Have you ever wondered why empty storefronts in major cities stay empty for so long? There is a new and still in the works paper by Daniel Stackman and Erica Moszkowski, and it provides valuable information about one piece of the puzzle. Here is the abstract: We document the rise of storefront vacancies in prime
The post The Contractual Origins of High-Rent Urban Blight appeared first on Marginal REVOLUTION.
Have you ever wondered why empty storefronts in major cities stay empty for so long? There is a new and still in the works paper by Daniel Stackman and Erica Moszkowski, and it provides valuable information about one piece of the puzzle. Here is the abstract:
We document the rise of storefront vacancies in prime retail locations, a phenomenon we refer to as high-rent blight, in America’s largest and most expensive urban retail market: Manhattan. We identify a little-known contracting feature between retail landlord and their bankers that generates vacancies in the downstream market for retail space. Specifically, widespread covenants in commercial mortgage agreements impose rent floors for any new leases landlords may sign with tenants, short-circuiting the price mechanism in times of low demand for retail space. Quasi-experimental estimates suggest that binding rent floors imposed by mortgage covenants substantially reduce the probability of occupancy, and we show in counterfactual exercises that covenants may have increased vacancy rates by as much as 14% over the 2016 to 2020 period.
There are some earlier MR posts on this question, though I am not sure of the appropriate key words to find them…
The post The Contractual Origins of High-Rent Urban Blight appeared first on Marginal REVOLUTION.
Economics, Law, Uncategorized
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