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It IS because of greedy landlords, more accurately because of unrealistic expectations. The internet has killed the stratospheric value of storefronts but they still have high value and landlords are not only refusing to come down they are asking for more
I think that this is basically what it is. The vacancies in commercial real estate in Manhattan are still gaining value in the equity, so the landlords aren't really losing anything. They can take the loss of income up front, and eventually make it up in the long run through selling it or whenever they eventually rent it out at a absorbent rate.
The same thing happens with vacant homes too. Even when not occupied, the property gains value in equity...and while it will cost the owner up front, the long term gain is there if you're willing to hold out long enough.
lol dude you are so confused. A tax reduction of 15% is never better than a 100% loss, it's kindergarten math
I think the math is a bit more complicated than you think.
Most retail property in the city, especially large property in Midtown, are owned by large conglomerates. There was an interesting article in The Economist about this. All they need is a little over half their stock leased out to break even. They don't lower rates on the empty property, because by doing so, the property they have leased to, often large corporations, will demand their rents to be lowered upon renewal. And due to tax write offs, appreciation in value and the savings they get by not needing to maintain the space (which they would if it were leased).
A large percentage of those corporate anchor stores in Midtown, etc. are losing money. The rent is too damn high even for them, but having their brand front and center to all those tourists is often worth it. They take the loss.
Like the Greenwich Village bar I mentioned earlier, the property owners refused to renew their lease, even at a higher rate. They blatantly told the bar owner they are looking for a corporate lease. Preferably a bank branch. That space has sat empty for 5+ years now.
I think the math is a bit more complicated than you think.
Most retail property in the city, especially large property in Midtown, are owned by large conglomerates. There was an interesting article in The Economist about this. All they need is a little over half their stock leased out to break even. They don't lower rates on the empty property, because by doing so, the property they have leased to, often large corporations, will demand their rents to be lowered upon renewal. And due to tax write offs, appreciation in value and the savings they get by not needing to maintain the space (which they would if it were leased).
A large percentage of those corporate anchor stores in Midtown, etc. are losing money. The rent is too damn high even for them, but having their brand front and center to all those tourists is often worth it. They take the loss.
Like the Greenwich Village bar I mentioned earlier, the property owners refused to renew their lease, even at a higher rate. They blatantly told the bar owner they are looking for a corporate lease. Preferably a bank branch. That space has sat empty for 5+ years now.
It's obviously worth it to them.
Good post, and yes many will not want to reduce rent because of other tenants paying full freight. That's called holding the line, and if they make money overall on their rentals they can definitely hold out for a long time. The real problem is the new owners who just bought the building and have a big fancy spreadsheet that says in order to make the mortgage they need X in ground lease income. They are very hesitant to lock into a 10 or 15 year lease a price below that so they are holding out for their number. Eventually they will break
If you ratchet up the pressure high enough they will. Property taxes are collected quarterly. Let's say a retail space goes vacant. The first full quarter it's vacant, no surcharge. The second quarter it's empty 5% surcharge. Every quarter thereafter, it doubles. So 10%, 20%, 40%, 80%, 160%, and so forth, with no cap. At some point this is going to hurt enough that they'll do something about it.
Quote:
Originally Posted by vision33r
It won't work, many property owners are huge conglomerates that owned properties back when the properties were bought for 1/10 of the value today. They make enough leasing to big businesses even if 1/2 of their properties are not being leased just having a few whales leasing is enough.
How many chinese takeouts, laundries, bars, 99c Stores, Bodegas, pizza, various ethnic restaurants can there be in a two block radius?
Maybe rezone and let some of those stores become residential.
I think there's some confusion here. Commercial rental prices on commercial streets are much, much higher than their residential counterparts. For the storefronts, they're also usually at ground level which are great for stores and services, but actually get hit for residential since people don't generally want to live on a ground floor for any area with building density and foot traffic which are what commercial arterials usually have. Add to that is a relative lack of natural light, abundance of noise from the streets, and people peeping in. There's a lot more than just the few things you're listing that with reasonable commercial rental rates can survive. The list of functional, working businesses in NYC runs a huge gamut aside from just what you're listing.
Quote:
Originally Posted by vision33r
It won't work, many property owners are huge conglomerates that owned properties back when the properties were bought for 1/10 of the value today. They make enough leasing to big businesses even if 1/2 of their properties are not being leased just having a few whales leasing is enough.
Right, they make enough on the balance sheets with essentially inflating the price for those major tenants who do have the enough to cover and they also make it on equity from the increase in value of the buildings. What a well-implemented vacancy tax would do is nudge that equation to make it worth more to rent out than to lay empty.
Quote:
Originally Posted by BBMW
If you ratchet up the pressure high enough they will. Property taxes are collected quarterly. Let's say a retail space goes vacant. The first full quarter it's vacant, no surcharge. The second quarter it's empty 5% surcharge. Every quarter thereafter, it doubles. So 10%, 20%, 40%, 80%, 160%, and so forth, with no cap. At some point this is going to hurt enough that they'll do something about it.
Agreed on a vacancy tax of some kind! I recognize that's just a quick first try--I'd add that there be some kind of metric to consider the location in case there is actually a lack of demand for the area. There are a lot of taxes and fees that are proposed that are excessive and terrible for business and there are some that should be rescinded or reduced. However, this is one of the few additional taxes that should be levied since it's not much good for the city or its residents either.
Sure, the property owner is paying a property tax, but purposefully laying it empty in order to squeeze more rent for the properties they can rent out and making money on real estate appreciation means the city isn't getting those business taxes, income taxes, sales taxes, and just overall more jobs a functioning business in those places would have. It also makes the city less attractive overall when there are dead commercial streets. What's more, these storefronts in the past have often become incubators for businesses that sometimes become far larger than their first roots and sometimes go on to become regional national, or international businesses. That incubation doesn't happen as much if these small businesses can't even establish a toehold due to rent prices. What's more, even fairly successful businesses in recent years have been plowed under from ridiculous escalations in rent prices and with little to nothing to do with the expansion of online retail.
Last edited by OyCrumbler; 09-27-2019 at 02:09 PM..
I think there's some confusion here. Commercial rental prices on commercial streets are much, much higher than their residential counterparts. For the storefronts, they're also usually at ground level which are great for stores and services, but actually get hit for residential since people don't generally want to live on a ground floor for any area with building density and foot traffic which are what commercial arterials usually have.
Convert the empty commercial spaces into residential then, make first & second floor duplex apartments
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Convert the empty commercial spaces into residential then, make first & second floor duplex apartments
That's what I'm saying doesn't make sense. The commercial spaces generally rent for a lot more per square foot--probably still a significant difference even when it comes to commercial rates where even small businesses would actually bite. It makes little sense to convert them into residential.
The cherry on top is that in addition to the difference between residential and commercial space rents, there's also within residential a price difference between renting on the bottom first or second floor and the top first or second floor.
It's an interesting idea, but generally it's ass backwards and not in a good backing that ass kind of way.
Last edited by OyCrumbler; 09-27-2019 at 02:56 PM..
Outside of places in brownstones/tenement apartments that were once residential many commercial/retail spaces do not meet building and other codes for safety and other standards. Things like certain number and location of windows, egress, etc... Changes always could be made, but sometimes cost of doing so is far greater than any likely rent would bring in.
What city could do is stop forcing new development to include retail space. Let developers do community space, or maybe yes residential from start.
One issue to come out of this RE boom is developers often by zoning had to include ground floor retail. So now you've got more space coming on line at a time when many areas are already saturated with retail that cannot (or isn't) renting out.
That is true in many cases, but I believe there is some way architect can redo some commercial spaces to make them comply. Like the ground floor commercial spaces of Railroad style buildings. Front and back walls can be knocked off. Just put in new walls with the windows, and entrances/exits.
I think there's some confusion here. Commercial rental prices on commercial streets are much, much higher than their residential counterparts. For the storefronts, they're also usually at ground level which are great for stores and services, but actually get hit for residential since people don't generally want to live on a ground floor for any area with building density and foot traffic which are what commercial arterials usually have. Add to that is a relative lack of natural light, abundance of noise from the streets, and people peeping in. There's a lot more than just the few things you're listing that with reasonable commercial rental rates can survive. The list of functional, working businesses in NYC runs a huge gamut aside from just what you're listing.
What you say is true but what are you going to do with it if no one wants it? Right now residential is in high demand.
Aside from the things I listed, what else is there. A law office, and accountant office? Even with that, how many can you have in a two block radius? An art gallery, pet store, day care center maybe, I dont know but unless rents go back down to triple digits, you cannot have one every two blocks and expect to survive.
If you ratchet up the pressure high enough they will. Property taxes are collected quarterly. Let's say a retail space goes vacant. The first full quarter it's vacant, no surcharge. The second quarter it's empty 5% surcharge. Every quarter thereafter, it doubles. So 10%, 20%, 40%, 80%, 160%, and so forth, with no cap. At some point this is going to hurt enough that they'll do something about it.
sounds extremely punitive, in a very illegal way.
if they own it, they should be free to do whatever they want with it which of course means leaving it vacant.
how would you like it if the govt mandates how you use your property and fines you if you don't comply?
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