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Sounds like a regulatory failure; an unoccupied building shouldn't be able to retain book value.

At one point there were suddenly dozens of new bank branches a year because that was the only kind of business that could afford the rent. So the banks ended up propping up the values of their loans.

There were subway ads touting how convenient Chase was with 3k locations in Manhattan alone.

It's not a regulatory issue. The issue is loan covenants negotiated between private lenders and borrowers. No one forced them to agree to those terms, and they are free to renegotiate at any time.

But cities that want to retain vibrant downtowns should consider imposing some sort of vacancy tax on commercial real estate. That would give landlords an incentive to lease their space out at a lower rate rather than waiting for a more lucrative tenant to come along.

Curious and just brainstorming a possibility here; is it possible for a city to rezone an existing property? Say a building that's unoccupied for N years triggers an automatic zoning review.

Cities in most states have some freedom to rezone existing properties. They already conduct periodic zoning reviews when updating their master plans, and real estate owners can request zoning variances at any time. So I don't know that a vacancy trigger would really change anything.

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