[tartoran]

I am trying to understand what types of lower costs would the landlords need, property taxes? Those won't go down for sure but would it make sense to keep their properties vacant? I'm failing to see how this makes any sense. Still, I don't know much about what landlords have to deal with and how much sense it makes to them.

The offer will intuitively grow as there are more empty places but they may want to game that. It may be part of the problem and why we see lots of empty commercial spaces. If you live in NY it is quite disheartening to see empty storefronts on main streets, it adds to the depressive landscape. I think they may have become more than greedy and charged more than what the places were worth and now in the downturn are in a bind: lower prices and see a lot of the property generate rent (but that would force them to lower their current profitable rentals as well) or keeping it as it is.

[klodolph]

From what I understand, the situation has become more complicated than the scenario of “landlord owns property, wants to make money on rent”. It’s now, “landlord simultaneously rents space to tenants and sells interest in the property to investors.” Because the landlord is dealing in two markets simultaneously, the optimal decision for the landlord may look inefficient if you look at a single market.

The empty storefronts are bad, for sure. But to the landlord, reducing rent in order to generate additional income may revalue the property and put it underwater, which triggers clauses in the deals with investors and banks. And as far as I can tell, the whole thing is driven by how balance sheets can be presented to investors and banks, as much as it is driven by how properties can be rented to businesses.

My personal take is that this system killed SoHo. I also don’t understand anything about real estate ¯\_(ツ)_/¯

[coredog64]

It's also possible that Covid-19 provides a reasonable cover for a large case of "big bath accounting". Individual building owners might not want to (or be able to) reduce rents/returns. But if happens across the ecosystem, then everyone resets expectations enough that businesses can return.