[TAS]

I had inquired about leasing space on the podium of Stantec and in the Connect Centre, and the lease rates were more than what WEM charges. I don't think there's necessarily a lack of interest, but there's a reason why they haven't been able to get any tenants committing to $70/sqft when foot traffic is poor, safety is and disorder is a concern, and competing quality spaces are available outside the core. The City and private industry need to begin working more cohesively towards a shared vision of our downtown because this patchwork of conflicting policies and ambitions is a disaster. There is no flow, no identity, no risk (sorry Melcor) to do anything other than the bare minimum. Murals on old buildings and new garbage cans aren't going to cut it.

Thanks for sharing this and the insight.

With those kinds of high lease rates, if the city was providing free street parking on evenings and weekends at its curbside parking, would that have been enough to have made Connect Centre manageable for you?

Were rates better at some nearby commercial spaces such as on 104st, or still not enough to make a difference based on other reasons you provided?

 

[NicolBolas]

I had inquired about leasing space on the podium of Stantec and in the Connect Centre, and the lease rates were more than what WEM charges. I don't think there's necessarily a lack of interest, but there's a reason why they haven't been able to get any tenants committing to $70/sqft when foot traffic is poor, safety is and disorder is a concern, and competing quality spaces are available outside the core. The City and private industry need to begin working more cohesively towards a shared vision of our downtown because this patchwork of conflicting policies and ambitions is a disaster. There is no flow, no identity, no risk (sorry Melcor) to do anything other than the bare minimum. Murals on old buildings and new garbage cans aren't going to cut it.

Thats wild.

 

[thommyjo]

How would it affect financing for projects if the city developed policies that either taxed vacant storefronts or had other “sticks” to try to get developers to fill empty CRUs?

Clearly it’s not supply/demand curves working as they should because the financial industry has to keep lease rates artificially high.

Would developers build less CRUs? Have to charge higher residential rates? Simply less proposals being approved cause they can’t secure financing for too low of expected commercial lease rates?

 

[NicolBolas]

How would it affect financing for projects if the city developed policies that either taxed vacant storefronts or had other “sticks” to try to get developers to fill empty CRUs?

Clearly it’s not supply/demand curves working as they should because the financial industry has to keep lease rates artificially high.

Would developers build less CRUs? Have to charge higher residential rates? Simply less proposals being approved cause they can’t secure financing for too low of expected commercial lease rates?

The carrot works better then a stick. For areas of the city where you actually want to bring life you need to incentivize. Offer X amount of tax incentives for businesses to fill an area. Worked in New York City, it can work here.

Oh and to beat a dead horse, maybe have some cops on foot patrolling these areas.

 

[itom987]

They should be doing short term leases at lower rates to fill up the all the spaces and generate traffic. Then longer term leases at higher rates can be considered. Leaving retail bays empty is worse than having them filled.

 

[bodsbods9090]

They should be doing short term leases at lower rates to fill up the all the spaces and generate traffic. Then longer term leases at higher rates can be considered. Leaving retail bays empty is worse than having them filled.

100%. Having some $$ coming in is better than no $$ coming in.

And exposure is good too.

 

[Greenspace]

This is unfortunately not how landlords operate. They take out financing based on highest and best use of the retail space. They risk that financing by lowering lease rates. This is why space in new buildings oftens stays empty rather than lower the rate.

 

[David A]

How would it affect financing for projects if the city developed policies that either taxed vacant storefronts or had other “sticks” to try to get developers to fill empty CRUs?

Clearly it’s not supply/demand curves working as they should because the financial industry has to keep lease rates artificially high.

Would developers build less CRUs? Have to charge higher residential rates? Simply less proposals being approved cause they can’t secure financing for too low of expected commercial lease rates?

We seem to be locked in this holding pattern with too much vacant space downtown for several years now, we need to jump start something to get out of it.

There probably should be some city tax relief for space retail vacant, say more than a year or some other set period of time, which only applies if the space is filled.

 

[inclusion]

Call me crazy but 2 hour free parking might be worth a look at for both City Centre and Ice District parkades.

The problem with parkades is that they have overhead operating costs in the evenings. Manulife makes it work on event nights for Rogers, knowing people will park there and pay, which pays for the parking attendant, which is now mandatory due to the security issues downtown. If you make it free, there are still costs associated—do you pass that onto tenants in their leases?

The other issue is that there is basically no point in coming to the mall downtown anymore for the surrounding inner communities. It is faster to drive somewhere else with amenities and not worry about your car being broken into as much as downtown, even in a parkade. It wasn't that long ago that I went downtown on a weekend to the mall to Softmoc to buy a pair of shoes that I didn't want to drive to SEC/Southgate for. That option is gone now.

The retailers making it work downtown aren't the ones that are worried about free parking - Henry Singer, Helm, and other specialty clothing. Likewise, no one is driving downtown to go to Tims or the Telus kiosk, even if there is free parking. The downfall has been gradual, but the gap is so bad now that it is a monumental task to rebuild retail to the point where it is just acceptable for the average person who wants to visit Gap, Sporting Life, Banana Republic (insert other basic national retailers here).

Is free parking enough to attract those tenants? I doubt it, to be honest. The foot traffic from office spillover was the main driver of traffic for them, and that is never coming back. Realistically, it is going to take a slow, gradual decade or two for downtown to get back to a good spot, and it is not going to look like it used to.

 

[itom987]

This is unfortunately not how landlords operate. They take out financing based on highest and best use of the retail space. They risk that financing by lowering lease rates. This is why space in new buildings oftens stays empty rather than lower the rate.

A solution needs to be found because the problem is extremely prevalent. A good example is the building facing the intersection on 111th Ave and Kingsway Ave. that building was built and never had its retail bays filled, it also never had all its residential units filled. Its been standing almost empty for over 10 years and problems are beginning to show up due to the lack of maintenance performed. If those retail bays were filled, even at a rate that might be considered a loss to the owner, the businesses would care about the building and enough money would be collected to maintain it. That in turn would encourage someone to purchase a condo above. That preserves the buildings value in the long run and protects the owner's investment increasing the odds of a positive cash flow in the future.

Perhaps transferring the loan to another company that removes the condition of high lease rates is the way to go. In any case, all parties need to get involved in finding ways to minimize negative cash flow instead of completely stopping it.

That would be a good item to have on someone's platform in this election.

 

[Greenspace]

^It's not as simple as moving a loan. The loan is based on the valuation of the existing building including the lease spaces. The loan might be for that project or a future construction project. Going lower on one space affects negotiations for other spaces.

Super frustrating and many have discussed the issue but so far no easy solutions.

 

[itom987]

I hope their calculations are based the local Edmonton market instead of somewhere else like Toronto, or Canada as a whole.

 

[thommyjo]

This is unfortunately not how landlords operate. They take out financing based on highest and best use of the retail space. They risk that financing by lowering lease rates. This is why space in new buildings oftens stays empty rather than lower the rate.

Exactly why carrots can’t always work imo

For those wanting to learn more, this is a helpful read: https://www.strongtowns.org/journal...efronts-8-reasons-for-empty-commercial-spaces

Or this discussion on reddit has a number of sources summarized too:

https://www.reddit.com/r/slatestarcodex/comments/ttnxkv/comment/i64046q

 

[JNO1]

^And there it is. Thanks for posting this.

 

[David A]

A solution needs to be found because the problem is extremely prevalent. A good example is the building facing the intersection on 111th Ave and Kingsway Ave. that building was built and never had its retail bays filled, it also never had all its residential units filled. Its been standing almost empty for over 10 years and problems are beginning to show up due to the lack of maintenance performed. If those retail bays were filled, even at a rate that might be considered a loss to the owner, the businesses would care about the building and enough money would be collected to maintain it. That in turn would encourage someone to purchase a condo above. That preserves the buildings value in the long run and protects the owner's investment increasing the odds of a positive cash flow in the future.

Perhaps transferring the loan to another company that removes the condition of high lease rates is the way to go. In any case, all parties need to get involved in finding ways to minimize negative cash flow instead of completely stopping it.

That would be a good item to have on someone's platform in this election.

Its called cash flow, like many things in life say 70% or 80% of what you want is better than 100% of nothing. Cash flow is what allows you to do adequate maintenance and pay down mortgages.

I don't know what sort of fantasy world some people live in or have convinced themselves and maybe some others of, but this is a good example of how it does not really work in the end.