4 ms·
"What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory." This is becau
by rsync 5y ago
"What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory."
This is because their loan-to-value ratio is based on their square foot rental rates. If the unit sits empty they, of course, lose money ... but if they rent it at market price they could lose the property entirely with a (for lack of a better term) margin call.
If the value of the building ratchets down and blows up their loan covenants, it is better to have it sit empty and lose money slowly ...
- fairity 5y agoThe situation you're describing is lose-lose-lose, which makes me skeptical that it describes what's actually happening. The landlord loses out on rent payments (albeit at a lower monthly rate). The lending institution loses because the default rate increases if landlords stop collecting rent. Renters also lose due to artificially inflated prices. What's stopping the landlord and lender from re-negotiating loan covenants to enable the landlord to collect lower rent payments for a period of time without triggering a new valuation?