<story><title>Landlords are trying not to rent to startups in San Francisco</title><url>https://42floors.com/blog/cre/landlords-are-trying-not-to-rent-startups</url></story><parent_chain><item><author>fredkbloggs</author><text>This is a great analysis and the argument makes perfect sense in every respect.  The only thing I find dubious is the idea that the bust is 2-4 years out.  I think if you polled most SF commercial landlords, they would tell you that they expect most of their startup tenants to start having difficulty paying the rent in no more than 18 months.  It would be interesting to see some actual data on this.  After all, there&amp;#x27;s not much benefit to demanding 5-year leases if you think that (a) prices are going to keep going up for 3 or 4 more years, and (b) your tenants are mostly going to be solvent for at least that long.  If the landlords really believed the bust were 3 or 4 years out, given the sub-sub-sublease problem, they&amp;#x27;d take startups on 1-year terms at a MUCH higher rate than established tenants who could negotiate modest discounts on longer-term leases.  The evidence presented suggests rather strongly that most landlords don&amp;#x27;t expect these startups to be in business in 2 years, and I agree.</text></item></parent_chain><comment><author>ww520</author><text>It&amp;#x27;s not that the bust is coming soon.  Startups are notoriously bad tenants as a class, whose life cycle is too short.  Signing long lease with them just doesn&amp;#x27;t make sense.  By definition a startup is an experiment to build products and a business in a short amount of time, with one to two years of funding in most cases.  9 out of 10 these experiments fail, so 9 out 10 startup tenants will move out after a short time.  Commercial landlords want long term tenants, not people going out of business in one or two years.&lt;p&gt;Commercial lease is really only applied to companies that can stay in business.  A long lease is often not enforceable.  The incorporated company simply declares bankruptcy and it&amp;#x27;s hard to collect the money on the full term of the lease.  I remember in the Dot Com bust days some failing startups simply stopped paying rents but stayed on, to stretch that last dollar or to burn out that security deposit.</text></comment>
<story><title>Landlords are trying not to rent to startups in San Francisco</title><url>https://42floors.com/blog/cre/landlords-are-trying-not-to-rent-startups</url></story><parent_chain><item><author>fredkbloggs</author><text>This is a great analysis and the argument makes perfect sense in every respect.  The only thing I find dubious is the idea that the bust is 2-4 years out.  I think if you polled most SF commercial landlords, they would tell you that they expect most of their startup tenants to start having difficulty paying the rent in no more than 18 months.  It would be interesting to see some actual data on this.  After all, there&amp;#x27;s not much benefit to demanding 5-year leases if you think that (a) prices are going to keep going up for 3 or 4 more years, and (b) your tenants are mostly going to be solvent for at least that long.  If the landlords really believed the bust were 3 or 4 years out, given the sub-sub-sublease problem, they&amp;#x27;d take startups on 1-year terms at a MUCH higher rate than established tenants who could negotiate modest discounts on longer-term leases.  The evidence presented suggests rather strongly that most landlords don&amp;#x27;t expect these startups to be in business in 2 years, and I agree.</text></item></parent_chain><comment><author>ChuckMcM</author><text>Agreed, many landlords seem to feel like the trouble is a mere few months away, although often any attempt at getting them to discuss how they arrived at that conclusion gets something like &amp;quot;I just know it.&amp;quot;&lt;p&gt;So one wonders about the whole &amp;quot;wisdom of the crowds&amp;quot; or &amp;quot;herd&amp;quot; in this case, and whether or not they can sense something that isn&amp;#x27;t showing up in other indicators. I&amp;#x27;ve been looking but other than the extensively covered late stage valuation madness I&amp;#x27;ve not found good correlation for this feeling.</text></comment>