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Property taxes are a big expense, but not as big as the debt on the construction costs. And you end up with massive additional construction costs for fewer squ
by mlyle 3y ago
Property taxes are a big expense, but not as big as the debt on the construction costs. And you end up with massive additional construction costs for fewer square feet to lease.
So you only can do this if your bank decides to agree to take a haircut... which only happens if the bank is convinced you have no other options.
Reducing the property tax provides a sweetener that you and the bank can share to make it slightly more palatable.
- fasthands9 3y agoI could imagine edge scenarios (not sure how common) where office buildings that happen to have residential friendly layouts do this first. Perhaps if that happened it would both raise demand for non-residential space (more people living nearby) and lower supply of commercial prop avail.
- mlyle 3y ago> Perhaps if that happened it would both raise demand for non-residential space (more people living nearby) and lower supply of commercial prop avail. Yup, that's what economics does: the firms with the lowest cost to converting, do so. And it's a nice follow-on effect that more residential hopefully increases commercial demand. This is mostly a factor where you have a big inventory of older commercial buildings. Advances in HVAC (and before that, lighting) have let you build bigger floors that are less desirable for residential use.