Monday, August 21, 2006

Crazy banks to blame for Kings Cross rental sting?

I have long wondered why landlords in places like Kings Cross and Oxford street prefer an empty shop at outrageous rent to a tenanted shop at a reasonable rent. Elizabeth Farrelly in the SMH last Thursday explained:

'This disturbingly counter-intuitive effect derives from the fact that retail
properties are valued on rental yield. To reduce rent is to lose borrowing
capacity, summoning the spectre of foreclosure. Even vacancies are better
than that.'

So banks would rather lend to a person with no rental income than to someone with a reasonable one.

It's a vexed question in Kings Cross which, despite endless spin to the contrary from Council and the Kings Cross Partnership, continues to drag its retail feet.

Some residents, and Clover Moore, want to curtail the liquor and club industry in the Cross. There is a theory this will reduce rents in neighbouring premises.

However it would be difficult to prove the effect -- given that the same problem exists elsewhere, and it appears to relate to banks, there is a risk that this negative policy would only succeed in curtailing the more successful night time economy of the Cross while having little effect on rents. Let's not forget that all these late-night patrons are voting with their feet and their dollars They have rights to their entertainment just as we residents have a right to have a say in our area.

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