Web Analytics
Why is there so much unoccupied commercial real estate in Montreal downtown NDG plateau etc - Parkers Legacy

Why is there so much unoccupied commercial real estate in Montreal downtown NDG plateau etc

nThere are all kinds of reasons for owners of real estate to hold it empty, and you and I can’t know the particulars of any situation, unless it has gone public… or we know somebody on the inside.But here are some possible reasons (among many more).Prestige.

It is better to be seen to rent to big, important companies (or government departments), than to a nest of little renters.If you have other big holdings that are currently rented, then the financial hit might be acceptable in the short term, to wait for a high-value, high-prestige tenant.State [and perception] of the property.

Maybe it’s an old building and needs a massive refurbishment before it can resume attracting “A”-list tenants, and maybe the landlord has been trying to pull together the necessary financing to begin work on a massive facelift, which could be in the many tens of millions (or more) depending on the size of the property, the scope of needed updates, and the level of poshness to which the owners might aspire.It might not be just appearance issues.It might be other infrastructure that needs expensive upgrade before a large corporate or government renter will consider entering into a contract, moving all their personnel and stuff, etc.

I haven’t lived in Montreal for many years, so haven’t paid attention to the real estate climate there.Maybe recent years have been lean for financing and rents?Or other big, flashy properties have sucked up the prime renters and the available cash for big projects?

Stability of income and costs.Big businesses value stability of income and cash flow, such that they can report reliably to boards of directors and shareholders, they can plan expenditures over periods of years, rather than months, and they can predict staffing and other costs.If there are legal or bankruptcy or other problems, they are dealing with a single big entity that has predictable patterns of operation and might still be findable, accessible after the dust settles.

Also, if a big renter goes bust, you can get a better price selling off large amounts of similar office furniture and equipment, than little batches of dissimilar stuff sold off at odd times when small renters cut and run in the middle of the night, and often take all their stuff when they go.Contracts with other renters.Other big renters might also have negotiated clauses regarding who their neighbors might be.

They have an image to keep up and don’t necessarily want to be seen in the company of riff-raff.Have you ever noticed that big shopping malls have big anchor tenants and that you almost NEVER see a lashes and nails or tanning shop or cheap-party-stuff store next door?That’s because the anchor tenants have clout, and have negotiated a say in the kinds of businesses that can move in right next door to them.

It’s also because retail space next door to an anchor tenant is usually the priciest in the mall.There’s a similar dynamic in play, even when it’s office space and not retail.There are posh neighborhoods and there are downscale neighborhoods, and as a landlord, you want to be known for a certain kind, and your renters/lessees want to be able to count on you not doing something that…. “there goes the neighborhood.”

(See prestige above) Parking.A big tenant will have a few execs (who must have their own cars available all the time, therefore require indoor parking, etc.)and legions of workies, most of whom take public transit.

Small companies often have a higher percentage of people who need vehicles close by.They tend to do more of their business locally, as opposed to nationally and internationally, so they have people, not just the executives, who drive more as part of their work, therefore needing reliable parking near/under the office.Contract with previous renter.

Rents are cyclical.True, they tend to rise over time, but there are good years and bad years.If a large tenant has departed, they might have started in a fat year and have been paying a hefty rent.

They leave for business reasons, halfway into a multi-year tenancy.The landlord might prefer to keep them paying, rather than to rent out in a leaner year, when they can expect to negotiate only relatively low-return contracts.For the departed company, the contractual penalties for breaking the lease might be more onerous than simply paying a stable cost and possibly finding a sub-lessee.

Or, they might have a whole bunch of corporate junk stored at their former office site, and just not be carrying on business there any more.The no-longer-resident company might be holding onto their lease to prevent a competitor from getting that space, as part of some strategy.New renter hasn’t moved in yet.

A new entity might have signed a lease, but has not yet begun to move.They might have issues at their previous/current site.They might be a government department that must wait for treasury to sign off on the big expenses for the big move and the expensive update of the new premises.

There could be all kinds of reasons why a company could be paying rent on a place that they have yet to occupy.Maybe business has taken a hit and they have deferred the costs of the big move for a year or three.Cost/benefit of subdividing isn’t good enough.

Renting to one, big, monolithic lessee means dealing with one entity, for problem reports, modification requests, renewals, etc.They usually have a stable set of requirements that don’t change much over a given period, which is usually many years.(See also stability of income and costs, above.)

Renting to a bunch of little people means that you must chop up your space into many, many small chunks, possibly oddly shaped, after a while, that there is more coming and going, that leases are all ending at different times, which precludes ever getting a single big renter in there, again, and you have to deal with all sorts of different headaches from all sorts of different people, and not just one liaison office (as you would with a big tenant).Large spaces require large (long) negotiations.Like it says.

A big landlord might be in the middle of a long negotiation for a lengthy and lucrative contract, and can’t afford to get somebody in for a short time.Or they might HAVE been in such negotiation and it fell through, so they had to start over.These things can take years, with legions of lawyers and accountants on both sides.

Probate.(or equivalent) Assets might be frozen or hindered by court battles due to the heirs squabbling over the legacy of a deceased property owner.Or there might be a legal investigation of some kind that makes it chancy to carry on business in normal fashion.

Big (potential) renters might prefer to stay away until the situation is settled.Other.It’s a business.

Lots of things could be going on that you don’t know about.