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Comment by godzillabrennus | Hacker News Reader

Commercial real estate is around a $16T industry in the USA: https://www.reit.com/data-research/research/nareit-research/...

Even with a correction in demand there will still be value in the property. The industry will not be wiped out.

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There’s evidence of properties in NYC which have been vacant for 7+ years. These properties, even with the pandemic, have not budged their rent. They simply do not care if they’re not making money. They would rather preserve their capital, bank on appreciation, and not deal with tenants than fall prey to deflationary pressures.

The only explanation is the prevalence of some form of money laundering, an area I’m not an expert in.

Not an expert either, but money laundering does seem to like real estate.

These property owners are going to become like the Bitcoin HODLers. Their approach is sound as long as they are just riding out bumps in an economic cycle but will fall apart when their is a societal shift.

Commercial real estate is going the way of the newspaper industry - it will not go away, there will remain some successful examples, but the industry as a whole will be decimated.

that's not the only explanation. they are plenty of lit market public policy outcomes that promote irrational markets.

its better that you aren't an expert in the lit market or the dark markets, god forbid the people form enough consensus to actually change it.

> They would rather preserve their capital, bank on appreciation, and not deal with tenants than fall prey to deflationary pressures

New York and San Francisco laws capping rent increases also deter rent decreases. Particularly if the decrease might wind up being temporary.

They are reluctant to move the rent because commercial property value is highly dependent on the "perceived" rental value. Locking in low rents instantly wipes out the buildings value.

30% market correction will effectively wipe out many players in commercial real estate. Even less than that for many. Keep in mind, real estate is often highly levered so these property owners still have to pay a bank their money.

They’d just be underwater. But if the property is cash flow positive, over time they’d recover.

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