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I've read elsewhere that while this seems logical, it often isn't possible for commercial landlords as their loan terms are tied to a given rental price.

criddell 6y ago
Does this lead to landlords keeping the space empty than lowering the rent?
- splonk 6y ago
  I can't find the article, but supposedly yes. IIRC the reason was that the landlord's loan terms are dependent on the income from the building, but that number doesn't recalculate until a new tenant comes in, so accepting lower rent can trigger a large cash call.
- bsder 6y ago
  Ayup. In addition, the revenue from a missing tenant can often be added to the end of the mortgage. I've seen retail space in amazingly hot markets be empty for 5+ years now.
6gvONxR4sf7o 6y ago
This right here is why i've been less and less enthusiastic about some of the roles credit plays in our society. You get credit assuming the future will be in some range, but then you can get screwed if it deviates. So now you have to fight for it to stay that way, and when shit hits the fan, there's this long chain of dependencies that needs to unwind to allow flexibility. Like it's trading robustness for efficiency.
- aeternum 6y ago
  Yes but efficiency is pretty valuable since we have limited lifespans. Providing the capital to start a company (or build new housing/apts) now rather than in 10-20 years probably does more good than harm overall. It's definitely a balance though, very easy to go overboard.
meepmorp 6y ago
This is rather dependent on the landlord, obviously, but the actual rental price is often just one component of the overall cost of a commercial lease. In addition to rent, stores often pay fees for common area maintenance, security, etc., and negotiating on these fees is much easier. Depending on the state and legal situation, some landlords actually own liquor licenses that they rent to the lessee for restaurants or bars for a fee. There's a lot of stuff that can done to reduce the costs of a lease beyond just rent reduction.

criddell 6y ago

Does this lead to landlords keeping the space empty than lowering the rent?

splonk 6y ago
I can't find the article, but supposedly yes. IIRC the reason was that the landlord's loan terms are dependent on the income from the building, but that number doesn't recalculate until a new tenant comes in, so accepting lower rent can trigger a large cash call.
bsder 6y ago
Ayup. In addition, the revenue from a missing tenant can often be added to the end of the mortgage. I've seen retail space in amazingly hot markets be empty for 5+ years now.

6gvONxR4sf7o 6y ago

This right here is why i've been less and less enthusiastic about some of the roles credit plays in our society. You get credit assuming the future will be in some range, but then you can get screwed if it deviates. So now you have to fight for it to stay that way, and when shit hits the fan, there's this long chain of dependencies that needs to unwind to allow flexibility. Like it's trading robustness for efficiency.

aeternum 6y ago
Yes but efficiency is pretty valuable since we have limited lifespans. Providing the capital to start a company (or build new housing/apts) now rather than in 10-20 years probably does more good than harm overall. It's definitely a balance though, very easy to go overboard.

meepmorp 6y ago

This is rather dependent on the landlord, obviously, but the actual rental price is often just one component of the overall cost of a commercial lease. In addition to rent, stores often pay fees for common area maintenance, security, etc., and negotiating on these fees is much easier. Depending on the state and legal situation, some landlords actually own liquor licenses that they rent to the lessee for restaurants or bars for a fee. There's a lot of stuff that can done to reduce the costs of a lease beyond just rent reduction.