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I suppose if the buildings every go up for sale, this would be a possibility. In my hometown, approximately 50% of the retail space in our downtown has been va

I suppose if the buildings every go up for sale, this would be a possibility. In my hometown, approximately 50% of the retail space in our downtown has been vacant and listed "For lease" for I'd say about the past 2 years now. The owners are very wealthy, continually raise rental prices, eventually driving everybody out. The problem is, they never intend to sell. I witnessed an old bank building sit vacant for literally 20 years before they found a new tenant who was willing to renovate and start paying. Somebody was paying the property taxes on it the entire time, and they weren't even actively marketing it's lease as much as they could have been. Another old store went under about 2 years ago, and it has been empty ever since with a for-lease sign on it. Nobody has entertained the new lease, but the owners refuse to lower the price or sell the property. In fact, I have never in the life of me seen a for sale sign on any of the downtown retail properties. It just doesn't happen. Old money can be one hell of a burden on old communities, it would seem.

x0x0 12y ago
If you called with a serious offer, do you think you would be turned down? Though I guess stuff like this happens even in sf. Que Tal -- a coffee shop in mission -- got kicked out by their landlord massively increasing rent in August 13. I walked past their old location a month ago and it was still empty, and it didn't look like there was construction going on. So the landlord has eaten 17+ months of rent so far.
- deleted 12y ago
  [deleted]
- seabee 12y ago
  Seems like potential gains aren't as motivating as actual costs.
- GigabyteCoin 12y ago
  In the case of the beautiful old bank building that sat vacant for 20 years. There wasn't even a number to call. Everybody just walked past it for decades saying "I wonder what if anything they'll ever do with that place?". I'm assuming you had to know the "right people" to even get an appointment to purchase or lease, but I'm not sure why.
stickfigure 12y ago
Perhaps property taxes in this area are not high enough? There needs to be more than just 'opportunity cost' for squatting on valuable space.
- Shivetya 12y ago
  No. No. No. The power of government should never be used to force people from their property. Eminent domain is already horribly abused with seizure laws no person's property is safe. Why do others become so draconian when its other people's stuff? It is easy being generous when its not your pocket that is being emptied.
  - nodata 12y ago
    This isn't about forcing people from their property. This is about a building with a certain code (retail) which has a particular purpose, and that purpose isn't being fulfilled. Taxing to change this mis-behavior is good.
    - minot 12y ago
      I'd compare this more with someone buying a large hydroelectricity project and just stopping production. Land is a finite resource. However, I struggle with this because following this logic, is it OK for Argentina to seize bank accounts in foreign currency and pay them one unit of local currency for every US dollar seized because us dollars are a limited resource there?
    - tvanantwerp 12y ago
      The problem with trying to use taxes to punish what's seen as bad behavior is that it can punish people who aren't behaving badly. If the owners of the derelict property can currently afford their property taxes, they can probably still afford it after it's raised. But others who actively use their property and perhaps aren't as rich could face losing what's theirs. If you want to talk about using the law to prevent situations like this, then it needs to be a law unto itself rather than something incorporated into the tax code.
yitchelle 12y ago
I think this problem is present in most large, well to do cities. The Guardian ran a similar story a couple of months bank. http://www.theguardian.com/society/2014/jan/31/inside-london-billionaires-row-derelict-mansions-hampstead http://www.theguardian.com/society/2014/jan/31/inside-london...
- Steltek 12y ago
  No. London is suffering from foreign investors buying freshly listed properties solely in order to squat on them. Currently, the value is pretty much guaranteed to rise so they're actually fairly good investments for the buyers. I think the more typical downtown vacancy problem is better characterized by 'Someone' in the comment above.
eli_gottlieb 12y ago
And this is why property tax should be charged as a percentage of sale price when selling and a percentage of asked rental price when rented.
- nosuchthing 12y ago
  on property tax & speculative hording: http://www.gamasutra.com/blogs/RaminShokrizade/20130405/189984/How_I_Used_EVE_Online_to_Predict_the_Great_Recession.php http://www.gamasutra.com/blogs/RaminShokrizade/20130405/1899...
Someone 12y ago
Deosnt have to be old money. Investors can get stuck in a weird catch-22, too. For example, suppose you have buildings valued at 10 million, 8 million in mortgages, and 2 million in the bank. That looks like a healthy company. Now, a tenant leaves. If you lower the rent, you have to lower the value of the building in your books and, possibly, for other buildings in the neighborhood. Before you know it, you have buildings valued at 6 million, 8 million in mortgages, and 2 million in the bank. That's close to bankruptcy. Another approach is to guess that the lack of demand at the asked price is temporary and sit it out. That may cost you a few hundred k in lost rents a year, but keeps your balance sheet healthy for at least a few years. Problem, of course, is that your pockets may not be deep enough to outlast the bust period. Is that denying reality? You only know after a few years. If the market rebounded soon, it was a good business move. If it doesn't, you are on a slow trajectory to nowhere.
- eldavido 12y ago
  "Looks like a healthy company" to who? Any businessperson worth their salt will look at operating cashflow, current/quick ratios, and P&L/income statement. It's interesting, I think there's a lot of psychological parallels between the Japanese "lost decade" and these investors in the US. In both cases, large nonperforming assets (loans, or buildings) were held for a long time because the owners didn't want to admit defeat by selling at a big markdown -- in the case of the banks, due to capital requirements where a significant remarking of their assets might cause regulatory non-compliance. Valuing things is hard.

x0x0 12y ago

If you called with a serious offer, do you think you would be turned down? Though I guess stuff like this happens even in sf. Que Tal -- a coffee shop in mission -- got kicked out by their landlord massively increasing rent in August 13. I walked past their old location a month ago and it was still empty, and it didn't look like there was construction going on. So the landlord has eaten 17+ months of rent so far.

deleted 12y ago
[deleted]
seabee 12y ago
Seems like potential gains aren't as motivating as actual costs.
GigabyteCoin 12y ago
In the case of the beautiful old bank building that sat vacant for 20 years. There wasn't even a number to call. Everybody just walked past it for decades saying "I wonder what if anything they'll ever do with that place?". I'm assuming you had to know the "right people" to even get an appointment to purchase or lease, but I'm not sure why.

stickfigure 12y ago

Perhaps property taxes in this area are not high enough? There needs to be more than just 'opportunity cost' for squatting on valuable space.

Shivetya 12y ago
No. No. No. The power of government should never be used to force people from their property. Eminent domain is already horribly abused with seizure laws no person's property is safe. Why do others become so draconian when its other people's stuff? It is easy being generous when its not your pocket that is being emptied.
- nodata 12y ago
  This isn't about forcing people from their property. This is about a building with a certain code (retail) which has a particular purpose, and that purpose isn't being fulfilled. Taxing to change this mis-behavior is good.
  - minot 12y ago
    I'd compare this more with someone buying a large hydroelectricity project and just stopping production. Land is a finite resource. However, I struggle with this because following this logic, is it OK for Argentina to seize bank accounts in foreign currency and pay them one unit of local currency for every US dollar seized because us dollars are a limited resource there?
  - tvanantwerp 12y ago
    The problem with trying to use taxes to punish what's seen as bad behavior is that it can punish people who aren't behaving badly. If the owners of the derelict property can currently afford their property taxes, they can probably still afford it after it's raised. But others who actively use their property and perhaps aren't as rich could face losing what's theirs. If you want to talk about using the law to prevent situations like this, then it needs to be a law unto itself rather than something incorporated into the tax code.

yitchelle 12y ago

I think this problem is present in most large, well to do cities. The Guardian ran a similar story a couple of months bank. http://www.theguardian.com/society/2014/jan/31/inside-london-billionaires-row-derelict-mansions-hampstead http://www.theguardian.com/society/2014/jan/31/inside-london...

Steltek 12y ago
No. London is suffering from foreign investors buying freshly listed properties solely in order to squat on them. Currently, the value is pretty much guaranteed to rise so they're actually fairly good investments for the buyers. I think the more typical downtown vacancy problem is better characterized by 'Someone' in the comment above.

eli_gottlieb 12y ago

And this is why property tax should be charged as a percentage of sale price when selling and a percentage of asked rental price when rented.

nosuchthing 12y ago
on property tax & speculative hording: http://www.gamasutra.com/blogs/RaminShokrizade/20130405/189984/How_I_Used_EVE_Online_to_Predict_the_Great_Recession.php http://www.gamasutra.com/blogs/RaminShokrizade/20130405/1899...

Someone 12y ago

Deosnt have to be old money. Investors can get stuck in a weird catch-22, too. For example, suppose you have buildings valued at 10 million, 8 million in mortgages, and 2 million in the bank. That looks like a healthy company. Now, a tenant leaves. If you lower the rent, you have to lower the value of the building in your books and, possibly, for other buildings in the neighborhood. Before you know it, you have buildings valued at 6 million, 8 million in mortgages, and 2 million in the bank. That's close to bankruptcy. Another approach is to guess that the lack of demand at the asked price is temporary and sit it out. That may cost you a few hundred k in lost rents a year, but keeps your balance sheet healthy for at least a few years. Problem, of course, is that your pockets may not be deep enough to outlast the bust period. Is that denying reality? You only know after a few years. If the market rebounded soon, it was a good business move. If it doesn't, you are on a slow trajectory to nowhere.

eldavido 12y ago
"Looks like a healthy company" to who? Any businessperson worth their salt will look at operating cashflow, current/quick ratios, and P&L/income statement. It's interesting, I think there's a lot of psychological parallels between the Japanese "lost decade" and these investors in the US. In both cases, large nonperforming assets (loans, or buildings) were held for a long time because the owners didn't want to admit defeat by selling at a big markdown -- in the case of the banks, due to capital requirements where a significant remarking of their assets might cause regulatory non-compliance. Valuing things is hard.