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Comment by duxup | Hacker News Reader

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duxup·

What is the risk exactly?

Say a business signs a 2 year lease. They go out of business after 1 year.

They got ~1 year of lease payments compared to ... nothing.

That still seems like something.

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Many commercial leases will pay to make renovations up front based on signing a long term lease. Many of these renovations can be in excess of the entire first year's lease. These can be quite large expenses and the owner would need to make sure they could recoup the cost.

Some strip malls in less desireable areas work they way a residential lease would, but those wouldn't be the best place to do it.

Commercial leases are normally much longer than residential leases: 5-10 years is typical. Restaurants also normally require extensive renovations to the space, which then have to be ripped out at additional cost to make the space usable for the next tenant.

I'm pretty sure commercial leases are more likely 10 year leases.

And I'd imagine the risk is broadly similar to residential rentals, e.g. trouble evicting tenants, the tenant damaging your property.

Yes, but if $chain does decide to open a location in the neighborhood in month 10 of that 2-year lease, it moves in to your competitor's building across the street, then you're stuck with the empty storefront again in a year while they have a nice indefinite recurring revenue stream.

The building across the street isn’t ones “competitor”.

For the property owner they are

> then you're stuck with the empty storefront again in a year while they have a nice indefinite recurring revenue stream

So that risk is worse than ... being stuck with an empty storefront?

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