8817 replies to this topic

[Mike K.]

Retail is struggling due to the online shopping that is increasing as well... Death by 1,000 cuts again.. No singular answer... If so many close maybe leases come down or I guess development swallows those properties up for a couple years.

Will property taxes those businesses pay also come down, to lower the leases even further?

I wound say that it may be more likelier for leases to rise, as property taxes rise, and as interest rates force up mortgages. Maintenance costs are up, security costs are up, energy costs are up, insurance costs are up. I doubt landlords have much room to bring lease rates down, or even if they do, those other costs are way up, which will negate a $1 or $2 off a lease rate.

[Ismo07]

Will property taxes those businesses pay also come down, to lower the leases even further?

I wound say that it may be more likelier for leases to rise, as property taxes rise, and as interest rates force up mortgages. Maintenance costs are up, security costs are up, energy costs are up, insurance costs are up. I doubt landlords have much room to bring lease rates down, or even if they do, those other costs are way up, which will negate a $1 or $2 off a lease rate.

 

What is the % of property tax in the lease?  And no property taxes would not decrease typically..  Does the assessment decrease?  A lot of old buildings are paid for ten times over...  $$$ makers...  Lease rates are based on competition, like rents...  Yeah there are other factors but you and I both know they can fluctuate based on market.  Property taxes unfortunately will usually rise...

Edited by Ismo07, 23 November 2022 - 08:59 AM.

[Mike K.]

Of course you’d think that. Paid for 10x over.

Except all of the ones just recently purchased, the ones recently refurbished, the ones seismically upgraded, the ones recently redeveloped internally, and the ones still paying a 25-40 year commercial mortgage, maybe even having been refinanced to deal with major repairs, so having been paid off 10x over but still stuck with a $2.5M mortgage.

Property taxes are a huge portion of the added costs of a lease. Sometimes around 40%.

[Ismo07]

Of course you’d think that. Paid for 10x over.

Except all of the ones just recently purchased, the ones recently refurbished, the ones seismically upgraded, the ones recently redeveloped internally, and the ones still paying a 25-40 year commercial mortgage, maybe even having been refinanced to deal with major repairs, so having been paid off 10x over but still stuck with a $2.5M mortgage.

Property taxes are a huge portion of the added costs of a lease. Sometimes around 40%.

 

Well that's not going to go down...  Leases will go down if no one is renting...  Except for those properties that are owned by huge holdings cause they get better lending with a higher lease.  Again leases have to be based more on market.  I think very few are 40% property taxes...  The ones that are, are likely lower leases.

 

I talk to some of the older family owned buildings...  10x is generous...  They know it and know they can reduce leases if it makes sense...  

[dasmo]

I had my lease lowered before. When I went to live in Rotterdam I kept the office running here but I only had one employee left at the time. So I looked at a shared space desk instead and then just asked the landlord to lower my rent. They did!  It happens. 

 

I agree that the landscape has changed for retail. I try to support local but when shopping local became a horrendous experience I went online. That has stuck. I also didn't go to a restaurant for years. That used to be daily for lunch and weekly for dinner. That has also stuck. Also no coffee out. 

 

Bring back the experience of people connection and it will rebound. 

[Ismo07]

I had my lease lowered before. When I went to live in Rotterdam I kept the office running here but I only had one employee left at the time. So I looked at a shared space desk instead and then just asked the landlord to lower my rent. They did!  It happens. 

 

I agree that the landscape has changed for retail. I try to support local but when shopping local became a horrendous experience I went online. That has stuck. I also didn't go to a restaurant for years. That used to be daily for lunch and weekly for dinner. That has also stuck. Also no coffee out. 

 

Bring back the experience of people connection and it will rebound. 

 

Canada in the World cup will help today

 

Leases in Victoria aren't close to coming down yet...  The spot that led to this has already been sold and being reno'd for something...  Good spots still lease pretty fast...  Just if things really go south downtown we should see leases come down or properties sold for potential development...

Edited by Ismo07, 23 November 2022 - 10:19 AM.

[Mike K.]

Well that's not going to go down...  Leases will go down if no one is renting...  Except for those properties that are owned by huge holdings cause they get better lending with a higher lease.  Again leases have to be based more on market.  I think very few are 40% property taxes...  The ones that are, are likely lower leases.

 

I talk to some of the older family owned buildings...  10x is generous...  They know it and know they can reduce leases if it makes sense...  

 

Have you ever signed on as a tenant with a commercial lease?

[Mike K.]

I had my lease lowered before. When I went to live in Rotterdam I kept the office running here but I only had one employee left at the time. So I looked at a shared space desk instead and then just asked the landlord to lower my rent. They did!  It happens. 

 

A shared desk space isn't quite like a 10,000 square foot office lease, though, or a 5,000 square foot retail space.

 

And there's only so much a landlord can give, but chances are whatever you paid in that setup was just gravy. They would rather you pay them $5,000 for the year instead of you walking if they charged you $7,000.

 

But regardless of what the landlord gives, the operating costs are all rising and those inputs don't care about the tenant. Property tax is the single biggest premise expense for a business outside of the leased space itself. No matter what a landlord does, the other costs keep rising.

[Ismo07]

Have you ever signed on as a tenant with a commercial lease?

 

Nope why?  Only people that have signed a lease can speak to it?  I've bought and sold properties and been a landlord.  Is a commercial lease light years from residential?  Commercial leases are solely based on property taxes?  Seems odd.

[Ismo07]

A shared desk space isn't quite like a 10,000 square foot office lease, though, or a 5,000 square foot retail space.

 

And there's only so much a landlord can give, but chances are whatever you paid in that setup was just gravy. They would rather you pay them $5,000 for the year instead of you walking if they charged you $7,000.

 

But regardless of what the landlord gives, the operating costs are all rising and those inputs don't care about the tenant. Property tax is the single biggest premise expense for a business outside of the leased space itself. No matter what a landlord does, the other costs keep rising.

 

I'm sure most leases involve a lot of revenue to the landlord as well....  You missed that part...  Have you never leased a commercial property to a tenant?  Very few only make the lease amount equal to the operating costs.  I know for a fact that a good friend who owns a restaurant for 30+ years has paid for the building it is in many times over.  He isn't the only tenant. Every lease has the potential to come down if they need to find a tenant.  Property taxes simply won't....  Sorry if that is a shock to your world.  Yes I'm sure property taxes are the single most expense (unless a huge mortgage) for a property.. I get that..  I think a lease is the single most expense for most businesses.  So what's your point?

Edited by Ismo07, 23 November 2022 - 10:31 AM.

[Mike K.]

Nope why?  Only people that have signed a lease can speak to it?  I've bought and sold properties and been a landlord.  Is a commercial lease light years from residential?

 

YES.

 

 

Commercial leases are solely based on property taxes?  Seems odd.

 

NO.

 

But, your employer is a big expense for commercial operators. It's the lease, then it's property tax, in that order.

[Mike K.]

I'm sure most leases involve a lot of revenue to the landlord as well....  You missed that part...  Have you never leased a commercial property to a tenant?  Very few only make the lease amount equal to the operating costs.

 

That's not a rule.

[Ismo07]

That's not a rule.

 

What's not a rule?

 

YES.

 

 

NO.

 

But, your employer is a big expense for commercial operators. It's the lease, then it's property tax, in that order.

 

Right property owners don't even pay the property tax, it's all passed on to the lessee right, so all revenue (minus a few expenses).  In any event lease rates will fluctuate based on what the landlord can get..  Property taxes will always remain (and increase for that matter)..  Not sure why we are even talking about them... 

[Victoria Watcher]

Owners pay property tax on any unleased space.

[Mike K.]

What's not a rule?


Right property owners don't even pay the property tax, it's all passed on to the lessee right, so all revenue (minus a few expenses). In any event lease rates will fluctuate based on what the landlord can get.. Property taxes will always remain (and increase for that matter).. Not sure why we are even talking about them...

Because you dipped into the pocket of someone else.

I don’t think you know how commercial leases work, or assume they’re like residential leases.

They are typically NNN, meaning the lease rate is only for the space. In addition, as separate line items, the tenant will pay all other costs associated to their space (property taxes, common improvement/maintenance fees, and sometimes amenities and/or operational costs associated with a specific thing, like a front desk clerk, etc).

[Ismo07]

Because you dipped into the pocket of someone else.

I don’t think you know how commercial leases work, or assume they’re like residential leases.

They are typically NNN, meaning the lease rate is only for the space. In addition, as separate line items, the tenant will pay all other costs associated to their space (property taxes, common improvement/maintenance fees, and sometimes amenities and/or operational costs associated with a specific thing, like a front desk clerk, etc).

 

Yeah yeah triple net in, I get it.  What does any of that have to do with leases potentially lowering if there is little uptake for a commercial lease..?  This is what we are talking about.  The potential of lease rates coming down.  I dipped into someone else's pocket?  What?  Your axe to grind about property taxes is not with me.

 

 

Owners pay property tax on any unleased space.

 

Exactly, so in a slow market wouldn't it behoove most landlords to reduce the lease in order to get someone in?  Some other incentive I suppose...

Edited by Ismo07, 23 November 2022 - 02:57 PM.

[Mike K.]

Because you immediately jumped to the landlord offering the discount, instead of asking how the CoV can make running a business more viable for the business operator.

[Mike K.]

A friend tells me his downtown office was broken into and ransacked earlier this month.

How long before every block downtown has to start hiring overnight security?

[Belleprincess]

Of course you’d think that. Paid for 10x over.

Except all of the ones just recently purchased, the ones recently refurbished, the ones seismically upgraded, the ones recently redeveloped internally, and the ones still paying a 25-40 year commercial mortgage, maybe even having been refinanced to deal with major repairs, so having been paid off 10x over but still stuck with a $2.5M mortgage.

Property taxes are a huge portion of the added costs of a lease. Sometimes around 40%.

Exactly right, Mike. Property taxes are a huge part of the expenses, especially with a triple net lease. To be honest, there isn’t much value for dollar. What do businesses get from their high tax rate? The city doesn’t even keep the streets clean, the DVBA does that. We have no services - we don’t have city garbage pick up so we have to pay high private rates for garbage and recycling. Heck, the police don’t even respond to thefts anymore. I pay over $10,000 in property taxes this year for nothing in return.

[Matt R.]

Don't get me started... 

 

The assessment at one place went down so we got a refund from the landlord.  I am not sure what we even get for our property tax bills here.  I guess Emcon throws some gravel down a few times a year.  All other services are billed directly.