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Plenty of leases have already expired. Yet it seems landlords would prefer to leave a building empty than to lease it for a low rent. Somehow the usual rules

Plenty of leases have already expired. Yet it seems landlords would prefer to leave a building empty than to lease it for a low rent. Somehow the usual rules of supply and demand don't seem to be applying.

stjohnswarts 3y ago
I don't understand why they can't have shorter leases with lower rent. I'm not sure why they can't do that and swallow their pride a bit. They can charge the next renter more when the short term 1-2 year lease is up. Better than making $0
- lamontcg 3y ago
  It isn't better than making $0 because now at lower rents the property gets revalued to be lower, and when the rents and underlying property is used as collateral on loans then they adjust higher than they already would in a rising rate environment to cover the risk of default. It works out better to kick the can down the road for as long as possible, hoping that something will change and to put off the day of reckoning, so they fight it tooth and nail. The market is only going to adjust downwards when there's a real crisis and fire sales start happening due to forced liquidation that causes everything to get marked down to market. Then there's no point in kicking the can down the road any more.
- dsr_ 3y ago
  One of the things that can be done is to maintain the illusion of a high rent by working out lease terms. For example, a 60-month lease at $75/sqft might come with the first 4 months of rent in each calendar year for free, making the actual price $50/sqft. Or, a ten year lease on biolab space might come with the landlord paying for the initial buildout and equipment installation, equal to a 30% discount.
DANmode 3y ago
How many jurisdictions allow writing off lost income (up to some monetary limit) from your unoccupied properties due to x,y,z market conditions?
xw4002 3y ago
Interests rates only started rising in 2022. Before then it was possible to get a basically free loan to buy time in hopes of locking in a good long term deal. It’s going to take time to suck all the money out of the system and force hard choices.

stjohnswarts 3y ago

I don't understand why they can't have shorter leases with lower rent. I'm not sure why they can't do that and swallow their pride a bit. They can charge the next renter more when the short term 1-2 year lease is up. Better than making $0

lamontcg 3y ago
It isn't better than making $0 because now at lower rents the property gets revalued to be lower, and when the rents and underlying property is used as collateral on loans then they adjust higher than they already would in a rising rate environment to cover the risk of default. It works out better to kick the can down the road for as long as possible, hoping that something will change and to put off the day of reckoning, so they fight it tooth and nail. The market is only going to adjust downwards when there's a real crisis and fire sales start happening due to forced liquidation that causes everything to get marked down to market. Then there's no point in kicking the can down the road any more.
dsr_ 3y ago
One of the things that can be done is to maintain the illusion of a high rent by working out lease terms. For example, a 60-month lease at $75/sqft might come with the first 4 months of rent in each calendar year for free, making the actual price $50/sqft. Or, a ten year lease on biolab space might come with the landlord paying for the initial buildout and equipment installation, equal to a 30% discount.

DANmode 3y ago

How many jurisdictions allow writing off lost income (up to some monetary limit) from your unoccupied properties due to x,y,z market conditions?

xw4002 3y ago

Interests rates only started rising in 2022. Before then it was possible to get a basically free loan to buy time in hopes of locking in a good long term deal. It’s going to take time to suck all the money out of the system and force hard choices.