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What this truly shows is that landlords have too much money. They are able to sit on their non performing asset keeping prices inflated. Call me a socialist but

What this truly shows is that landlords have too much money. They are able to sit on their non performing asset keeping prices inflated. Call me a socialist but I think this shows that the effective real estate tax rate is too low for some commercial properties.

wastedhours 9y ago
Are they also able to write them off as a liability?
MrFantastic 9y ago
Many commercial RE contracts require the rents to be paid for set periods regardless of whether the lessee still occupies the site.
- criddell 9y ago
  Even assuming the spaces are still under lease and the entity that signed the lease still exists, the lease often has a sales percentage built in. An empty site isn't good for anybody.
lr4444lr 9y ago
They're paying the opportunity cost in lost rent, and there are numerous legal liabilities and regulations they have as a property owner in the city. It can't go on forever, even with low tax rates.
Eridrus 9y ago
I don't think this is that landlords have too much money. Commercial leases are typically quite long; 10 years is quoted in the article. Landlords don't want to be locked into a price for 10 years that could be a momentary downturn. When you look at it at these time horizons, being vacant for 1 year and renting for your asking price is as good as giving someone a 10% discount to start a lease today. I do think there should be a blight tax though to encourage real estate developers to find a short term use for the space.
- robbyt 9y ago
  There are plenty of business in NYC that would be very happy to have an affordable lease on that street for even 6 months. Only big slow companies want long leases, and only big companies can afford the bloated rent. I don't agree that the root issues is the duration of the lease.
  - Eridrus 9y ago
    Right, but when you say affordable, you probably mean something like a 50%+ discount, which is probably going to be more hassle than it is worth at the moment. Not that price anchoring isn't real, and landlords are often shitty, but I doubt there are plenty of businesses interested in a short term lease for a 10% discount. "Arleen Bowman Boutique" had a 10 year lease and wasn't exactly a big business, so I don't think that big businesses are the only ones who want long leases; I think your comment says more about the desirability of the real estate that people will deal with imperfect conditions to get a deep discount.
    - robbyt 9y ago
      Emperically, a friend's bag company rented space in the LES for 1 month last December, and broke even on sales. This company is online only, and they justified the storefront as a marketing opertunity. The space cost them $18k for the month (which is low, considering the area), and the only reason they got that price is because a big company backed out on their pop-up store deal.
      - Eridrus 9y ago
        I think that's great; I think we should be incentivizing that sort of thing, but I'm sure you can imagine real estate companies are probably not angling to work on 18k deals that have only a marginal impact and distract them from trying to find someone who wants a 10 year multi-million dollar lease. Not because they have too much money, but because these tiny deals are probably a worse deal for them. The policy responses for "landlords have too much money" and "landlords are acting rationally by leaving their lots vacant" are quite different.

wastedhours 9y ago

Are they also able to write them off as a liability?

MrFantastic 9y ago

Many commercial RE contracts require the rents to be paid for set periods regardless of whether the lessee still occupies the site.

criddell 9y ago
Even assuming the spaces are still under lease and the entity that signed the lease still exists, the lease often has a sales percentage built in. An empty site isn't good for anybody.

lr4444lr 9y ago

They're paying the opportunity cost in lost rent, and there are numerous legal liabilities and regulations they have as a property owner in the city. It can't go on forever, even with low tax rates.

Eridrus 9y ago

I don't think this is that landlords have too much money. Commercial leases are typically quite long; 10 years is quoted in the article. Landlords don't want to be locked into a price for 10 years that could be a momentary downturn. When you look at it at these time horizons, being vacant for 1 year and renting for your asking price is as good as giving someone a 10% discount to start a lease today. I do think there should be a blight tax though to encourage real estate developers to find a short term use for the space.

robbyt 9y ago
There are plenty of business in NYC that would be very happy to have an affordable lease on that street for even 6 months. Only big slow companies want long leases, and only big companies can afford the bloated rent. I don't agree that the root issues is the duration of the lease.
- Eridrus 9y ago
  Right, but when you say affordable, you probably mean something like a 50%+ discount, which is probably going to be more hassle than it is worth at the moment. Not that price anchoring isn't real, and landlords are often shitty, but I doubt there are plenty of businesses interested in a short term lease for a 10% discount. "Arleen Bowman Boutique" had a 10 year lease and wasn't exactly a big business, so I don't think that big businesses are the only ones who want long leases; I think your comment says more about the desirability of the real estate that people will deal with imperfect conditions to get a deep discount.
  - robbyt 9y ago
    Emperically, a friend's bag company rented space in the LES for 1 month last December, and broke even on sales. This company is online only, and they justified the storefront as a marketing opertunity. The space cost them $18k for the month (which is low, considering the area), and the only reason they got that price is because a big company backed out on their pop-up store deal.
    - Eridrus 9y ago
      I think that's great; I think we should be incentivizing that sort of thing, but I'm sure you can imagine real estate companies are probably not angling to work on 18k deals that have only a marginal impact and distract them from trying to find someone who wants a 10 year multi-million dollar lease. Not because they have too much money, but because these tiny deals are probably a worse deal for them. The policy responses for "landlords have too much money" and "landlords are acting rationally by leaving their lots vacant" are quite different.