September 19, 2020 1 Comment Experience Working in Alberta's Oilfield, Finance

The Truth Behind High Commercial Vacancy Rates

Commercial landlords have kept their rates sky high despite the downturn. Many bluntly say they’ll gladly let their spaces sit empty for months to years to come – until the “right” leasee comes along – and rather lose money to accomplish this goal. In Edmonton, the commercial vacancy rate has been around 1/5 – much higher in certain areas than others. You can find some complexes or buildings where almost all the units are empty.

It has been like that even before COVID-19. For example, there was a brand new multi-story commercial building south of Ellerslie on 91ST. It was just finished construction about a year ago, but 0 businesses have moved in. Talking to the big cheese in charge: he said his family was very wealthy and could afford to let the entire building sit empty for years to come, until the “right” tenant came along [who would pay asking rents/lease rates]. They basically continue that gamble to make up for their losses when the next sucker will come and pay asking price.

Capitalism and the free market has its merits, but when left completely free, a free market is never actually free and functional.

Re: “They do it for the write-offs”

“Write-offs” or tax deductions just reduce your taxes payable on your taxable income. Taxes are payable usually only on net income (so if you’re actually making a profit). Unless you’re doing it in expectation of profit in the future (which is what they are expecting, with the “right” tenant/leasee/property buyer), it doesn’t make sense to purposely bleed costs for no profit. If you have no actual reasonable expectation of profit (a topic beaten to death in the Tax Courts), the CRA can actually come after you and deny your deductions.