Jack Harris
New Member
at least the second tower is present in the ad lol
- Thread starter Daveography
- Start date
SMayo
Active Member
I believe it's mainly for tax benefits.
David A
Senior Member
If you lose $1,000 and that allows you to save $450 in taxes, aren't you still $550 in the hole?
I believe it is for one of two reasons. First, the owners of most of these company are not monitoring the performance of individual properties that closely. Someone in Toronto does not see empty store fronts here.
Second, various property owners do not want to start a price war in a weak market, so they avoid doing that to keep rents higher on paper at the sacrifice of more vacancy. It is like a cartel.
SarcasticMarmot
Active Member
I think your two reasons are the larger portion. However, I do not think these large companies see a vacant space as losing money. They (using your example) see saving $450 in taxes as making $450, and renting the place out as making $1000 dollars. Yes, you could make $550 more but is it worth the effort? Seems like for many landlords the answer is no.
I would strongly be infavor of abolishing the rules that allow businesses to write off losses from vacant properties. They should be taxed at the full value of the last paying tenant until it is rented out again.
David A
Senior Member
It must be nice not to worry about losing money, but I do agree about the not worth the effort part.
Sometimes it seems any effort is too much for absentee landlords. Years ago, I knew someone who had a small commercial space downtown and was a good tenant. He wanted to expand and rent part of the space next to him that had been vacant for a while (and by the way still is vacant now over 10 years later). He tried several times to contact the absentee owners in another city to deal with it, but I guess he was too small for them to deal with so they never got back to him. In the end he moved elsewhere and expanded, actually renting from a local landlord who was more responsive.
I have no problem with businesses writing off their losses, that is Federal and Provincial tax money which the city does not see. However, there is an argument to be made for a municipal tax on long time vacant space (say over a year) as it seems to be more of a problem here.
SMayo
Active Member
I definitely may be wrong, but my understanding was that they consider the vacant commercial space as a loss of revenue for tax write offs and the value of those write off is worth enough to the companies that they would rather hold out until they can find a tenant at their high prices rather than lowering the price significantly and ending up in a long lease at a price lower than they’d like.
Like I said I definitely might be wrong if anyone knows.
Like I said I definitely might be wrong if anyone knows.
jason403
Active Member
First of all corps in Alberta are only paying approximately 23% in tax. 2nd of all, losses are not going to benefit a company more than breaking even or making money.
Best case scenario is a unique situation where you book a loss based on non-cash transactions and can carry back 3 years against taxes paid. Again this is only 23% and based on entire company, likely not one property.
People generally don't understand how losses work, and term writeoff is so often misused and misunderstood.
I think a factor people don't often consider is offering a lower lease will immediately affect valuation of property if attempting to sell the property in the short term. Poor leases may offer some immediate cash flow but ultimately cause a greater net loss.
Best case scenario is a unique situation where you book a loss based on non-cash transactions and can carry back 3 years against taxes paid. Again this is only 23% and based on entire company, likely not one property.
People generally don't understand how losses work, and term writeoff is so often misused and misunderstood.
I think a factor people don't often consider is offering a lower lease will immediately affect valuation of property if attempting to sell the property in the short term. Poor leases may offer some immediate cash flow but ultimately cause a greater net loss.
SarcasticMarmot
Active Member
That is a helpful specific, my knowledge of the business side is definitely surface level. I am mostly trying to understand the problem. However, I think the core issue is the same. Something is very broken in our commercial real estate market when a high value, empty commercial unit in the center of the city is worth more empty than being used. It hurts our communities and it kills our small business creativity.
I am not against private ownership of land by any means, but we have gone so far down the rabbit hole of property's main purpose being as an investment vehicle that we are killing our communities. Land's first function should be as a a part of our community, for people to live, work, and recreate. If it is sitting vacant, something is broken. And alot of space in our city is sitting vacant. I don't know the solution, but the status quo is bad and it will take smarter people than me to fix it, if we even try.