Comments on: Empty storefronts http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/ A slice of lime in the soda Tue, 21 May 2013 23:16:23 +0000 hourly 1 http://wordpress.org/?v=3.4.2 By: Restaurant Equipment http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/comment-page-1/#comment-7804 Restaurant Equipment Mon, 12 Oct 2009 07:13:12 +0000 http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/#comment-7804 I’ve been noticing this in Manhattan for the past few years as well. Go to midtown, 34th and 5th and you’ll see dozens of boarded up street level shops. I’ve been noticing this in Manhattan for the past few years as well. Go to midtown, 34th and 5th and you’ll see dozens of boarded up street level shops.

]]> By: Ledbury http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/comment-page-1/#comment-6117 Ledbury Mon, 31 Aug 2009 20:14:25 +0000 http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/#comment-6117 Avenue B's issues are as much the Community Board as the landlords. It seems they believe that empty storfronts are preferable to potentially loud resturaunts and bars. Not sure if they are right about that or not, but it may not be the purest form of tenant/landlord market data. Avenue B’s issues are as much the Community Board as the landlords. It seems they believe that empty storfronts are preferable to potentially loud resturaunts and bars. Not sure if they are right about that or not, but it may not be the purest form of tenant/landlord market data.

]]> By: Matthew http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/comment-page-1/#comment-6108 Matthew Mon, 31 Aug 2009 17:25:10 +0000 http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/#comment-6108 It's advocates do sometimes overegg the case, but surely this is exactly the problem a land value tax would solve? It’s advocates do sometimes overegg the case, but surely this is exactly the problem a land value tax would solve?

]]> By: SC http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/comment-page-1/#comment-6107 SC Mon, 31 Aug 2009 16:45:38 +0000 http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/#comment-6107 You're wrong about the numbers, too. I think most people in the business would agree that a reasonable non-bubble valuation for a high street retail asset would be an 8-10% yield (cap rate). If you own one building with a 10-year in-place lease and sell it at a 10 cap, the buyer certainly isn't going to recover his investment on a present value basis without giving any value to a sale at the end of the lease period. I'd suggest that the reason that you see a lot of retail vacancy right now is that not too many retailers want to or can invest in opening new stores in the middle of the current huge recession. You’re wrong about the numbers, too. I think most people in the business would agree that a reasonable non-bubble valuation for a high street retail asset would be an 8-10% yield (cap rate). If you own one building with a 10-year in-place lease and sell it at a 10 cap, the buyer certainly isn’t going to recover his investment on a present value basis without giving any value to a sale at the end of the lease period.

I’d suggest that the reason that you see a lot of retail vacancy right now is that not too many retailers want to or can invest in opening new stores in the middle of the current huge recession.

]]> By: matt m http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/comment-page-1/#comment-6104 matt m Mon, 31 Aug 2009 15:18:51 +0000 http://blogs.reuters.com/felix-salmon/2009/08/31/empty-storefronts/#comment-6104 What you're missing is the substantial upfront capital investment required of the tenant and/or the landlord. The lease needs to be long enough for the parties to amortize that upfront investment. A residential lease can be for one year notwithstanding the initial cost to build or renovate because replacement tenants will predictably rent the same exact space, perhaps with a new coat of paint. The next retail tenant might be a restaurant, or a florist, or a clothing store. Even for the same general use, like a restaurant, the space would typically need to be rebuilt, and the lease term would need to account for that cost. A short-term extension can be similarly problematic. If Kenny Shopsin needed new kitchen equipment, he wouldn't pay to have it installed in a space where he might be leaving it after only a year. The Newcastle space was already built out as a juice bar and could therefore be reused easily. They're "hoping to make it a bit more welcoming", but I assume that means bringing in some decoration they can easily take with them when they're terminated, and maybe some volunteer labor to paint. Anything that can't open for use with that little work just isn't a candidate for a month-to-month lease. What you’re missing is the substantial upfront capital investment required of the tenant and/or the landlord. The lease needs to be long enough for the parties to amortize that upfront investment. A residential lease can be for one year notwithstanding the initial cost to build or renovate because replacement tenants will predictably rent the same exact space, perhaps with a new coat of paint. The next retail tenant might be a restaurant, or a florist, or a clothing store. Even for the same general use, like a restaurant, the space would typically need to be rebuilt, and the lease term would need to account for that cost. A short-term extension can be similarly problematic. If Kenny Shopsin needed new kitchen equipment, he wouldn’t pay to have it installed in a space where he might be leaving it after only a year.

The Newcastle space was already built out as a juice bar and could therefore be reused easily. They’re “hoping to make it a bit more welcoming”, but I assume that means bringing in some decoration they can easily take with them when they’re terminated, and maybe some volunteer labor to paint. Anything that can’t open for use with that little work just isn’t a candidate for a month-to-month lease.

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