Why don’t landlords consider lowball offers?
Commercial real estate is valued based upon the rent collected in the building. Therefore, if a landlord accepts a lowball offer from a tenant because the space has been vacant for some time, it will devalue the entire building’s ‘market investment value’ throughout the lease term. Thus, many landlords prefer to keep vacant space in their building to avoid being tied up in a lower-valued building long-term. While that reasoning may make sense at face value, landlords are unlikely to consider lowball offers on vacant spaces for several reasons. Here are just a few:
- Market value: The landlord may believe that their property is worth more than the lowball offer based on current market conditions and demand for similar properties in the area.
- Cost of holding: The cost of holding onto a property without a tenant can be significant, and a lowball offer may not cover these expenses.
- Negotiating strategy: Landlords may prefer to start with a higher asking price and negotiate down rather than accept a lowball offer from the start.
- Reputation: Accepting a lowball offer may be perceived as a sign of desperation and could damage the landlord’s reputation within the community.
While these reasons may help you better understand a landlord’s perspective and why they wouldn’t accept a lowball offer on their space, it’s important to recognize the necessity of expert representation to achieve the best location and terms.