I agree. I see a lot of comments alluding to the 'regulations' being bad. They are there for a reason. To keep errant bankers from loaning out too much money and creating an even more fragile system.
People have to realize that banking as a business is inherently broken. It is about lending long and borrowing short, which is very risky. Deposits are used to provide funds to lend long, but deposits can be 'called' at any time. The loans cannot.
But banking is also critical for a properly functioning society. It is in the government's (the people's) best interest to have a robust banking system in place. How to reconcile the risk with the benefit? By heavily regulating it.
i think you are on the first step of the journey to seeing that neither math nor maximizing $ is the solution to all problems. it's not even the solution to most problems.
Banks care that you pay their loan first and foremost, how you do that as the borrower is up to you.
They care about the regulatory requirements in so far as you either meet it, or you don’t at the time of writing a loan. And maybe you get a yearly review.
Also people are looking at this in a very isolated view. Just because a building is vacant doesn’t mean the owner has no other option than just lower the rent. Typically owners of commercial property own multiple properties and various other types of assets. Vacancy rates are also built into calculations.
They are extending loans though. In a normal market, requesting an extension when the bank knows you're underwater should set off some risk alarm bells and trigger a denial. The "normal person" intuition about how loans work is correct here: if I try to refi my house when it's underwater and I've lost my income, the bank denies the refi. That incentivizes me to do what it takes to make the bank whole, or, make the appropriate decision to leave my house and let someone else who can afford it take over payments.
When everyone, the regulator, the operator, and the bank, are whistling a tune, when the whole sector is fucked, everyone has a big problem. How big? About as big as hundreds of buildings in the downtown of every major city sitting half-empty!
That's a pretty big problem. Maybe not as large as 08 but definitely structural. We're all paying indirectly for this office space to sit empty, instead of being able to use it.
I recommend getting out there and getting involved - it's surprisingly easy to end up talking to the actual owners of these buildings, and they're more often than not just a guy and not some weird conglomerate REIT and they'll make a deal but they'll also tell you what and why - listen!
I have the capacity to pay someone to dig a hole and fill it in. Would that be a wise use of my resources?
We're talking about the whole sector here, not one borrower. Huge swathes of commercial real estate are sitting empty, that's a big ongoing problem for everyone whether the loans are being serviced or not.
Dig and fill away dear fellow, that's what this site does best.
The whole sector doesn't have a vacancy problem. And it's not a problem for the banks nor the owners if they're servicing their loans. Sure they're not making money but that's not your or anyone else's problem either.
It's not a matter of whether I like it. It's a question of why the bank, unless required to do so by some kind of absurd perverse regulatory incentive, would do something which is not only harming others but also increasing the default risk for the bank by reducing the income of a borrower who, if they can't make the payments, will cause the bank to have to write off millions of dollars by foreclosing on an underwater building.
When people are fulfilling their obligations and most other people are not happy with the outcome, that usually means the definition of "obligations" is wrong.
Not sure what you mean. The goal is a good society. Allowing certain individuals to keep certain things they currently have was never any part of my goal. (I can't speak for others in the thread of course.)
I picture the banks and the landlords would do better in the long term too if the shops were full.
This is not Bluesky leftist "let's take Jeff Bezos' yacht so we can all have 15 minutes of health insurance" but rather "let's have more businesses in this town that can put capital to work, create jobs, create wealth and the kind of consumer choice that Ralph Nader and Ludwig von Mises both agreed on."
there is a problem to be solved. empty shops make shopping areas unattractive. walking through a half empty mall or shopping street is depressive.
i see this all the time in china and in developing countries in general. they build huge malls, and then they can't fill them because there are not enough businesses who can pay the rent being asked. at least there is growth and the place will fill up eventually. but until that happens the place is less attractive.
seeing the same in europe in malls or shopping streets is even worse because it feels like the economy is declining. you have to apply the broken window theory here. the more shops stay empty the less people will go there to visit the remaining shops. their revenue goes down, they can't afford the rent anymore and another shop is empty. if this becomes a trend then you risk that the shops will never come back.
it is therefore in the interest of landlords and the city to keep the streets alive and fill them with businesses that attract people.
ignoring this problem is just a sign of greed. instead of building a vibrant space they just want to extract as much money as possible.
instead of being forced to foreclose the banks should be forced to extend the loan and eat the loss. foreclosing will cause them a loss too. so the banks are not better off either way.
the article says the building is an income stream.
no, it isn't.
the building is part of a community. the needs of the community top your need to make a profit. yes, this means the community should probably contribute to make your work financially viable, and one way they can do that is by making policy that gives you more reasonable conditions to pay off your loan so that a foreclosure is not necessary.
no, i can't. the rent is to high. which means the rent is not market-rate. the free market was supposed to correct that, but it doesn't, so maybe this is not a free market after all.
if my business doesn't make enough profit then i literally can't. that's not an opinion or a choice. that's a fact of life. and if noone is willing to pay that much rent whether they could afford it or not, then the rent is not market-rate. that's not an opinion. that's how market-rate is defined. it is what the market is willing to pay.
you are missing the point, i don't care if i can buy this or not. i care that the street is attractive to people. if i do have a shop in the street (because i can actually afford it) then i care even more because if the street is not attractive then that is hurting my business.
the problem is not that i can't afford it. the problem is that NOBODY can afford it. free market rules then suggest that the value of that thing goes down and thus the price should go down too if the building owner has any interest in selling that thing.
and here is where the free market idea causes a conflict, because if they don't have an interest to sell then their interest and the city's interests are misaligned and the city should force the building-owner out.
or, you could also argue that the city itself is a market participant, because the city owns the land the shops are built on, and it leases or sells that land with specific expectations, namely that shops are built and rented out. if the renting out does not happen then the city's contract with the builder is violated and the city should have a right to take action.
Yes I understand your point - you are just a commentator with no actual interest in the matter hand. Not an owner, not a tenant, just some random stranger strolling on the street thinking other people should do something because you think it's the greater good.
Now you're proposing a different ownership model completely or that a government/city should be able to force a legal owner out of their legally owned property?
Honestly I think you need to back up and really consider what you're proposing.
i am considering what i am proposing. but i can't do that alone. throwing my ideas out there and having them critiqued with counterarguments is the point. if you just say i have no clue and my ideas are bad and i should reconsider then i am not going to learn anything. i can only reconsider if i get new input about what's wrong with my idea.
basically you act like the error in my idea should be obvious, and i should be able to figure that out by myself. well, no, because if i could, i already would have. i don't write stuff without thinking about it. it may look like that to you, but only because you seem to know something that i don't. please share.
and what do you mean by no actual interest? have i not explained my interest? do you think the interests of the people living in the city are irrelevant? only owners and tenants count? well, most certainly not. but if you do not accept that the city and its inhabitants should have an interest in this matter then our problem is that we have a fundamental disagreement in our worldview.
Well, sort of. One scenario is to say "it is illegal to let your property be vacant (for more than X months etc. etc.)". Then suddenly all these owners are violating laws. Another is to say "it is illegal to hold more than $100 million of wealth". Then a bunch of rich people are in violation. Laws are what we make them. The point here is that the current laws are inadequate to produce the society people want to live in. You may be right that no laws are being violated currently in many cases, but that doesn't mean things are fine; it just means we need better laws.
No one is getting that law across the line in any sane country, I’m not even sure why the conversation has veered this far off-topic. Suddenly because some people here do not like commercial vacancies all of a sudden laws are changing so properties are never vacant.
Can’t wait for people here to begin arguing Elon should just sell/give up his equity because Starship hasn’t launched successfully yet.
Not everything needs to make sense to a bunch of IT peeps so, politely, either genuinely learn about commercial property or take a hike.
real estate must be the worst thing to use as an argument for "it's a free market" - because its one of the types of things which every stock is it's own, truly unique monopoly. I can't "freely" produce the same commercial property, unless I already own that property.
in order to join that market you have to buy at the inflated prices on the market, since current owners refuse to sell for a loss, there's nothing you can do as an individual to make this cheaper unless you already own the land.
Location still matters, as it does for residential, proximity to employees, or customers is important.
Zoning restricts what land can do what.
There's many reasons why this isn't a "free market"
The people advocating for change in this situation likely advocated for all the impediments you’re providing as to reasons why it’s not supposedly a free market.
Someone bought an asset they could afford to hold in bad times. End of story.
How, specifically? If they refuse to acknowledge the building is worth less than they expected, they aren't going to sell it to you at a price where you can make money either.
You’re stating the outcome - the property is worth less - without understanding how people buy/sell said property. And asking why others don’t agree?
The article outlines the methods used for the most part to the best of my knowledge, as someone who owns and deals in this space.
I think you need to lay out a better argument for why your thesis is the case when what happens in the real world mirrors what the article discusses. Not to mention people forget property can be owned without a bank/loan, nor that vacancies are expected/factored in.
I know regardless of the vacancy I would not consider day rates, I’d eat the loss and deal with the cashflow via other means. Consider what sort of fit out would be necessary for what’s lets be honest is being suggested - hot desking - compared to a standard office: lots of IT systems necessary, lots of additional security, lots more cleaning, and likely lots more repairs for wear & tear which probably isn’t recoverable easily.
I'm not suggesting hotdesking at all; you may have seen someone else's comments suggesting they thought that! My best example (provided in my original comment) was Peerspace, but there are many others like that. Zero infrastructural investment past giving someone a key (or setting up an HID reader and such).
I own both commercial and residential property. I have used the company I mentioned, but I'm not trying to advertise for them, I just know other examples exist.
I didn't install a reader, I provided a physical key copy. Readers make it slicker.
I haven't had any problems, most of my rentals have been for small events. They brought their own supplies, minus a few tables I provided.
Generally people renting space have no incentive to create a problem. They pay, I get paid, they want to take some pictures or get some people together.
It certainly disappear for their customers however.
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