Commercial Real Estate is valued based upon the rent that is collected in the building. So, if a landlord takes a lowball offer from a tenant because the space has been sitting vacant for a period of time, that will devalue the entire building’s “market investment value” through the entirety of the lease term. Thus, many landlords would rather keep vacant space in their building so they don’t get tied up in a lower-valued building for the long term.
While that reasoning may make sense at face value, landlords most likely will not 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 the 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 costs.
- 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 in the community.
While these reasons may help you better understand the mind of a landlord and why they wouldn’t accept a low-ball offer on their space, it’s important to understand why having expert representation is necessary to achieve the best location and terms.