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> plus a baked-in annual increase of 6% Raising the rent annually on a multi-year lease. That is one lasting way that an investor can make money in a low or ze

> plus a baked-in annual increase of 6% Raising the rent annually on a multi-year lease. That is one lasting way that an investor can make money in a low or zero-interest rate (ZIR) economic environment.

raverbashing 7y ago
Except, as several landlords are learning right now, there's no money without a tenant, and not every tenant fits in every place, and not every empty space gets a tenant who's willing to pay the rent being asked. And in residential places: a good tenant that pays less might be more lucrative than a bad tenant that "pays more"
dsr_ 7y ago
This is more or less normal in long-term business leases: everyone can do the same math, and it's just a way of making the immediate pain of a new lease a little less injurious to the tenant's cash flow. If the tenant shrinks headcount, they can sublet a portion or move to a smaller space and sublet the whole thing. If the tenant is growing their business faster than the rent increases, it doesn't hurt. And at the end of the lease, everything is re-negotiable again.
walrus01 7y ago
> plus a baked-in annual increase of 6% I mean, that's pretty nuts to sign up for in the first place as a commercial office lease. Unless you're in an incredibly hot area and really have no choice operationally but to acquire office space in a class A tower in a major downtown. In commercial telecom leases a common escalator is to peg things to the consumer price index, or 2.5 percent.
throw0101a 7y ago
Depends on the market. Real estate is crazy in Toronto right now, and not just residential. Commercial vacancy rates are crazy-low: > 7.3 million sq. ft. of downtown office space is currently under construction, and 62.3% of that new inventory has been pre-leased * http://www.cbre.ca/EN/mediacentre/Pages/Record-Low-Downtown-Toronto-Office-Vacancy-.aspx http://www.cbre.ca/EN/mediacentre/Pages/Record-Low-Downtown-... > There’s 9.6 million square feet of office space under construction downtown, according to the report, and 57 per cent of that was pre-leased at the end of the first quarter. That number has now surpassed 70 per cent with the two deals noted above. * https://renx.ca/gta-office-market-continues-strong-performance/ https://renx.ca/gta-office-market-continues-strong-performan...

raverbashing 7y ago

Except, as several landlords are learning right now, there's no money without a tenant, and not every tenant fits in every place, and not every empty space gets a tenant who's willing to pay the rent being asked. And in residential places: a good tenant that pays less might be more lucrative than a bad tenant that "pays more"

dsr_ 7y ago

This is more or less normal in long-term business leases: everyone can do the same math, and it's just a way of making the immediate pain of a new lease a little less injurious to the tenant's cash flow. If the tenant shrinks headcount, they can sublet a portion or move to a smaller space and sublet the whole thing. If the tenant is growing their business faster than the rent increases, it doesn't hurt. And at the end of the lease, everything is re-negotiable again.

walrus01 7y ago

> plus a baked-in annual increase of 6% I mean, that's pretty nuts to sign up for in the first place as a commercial office lease. Unless you're in an incredibly hot area and really have no choice operationally but to acquire office space in a class A tower in a major downtown. In commercial telecom leases a common escalator is to peg things to the consumer price index, or 2.5 percent.

throw0101a 7y ago

Depends on the market. Real estate is crazy in Toronto right now, and not just residential. Commercial vacancy rates are crazy-low: > 7.3 million sq. ft. of downtown office space is currently under construction, and 62.3% of that new inventory has been pre-leased * http://www.cbre.ca/EN/mediacentre/Pages/Record-Low-Downtown-Toronto-Office-Vacancy-.aspx http://www.cbre.ca/EN/mediacentre/Pages/Record-Low-Downtown-... > There’s 9.6 million square feet of office space under construction downtown, according to the report, and 57 per cent of that was pre-leased at the end of the first quarter. That number has now surpassed 70 per cent with the two deals noted above. * https://renx.ca/gta-office-market-continues-strong-performance/ https://renx.ca/gta-office-market-continues-strong-performan...