[SarcasticMarmot]

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.

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.

 

[Greenspace]

Also in particular what you can borrow to finance your next development is dependent on the valuation of your existing assets. You want your empty commercial spaces to be valued high, thus why they don't drop their lease rates.

 

[thommyjo]

Also in particular what you can borrow to finance your next development is dependent on the valuation of your existing assets. You want your empty commercial spaces to be valued high, thus why they don't drop their lease rates.

Do you know how are valuations changed based on vacancies? Like if a building like fox 2 has had empty CRUs for 6 years, does it eventually get adjusted? At a certain point the cashflow and actual annual revenues have to factor in, right?

Shouldn’t the book value of the asset reflect future cash flow potential? But if the cashflow doesn’t happen, does anything change?

And how is commercial different than residential for this? Seems like companies are happy to drop rental prices or offer big incentives to try to fill units.

 

[Greenspace]

^Very good questions I don't have the answers to. Someone else here might.

 

[bolo]

Based on my personal experience with appraisals (which can vary by appraiser).

Occupied space is calculated: actual rent times market occupancy rate
Unoccupied space is calculated: market rent times market occupancy rate
When it comes to actual vacancy (i.e. you're occupancy is less than market average), I usually see an increase in the cap rate to account for that risk (i.e. you want a higher potential return to own this asset), but this varies wildly by appraiser and I have seen owners exert a lot of pushback to keep the cap rate lower.

It's a bit of a shell game. It's easy to just use market rates, market occupancy and market cap rates (it's all potentially true) and just ignore the reality of your vacancies. Once you lock in a below market lease, you can't ignore that and the calculation will lower the valuation of the building. This impacts your potential sale price, plus any loans you collateralize the asset against.

 

[thommyjo]

Based on my personal experience with appraisals (which can vary by appraiser).

Occupied space is calculated: actual rent times market occupancy rate
Unoccupied space is calculated: market rent times market occupancy rate
When it comes to actual vacancy (i.e. you're occupancy is less than market average), I usually see an increase in the cap rate to account for that risk (i.e. you want a higher potential return to own this asset), but this varies wildly by appraiser and I have seen owners exert a lot of pushback to keep the cap rate lower.

It's a bit of a shell game. It's easy to just use market rates, market occupancy and market cap rates (it's all potentially true) and just ignore the reality of your vacancies. Once you lock in a below market lease, you can't ignore that and the calculation will lower the valuation of the building. This impacts your potential sale price, plus any loans you collateralize the asset against.

Seems crazy to me haha. But having a few buddies in commercial real estate, I’m always amazed how it’s less data backed or logical than it might seem. Guess that’s just how it works. And why I think a tax that triggers a different calc, could be effective with the right protections to reduce demolitions and to moreso target newer projects.

 

[MacLac]

Falcon One Tower: Transforming Downtown Edmonton Living - Graham Construction & Engineering Inc

Falcon One is a 30-storey residential tower featuring 234 units, located in downtown Edmonton. As the first phase of the Falcon Towers development, the building boasts panoramic views of the North Saskatchewan River.

grahambuilds.com

 

[Gronk!]

 

[scyeg]

Well, hopefully the fact that they named it Falcon One bodes well for Falcon Two happening.

 

[Kosy123]

It'll probably lease up with students, couples and families decently enough. I've got utmost confidence based on vibes that Falcon Two will happen soon. I wouldn't mind the same building but taller and with glossier balcony windows tbh.

 

[Gronk!]

Well, hopefully the fact that they named it Falcon One bodes well for Falcon Two happening.

There is a blank white wall on the south podium (see my last pic).

 

[God]

I like that they chose not to go with a dark tint on the first story so people walking by can see into the potential stores. It’s almost like Langham lurks in these forums sometimes…

 

[Gus Haynes]

Learning lessons from The Quest and Capital 108.

 

[CplKlinger]

Downtown as home: Falcon Tower - Transforming Edmonton

For Shelby Krishka, living downtown is about enjoying her vibrant, busy lifestyle with ease and convenience. Every day offers something new, from cafés to restaurants to live music and the never-ending excitement of the Ice District. And, as an Oilers fan, the best part about living near 104...

transforming.edmonton.ca

"Langham Developments is a key player in revitalizing 104 Street with other projects, such as Icon Tower and Fox Tower, bringing more residents to the downtown core. Falcon Tower was the next progression in this journey, with Falcon Two on the horizon for 2025."

That'd be especially great if they keep Falcon 2 exactly the same as #1, as they said they would, because the majority of the units in Falcon 1 have two or more bedrooms; making it more likely that some families will live there. My rough napkin math is that it has ~26 3-bedroom units, 114 2-bedroom units, and 94 1-bedroom units.

 

[Kosy123]

Downtown as home: Falcon Tower - Transforming Edmonton

For Shelby Krishka, living downtown is about enjoying her vibrant, busy lifestyle with ease and convenience. Every day offers something new, from cafés to restaurants to live music and the never-ending excitement of the Ice District. And, as an Oilers fan, the best part about living near 104...

transforming.edmonton.ca

"Langham Developments is a key player in revitalizing 104 Street with other projects, such as Icon Tower and Fox Tower, bringing more residents to the downtown core. Falcon Tower was the next progression in this journey, with Falcon Two on the horizon for 2025."

That'd be especially great if they keep Falcon 2 exactly the same as #1, as they said they would, because the majority of the units in Falcon 1 have two or more bedrooms; making it more likely that some families will live there. My rough napkin math is that it has ~26 3-bedroom units, 114 2-bedroom units, and 94 1-bedroom units.

2025? HERE WE GO BOYS AND GIRLS