Why do commercial spaces sit vacant?
2 days ago
- #financialization
- #commercial-real-estate
- #urban-economics
- Commercial spaces remain vacant because lowering rents can lead to foreclosure, which is undesirable for both landlords and banks.
- Commercial real estate values are based on income potential, not physical attributes, leading to 'extend and pretend' strategies.
- Unlike residential mortgages, commercial loans are short-term and based on the building's income-generating ability, not the buyer's credit.
- Lowering rents can devalue the property, making it difficult to refinance and leading to financial losses for both landlords and banks.
- Cities could impose vacant storefront taxes, but this might force defaults and harm banks, potentially leading to bailouts.