A lesson for landlords
September 22, 2003
I write this letter as one who has significant commercial real estate holdings (none of which are local) and understands rental markets. I believe in free enterprise and permitting the law of supply and demand to work within a market place.
I make these statements so that the readers of this letter do not dismiss the writer as just another bleeding heart who feels sorry for the downtrodden local merchants who are unable to stay in business because of unaffordable rents.
While I believe that landlords should attempt to maximize profits, I am continually amazed at the indifference of several Aspen landlords when it comes to maintaining occupancy and retaining longstanding loyal tenants, particularly in a declining economic environment.
Replacing local restaurants and retailers with national chains and real-estate brokerage and other service-type tenants is a short-term decision with predictable long-term adverse consequences. With each restaurant, night club and store closing (even some of the nationals have closed), vitality is diminishing within the Aspen commercial core.
This, of course, makes the community less desirable for both residents and visitors. Long-term vacancies are increasing every year. The signs of a forthcoming rental rate correction are staring these landlords in their faces and yet they are apparently paying little or no attention.
Why can’t these landlords understand that in these difficult times occupied space at affordable rents is better than vacant space searching for higher rates? It takes a long time to recover lost rents and carrying costs resulting from significant vacancies.
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If these landlords are concerned that reducing rental rates in order to maintain occupancy will reduce their property values, they should consider negotiating short-term lease extensions or modifications with current tenants.
When the market ultimately recovers, their tenants’ businesses will likely improve, demand for space at higher rates will increase, and property values will recover. In the meantime the landlords will have maintained occupancy and a revenue stream.
Remember, the less vibrant the commercial core the less long-term demand for space. So landlords, don’t drive your tenants out. Do whatever is reasonable to keep as many of them as you can in business and live together to see another prosperous day. In the long run, we will all be better off.