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Why didn't the landlord offer this "2 years no rent" deal to the existing "favorite coffee places"? I'm not sure replacing established successful businesses wi

Why didn't the landlord offer this "2 years no rent" deal to the existing "favorite coffee places"? I'm not sure replacing established successful businesses with new ones is a fair trade...

ardit33 6y ago
I have no clue why not, but a similiar thing has happened in the rental market. Lots of landlords keeping the rates of apt. the same, and forcing people to move out. Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead. Many, eventually do capitulate, but this seems to take months or even more (for some, their building contracts have to reset, as there are REITs involved, etc). It is some kind of human psychology at play. This is similar on how so many tech companies refuse to give meaningful raises, and have employees leave. the replacement is always more costly.
- SllX 6y ago
  I don’t know about the dynamics in NYC but in SF a lot of landlords can afford to keep commercial spaces vacant, and apartments emptied out. The opportunity cost in not leasing out can be made up for by holding out for tenants that will overpay on the commercial side, and rent control makes renting apartments out for too low a price unappealing on the residential side. Kill both Prop 13 (entirely, not just sections of it) and rent control and you might see some normalcy return to the California property and rental market.
  - swiley 6y ago
    It's not just prop13 and it's not just in California. The Federal reserve has been buying mortgage backed securities to keep the market from correcting (similar to ~2008.) Because of this you can finance the construction and sale of small amounts of luxery space without having to worry nearly as much about being able to rent it for a profit. Essentially we have insane inflation but it's been carefully architected to only really affect real estate.
- pmiller2 6y ago
  > Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead. This one is easy to explain. Commercial real estate (which includes apartment buildings with 5+ units) is valued strictly by the amount of income it can produce, i.e. what the monthly rents are. If you drop the rent from X to 0.67X, you've basically cut your property value by 1/3. If you give a rebate of 4 months free rent, the effect on the property value is basically 0.
  - Scipio_Afri 6y ago
    This also inflates “market rate” and justifies higher prices for rent as well as government subsidized housing (which is just reduced rent because part of the rent is paid for from the market rate). By paying for “free months” themselves the rent prices never go down in the area and the market never corrects itself, leaving prices to either stay the same or rise always.

Why didn't the landlord offer this "2 years no rent" deal to the existing "favorite coffee places"? I'm not sure replacing established successful businesses with new ones is a fair trade...

ardit33 6y ago

I have no clue why not, but a similiar thing has happened in the rental market. Lots of landlords keeping the rates of apt. the same, and forcing people to move out. Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead. Many, eventually do capitulate, but this seems to take months or even more (for some, their building contracts have to reset, as there are REITs involved, etc). It is some kind of human psychology at play. This is similar on how so many tech companies refuse to give meaningful raises, and have employees leave. the replacement is always more costly.

SllX 6y ago
I don’t know about the dynamics in NYC but in SF a lot of landlords can afford to keep commercial spaces vacant, and apartments emptied out. The opportunity cost in not leasing out can be made up for by holding out for tenants that will overpay on the commercial side, and rent control makes renting apartments out for too low a price unappealing on the residential side. Kill both Prop 13 (entirely, not just sections of it) and rent control and you might see some normalcy return to the California property and rental market.
- swiley 6y ago
  It's not just prop13 and it's not just in California. The Federal reserve has been buying mortgage backed securities to keep the market from correcting (similar to ~2008.) Because of this you can finance the construction and sale of small amounts of luxery space without having to worry nearly as much about being able to rent it for a profit. Essentially we have insane inflation but it's been carefully architected to only really affect real estate.
pmiller2 6y ago
> Then, they find out they can't rent at those prices, they still are hesitant to drop prices and just offer 3-4 months of 'free rent' instead. This one is easy to explain. Commercial real estate (which includes apartment buildings with 5+ units) is valued strictly by the amount of income it can produce, i.e. what the monthly rents are. If you drop the rent from X to 0.67X, you've basically cut your property value by 1/3. If you give a rebate of 4 months free rent, the effect on the property value is basically 0.
- Scipio_Afri 6y ago
  This also inflates “market rate” and justifies higher prices for rent as well as government subsidized housing (which is just reduced rent because part of the rent is paid for from the market rate). By paying for “free months” themselves the rent prices never go down in the area and the market never corrects itself, leaving prices to either stay the same or rise always.