment) was Peerspace, but there are many others like that. Zero infrastructural investment past giving someone a key (or setting up an HID reader and such).

What sort of property do you own and do you utilise this service?

I can’t fathom just putting some dinky reader on the front door and letting absolutely anyone in.

The current tenants of mine started a lithium battery fire, almost burnt my property down.

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