A question that I get asked a lot is why won’t the landlord accept a lower rent when the space or commercial real estate property (office, retail, or warehouse space) has been sitting empty for a long time (months or years even). One would naturally think that the building owner would want to receive rent payments now vs later regardless of whether they reduced the rent or not.
Reasons Why Landlord’s or Commercial Building Owner’s Will Not Reduce the Rent Amount
- In many cases building owners or landlords will not reduce the rent for one simple reason………..they just don’t want to ………they want what they want and they are going to wait for the right deal to come along.
- If a landlord has a mortgage on the property then the bank may require that the owner get a certain rent amount. For example they are not able to charge less than $XX amount.
- Maybe the property has recently been purchased and the new owner paid a high price for the property…..therefore have to receive a certain amount of rent to cover their note.
- The new owner of the property could also have a lot of cash on hand or bought the property in all cash and are willing and able to wait for a tenant willing to pay their asking rents.
- The property could be in foreclosure and the bank is holding on to the title, thus will not accept a significantly reduced amount.
- Maybe the owner is trying to sell the property and want to keep the rents high since the rental amounts are what dictate the value of the building.
Landlords do not like to be low balled for no reason at all. If you are going to make an offer make one that is based on existing market conditions and quantifiable research. Make a low ball offer and landlords will not take you seriously. Do you homework and know what a landlords investment objective is. For example If they are trying to sell the property they may be more willing to give a little free rent rather than reduce the rate since that does not affect the value of the building the same way.
There is a balance you have to strike when making offers to lease or purchase commercial real estate space. This is where a good commercial real estate agent can help. They understand the market and comps in the area, and can assist you in putting together a proposal that makes business sense for you and for the seller or landlord.