
How Manhattan Became a Rich Ghost Town - eplanit
https://www.theatlantic.com/ideas/archive/2018/10/new-york-retail-vacancy/572911?single_page=true
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tsunamifury
I have been speculating for some time that we are looking at a commercial
real-estate correction or crash as many of the leases are now being held off
the market by big firms (Blackrock) while larger retail is actually reducing
its foot print. I don't know what the disconnect here is, but my nefarious
interpretation is that the larger funds are actually holding off a crash by
not leasing, thereby hiding what would be a downwardly market adjusted
portfolio value. The counter to this is that office space could fill it up,
but again, large firms are contracting their downtown footprints for a wide
variety of reasons, including cutting costs. Only a few tech companies are
expanding.

Looking at the mega projects like Hudson Yards which has lost and reduced
several leases before even opening, SF's failed 7X7 mall which opened with
ZERO leases and older established locations like 666 5th Ave struggling to
find new buyers -- it appears pretty grim.

Putting all that together, you have an interesting crash that could actually
affect the current White House in a very personal way.

~~~
partiallypro
I don't disagree that people are doing that, kind of. I don't think it's
nefarious though, or some plot against Trump or potential plot against Trump.
I think the simplest explanation is merely that real estate is a great vehicle
to park capital for foreign nationals. NYT's ran a piece about this a few
years ago with people hiding their money in real estate in markets like New
York, Nashville, Atlanta, etc. It was largely Chinese money. The fear is if
there is a longer than expected "trade war" and this property becomes sold in
quick succession leading to a crisis to shore up balance sheets in East Asia.

China will not admit it, but I have heard ramblings from very smart people
that their economy is currently on the brink. They're waiting out for the
midterms, but if what I've read/heard is true they might not be able to hold
out that long without causing significant damage to the global economy. You
have the "trade war" with the US and high debt loads, but you also have a ton
of manufacturing flight to countries like Vietnam. Things could get ugly if
the dominoes start to fall.

That being said, I do think there is still reason to be optimistic that this
is just a worst case and things will work out...but I still think foreign
nationals parking money in real estate is a big problem that drives out actual
tenants by obstructing true supply/demand.

~~~
tsunamifury
Didn't mean to imply it was a plot against Trump. Just meant, unlike other
presidents, a crash, or even a potential for a crash would strongly color his
agenda as a leader.

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pavel_lishin
> _Walking around the Upper East Side, where I live, I find it striking how
> many of the establishments still standing among the many darkened windows
> are hair salons, nail salons, facial salons, eyebrow places, and
> restaurants. What’s the one thing they have in common? You won’t find their
> services on Amazon. The internet won’t cut my hair_

Ok, fess up: how many of you reading this just came up with a dumb startup
idea?

~~~
ilaksh
There are actually already a lot of "Uber for hairdressers" apps. One of them
was actually partnered with Uber.

So it seems like actually the internet _will_ cut your hair.

I suspect there may be a social aspect to some of the salons that could be
somewhat missing with only one person coming to your house though. But maybe
the app just needs to incorpate a group video chat or something to get that as
well.

Someday we may not even need to get out of bed if we don't want to. Which
might not be very healthy of course.

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viburnum
Empty storefronts are a negative externality and should be taxed at a high
rate.

~~~
Scoundreller
Why stop at storefronts?

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hourislate
I once approached a Property Manager about a retail location in Toronto. It
was sitting empty for about 1.5 years because the lease was very expensive. I
mentioned to him that it would be worth renting it to me for less than having
it sit empty. He laughed and said that the property has been paid for the last
50 years and is just one of like 240 Properties the Landlord owns. He said the
Landlord could wait 20 years for the lease price he wants and it wouldn't
matter one bit.

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Scoundreller
Dunno about Manhattan, but Toronto used to rebate property taxes on unused
real estate.

The solution is simple here. A high property tax rate on unused real estate.

Who would vote against that?

~~~
hackeraccount
Anybody who owns property. Any who wants to buy property.

Don't tax you, don't tax me, tax the man behind the tree.

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pontifier
As a Landlord I can truthfully say - paying rent is for suckers.

This world would be a much better place if the entire rental market system was
outlawed.

~~~
A2017U1
As someone who rents in a large overvalued city, my landlord is getting a 1.5%
yield before taxes and deprecation. That's 60+ years of rent to outright buy
the same place.

More than happy with that situation while he speculates on near impossible
capital gains occuring.

~~~
pontifier
It's overvalued because a bunch of people bought stuff when it wasn't
overvalued and charge as much as they can for rent. High rents mean high
resale value. You're probably paying 2% or more of the original purchase price
every month.

The prices will go up until it is not economical to buy anymore.

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skybrian
It seems like this should be a temporary problem. Won't landlords eventually
get tired of not getting any rent?

~~~
robbyt
A friend of mine is a commercial landlord in NYC. He told me how this works...
Companies will seek extremely high rent, and make concessions to the tenants
to offset the high rent. E.g., rent this space for $50k/mo, and we'll give you
free storage, free power, and free construction build-out. Then the landlord
sells the building with the ultra high lease included as an asset, to get an
even higher value out of the sale. Rinse and repeat.

The amount of money they get from the sale of the property with the high lease
offsets the loss they're taking by keeping it empty. And they don't have to
bother with as many annoying tenants.

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RhysU
> Their strategy bodes the disappearance of those quirky restaurants, curious
> antique shops, and any coffee shops that aren’t publicly traded on the NYSE.

Curiously pro-linked markets given that SBUX lists on Nasdaq.

