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Comment by jeffbee | Hacker News Reader

What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory.

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Totally false. We saw many commercial units between $35-50/sf IG and just signed on one at $37/sf.

"At the first quarter of 2021, the overall citywide asking rent was $73.76 per square foot (psf) down 12.0% from the peak of $83.82 psf with the Class A citywide figure at $77.66 psf, down 10.0% from $86.31 psf,. Direct space continues to be marketed at near record levels for the time being with the citywide Class A direct asking rent at $84.47 psf and the CBD Class A direct asking rent at $85.71 psf" — Cushman and Wakefield

"Totally false" — Internet rando

> Cushman and Wakefield

Aka a company with a vested interest in convincing you that the $75 price they are offering you is totally in line with the average and it's really good and you should just take it.

But an anecdote about a class-C storefront on 7th street is more reliable?

I'd say both are anecdotes with bias, but honestly, the random internet commenter has less incentive to massage the data than WC.

Also, are these figures factoring in things landlords are doing now to sweeten the deal without dropping the per month/sq price?

I.e giving months away for free or other incentives like that? Anecdotally I’ve heard office rent is way down as well.

"What's awful is asking rents have barely budged. Peaked at around $85/sf, now around $75/sf. The landlords can afford to just sit on inventory."

This is because their loan-to-value ratio is based on their square foot rental rates. If the unit sits empty they, of course, lose money ... but if they rent it at market price they could lose the property entirely with a (for lack of a better term) margin call.

If the value of the building ratchets down and blows up their loan covenants, it is better to have it sit empty and lose money slowly ...

The situation you're describing is lose-lose-lose, which makes me skeptical that it describes what's actually happening.

The landlord loses out on rent payments (albeit at a lower monthly rate).

The lending institution loses because the default rate increases if landlords stop collecting rent.

Renters also lose due to artificially inflated prices.

What's stopping the landlord and lender from re-negotiating loan covenants to enable the landlord to collect lower rent payments for a period of time without triggering a new valuation?

Some loans are backed by certain rent levels. So commercial real estate owners don't have as much freedom to reduce their prices as you might think.

Commercial leases are often multi-year. If they expect the high vacancy rates to evaporate within a year or two, why would they drop the rates now to fill the vacancy?

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