[pc86]

2008 took months to unravel because of the nature of the crisis. Foreclosure is a process and in some areas can take up to 6 months or more from the time you stop paying your mortgage.

Here we had state governments practically shutting down their economies overnight. Overnight, every restaurant in my state was no longer allowed to have dine in. Only maybe half in my local area stayed open for carryout, and at least 80% of those have closed in the few weeks since.

The speed at which this happened is astronomical, but that doesn't necessarily mean that it's going to be multiple times worse than 2008. Just that the onset was very quick.

[rmrm]

The biggest risk stated in 2008 was contagion to "main street" economy, which did eventually occur to some degree.

This virus and fallout went directly to the main street economy (of the entire world at same time) and stopped it cold.

I think its entirely unknown what the ultimate ramifications are of this cold stop to the world economy. But I see no reason to think its not bigger than 2008.

[sciencewolf]

This is huge. It may be a months of jobless claims compacted into a week.

[tibbydudeza]

Also the knockon effect on landlords ... many bossiness want some sort of rental relief or those with limited cash flow are saying they are not going to pay.

[pc86]

Small business owners almost always have to personally guarantee commercial rents. "My business doesn't have revenue so I'm not paying" is simply not a valid response unless the owner is willing to take it the whole way to bankruptcy, which I'm sure we'll see a surge of in the coming months from the more aggressive landlords. It varies by state but my state is very forgiving to residential tenants and very unforgiving for commercial tenants (I say this as a former commercial tenant who owed past due rent at one point).

The SBOs with resources will just have to continue paying rent out of pocket, or face liens against their personal assets.

[cmurf]

Right. Quite a lot of SBOs never thought this day would come, that they had no choice but to sign such agreements. Tenant ignored the reality of these unfair and untenable agreements. And here we are.

My response to a landlord insisting on 100% rent for property, that just become non-revenue generating by order of the government, or else they will take my personal property? Force majeure, I owe you $0, this contract is null and void. Shall we re-negotiate?

Liens are going to require court judgements. That system is about to get plugged up with cases. Most SBOs and landlords are going to have to re-negotiate. Landlords will talk deferred rents and suggest SBOs get one of these SBA 3.75% loans, in order to make the landlord 100% whole, eventually. SBOs should seek better advice than that which comes from their landlord. SBOs could do much worse than mimicking the likes of Subway, Mattress Firm, etc. by insisting haircuts are coming, fast. And by much worse, I mean, paying the landlord 100% and making them whole.

[jachee]

Good. Screw the landlords. Let them liquidate and bring the market back down to earth a bit.

[cko]

Do landlords drive up prices? I know for residential properties, homeowners are willing to pay way higher prices than what makes sense for landlords.

I don't understand the vitriol towards landlords. Do people get angry at the bank for lending money so they can buy a house?

[pc86]

> I don't understand the vitriol towards landlords.

It's because real estate is - the vast majority of time - a tried and true way to accrue wealth, and it takes a least some measure of wealth (or a lot of personal risk) to get into it. People get angry when they see folks they think of as "less deserving" with money, and literally the only thing you need to get into real estate is money. So there are a lot of "dumb" people doing it, making a lot of money, seemingly for no reason other than they own the right building.

I've dealt with commercial landlords before and they can be ruthless. As a commercial tenant, you're most likely paying everything. Your rent (with yearly increases well beyond inflation), pro rata insurance, pro rata real estate and school taxes, common area maintenance (CAM) fees that can be thousands a month between all tenants for snow to get plowed ten times a year and the grass to get mowed.

If you're a low margin business it's easy to look at half your revenue leaving the door to your landlord who (in your eyes) has zero risk and provides no value and get angry. But I owned a brick and mortar business for 4 years and had 3 landlords in that time because they kept going bankrupt. So there's definitely some risk associated with it.

[blackrock]

Most landlords raised rents just because they could.

They were profitable where they were, but since the next guy raised his rents, then they jacked up their own rents.

This is what makes people angry at landlords. And often times, your rent increased, but your pay didn’t, so you get squeezed both ways.

[pc86]

This is literally basic Econ 101.

Commercial leases have rent increases built into them that are agreed to by all parties. Nobody is getting a surprise by their rent going up, and they're typically negotiated and signed close to a year before becoming effective. If the rent is too much, you can move your business or find ways to grow your revenue. If there's nothing cheaper, then that's what the market has decide a square foot of commercial real estate in your area is worth. If your business doesn't support that, the market doesn't want your business.

We tell contract developers all the time "you need to charge more!" and "charge what you're worth!" but the minute someone does it to us we scream about how unfair it is and how the system is broken. I'm sure the guy selling widgets who has his WordPress guy charging him $125/hr thinks that's unfair, too. And I say that as someone who has been both the widget salesman and the $125/hr WordPress dev.