[gregmac]

My office (near Toronto) was up for lease renewal about 1.5 years ago. Pre-pandemic about 50% of people were working from home at least some of the time, and by 2021 there were maybe 2-3 people in the office regularly (in a space that could easily have 45). The company was debating what to do but did want some physical space, and possibly would have just stayed considering the investment in build-out, networking (including at least a rack of internal servers and other infrastructure, with dedicated fibre to other company datacenters), video conference rooms, etc. What I heard was the building was trying to nearly double the rent, so this made a pretty easy decision and the place was closed. Servers were migrated to other locations, and everything else was shipped to other offices, given to employees, sold or scrapped.

Now it's 6 months later, and last time I drove by it still has our old sign up, and I can see online the entire space is still available to lease. Seems silly to risk it in the current market and take $0 instead of keep a quiet, established tenant.. but what do I know.

[lazide]

Some of this may be due to incentives in the way property management and owners value commercial property and calculate cash flows and fees.

In many cases, it can make more sense (to some folks) having a vacant property at a nominally high rent (look, we could make this much from this property, hence it’s worth x multiple!) then admitting that is not likely for the foreseeable future (oh shit, this property is now only capable of producing 80% of x, write downs and angry investors incoming).

It sounds weird, but the wil-e-coyote analogy is remarkably apt - in the cartoons, as long as he doesn’t look down, he keeps going just fine!