Quote:
Originally Posted by James_Mac
There must be some reason why so many retail spaces have been vacant for years. The obvious answer is that rents are too high, but then the question is why they're not lowered to meet the market. I have a recollection of this topic being discussed here before, and someone had a reason - perhaps that lowering rent affected valuation and could cause problems for debt financing, or something similar.
It's certainly weird. I live in the area and would love it if more fast food or other restaurant options opened up -- I get sick of walking to Michigan if I want something more than Subway.
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It's a question of economics, and also individual actors in a system. Most things in real life systems are not logical. If you built a high rise for a certain amount of money, and needed your retail/commercial to make a certain amount of money, you probably wouldn't go that much below what you thought was sufficient to make money (or at least cover).
Let's take around State & Walton for example. Walton on the Park has existed since 2009, and maybe 1.5 or 2 years ago they FINALLY got their their first retail tenant - a Chase Bank brach. However, down at State & Chestnut, that new building was completed a year and a half ago, and within a small handful of months already had a restaurant signed on to open (which is opening any day now). There was also a building built next to that, which had a restaurant signed on within a month or two and has been open for a bit (Lyfe Kitchen). Meanwhile, the 2nd space at Walton on the Park finally got a building permit issued yesterday for a LensCrafters store - only their 2nd tenant in around 7 years even though they have 3 or 4 spaces total. Meanwhile, 50 E Chestnut has never had a tenant other than an art gallery pop up last summer for a month or two.
You could ask how a new building got a restaurant tenant right away. I could make the point that the Walton on the Park one didn't offer good enough outdoor space if a patio was a must, but the Rush & Chestnut one did. I think it's a matter of rent prices for businesses to be honest. Where Amorino is at State & Chestnut right now for example - the previous tenant Johnny's left because the landlord jacked up the prices to a ridiculous level. It took them a number of months to find a new tenant - which is Amorino which is based in Paris - and these rents may seem fine to them.