6 ms·

Isn’t the problem that there is more empty space than needed now so the rents should fall?

Isn’t the problem that there is more empty space than needed now so the rents *should* fall?

latchkey 3y ago
Retail != Office Retail rent will fall because nobody is in the offices. Retail business will close because of less traffic, and thus there will be more space. But, retail leases are typically 5-10+ years. Why would a landlord lower the rent now to a small business and get stuck in a long lease, when they don't know if the office space will recover and the big businesses will want to come back? It is a game of chicken.
- profile53 3y ago
  A lot of those five-year contracts were negotiated before Covid and I suspect they will expire in the next year or two. After a certain point, the building owner will have to choose between lowering rents, or having the building foreclosed on due to having no tenants. Also, at the beginning of Covid, several big businesses just refused to pay retail rent as a negotiating tactic. It would not surprise me if that happens again.
  - latchkey 3y ago
    I'm not talking about past, I'm talking about current and future. "Why would a landlord lower the rent now to a small business" now.
    - ImPostingOnHN 3y ago
      as the post you responded to said: > After a certain point, the building owner will have to choose between lowering rents, or having the building foreclosed on due to having no tenants
      - latchkey 3y ago
        Except that isn't their only choices. It'll depend on their finances as well as the market futures. Many many buildings sit empty for ages for a whole bunch of different reasons. Can't just generalize into a binary like that.
        ImPostingOnHN 3y ago
        given the choice between no money and money, most will choose money, and no amount of 'it depends' will change that the fact that some people let some buildings sit empty for some time doesn't mean most will let most sit empty for most of the time after all, the next best alternative for building owners is foreclosure or abandonment or sale at a loss, the next best alternative for businesses is 1 of a thousand different places, or just a remote workplace
        latchkey 3y ago
        > given the choice between no money and money, most will choose money They might not have the choice. Nobody is going to rent ground floor retail space in an area with no foot traffic. It is a race to zero all around.
        ImPostingOnHN 3y ago
        > Nobody is going to rent ground floor retail space in an area with no foot traffic of course they will, at a low enough rent, obviously, which is the point: lowering rent is indeed a choice, as is going bankrupt, abandoning the property, foreclosure, or selling it at whatever price
        latchkey 3y ago
        There is a ground floor retail spot near my house with a for-rent sign on the front, that has been empty for years. People have their reasons.

Isn’t the problem that there is more empty space than needed now so the rents *should* fall?

Retail != Office Retail rent will fall because nobody is in the offices. Retail business will close because of less traffic, and thus there will be more space. But, retail leases are typically 5-10+ years. Why would a landlord lower the rent now to a small business and get stuck in a long lease, when they don't know if the office space will recover and the big businesses will want to come back? It is a game of chicken.

profile53 3y ago
A lot of those five-year contracts were negotiated before Covid and I suspect they will expire in the next year or two. After a certain point, the building owner will have to choose between lowering rents, or having the building foreclosed on due to having no tenants. Also, at the beginning of Covid, several big businesses just refused to pay retail rent as a negotiating tactic. It would not surprise me if that happens again.
- latchkey 3y ago
  I'm not talking about past, I'm talking about current and future. "Why would a landlord lower the rent now to a small business" now.
  - ImPostingOnHN 3y ago
    as the post you responded to said: > After a certain point, the building owner will have to choose between lowering rents, or having the building foreclosed on due to having no tenants
    - latchkey 3y ago
      Except that isn't their only choices. It'll depend on their finances as well as the market futures. Many many buildings sit empty for ages for a whole bunch of different reasons. Can't just generalize into a binary like that.
      - ImPostingOnHN 3y ago
        given the choice between no money and money, most will choose money, and no amount of 'it depends' will change that the fact that some people let some buildings sit empty for some time doesn't mean most will let most sit empty for most of the time after all, the next best alternative for building owners is foreclosure or abandonment or sale at a loss, the next best alternative for businesses is 1 of a thousand different places, or just a remote workplace
        latchkey 3y ago
        > given the choice between no money and money, most will choose money They might not have the choice. Nobody is going to rent ground floor retail space in an area with no foot traffic. It is a race to zero all around.
        ImPostingOnHN 3y ago
        > Nobody is going to rent ground floor retail space in an area with no foot traffic of course they will, at a low enough rent, obviously, which is the point: lowering rent is indeed a choice, as is going bankrupt, abandoning the property, foreclosure, or selling it at whatever price
        latchkey 3y ago
        There is a ground floor retail spot near my house with a for-rent sign on the front, that has been empty for years. People have their reasons.