Someone mentioned that for accounting reasons property portfolios may be better sitting empty than offering tenants a discount because their yields look bad?
In: Economics
If the property sits empty you can claim the rent you didn’t receive as a loss on your taxes, as well any maintenance costs related to the property.
Since there is no tenant or lease to abide by, what you set the “rent” at is arbitrary, as long as it’s not obnoxiously high.
If your real estate portfolio is deep enough you can potentially play the numbers in a way that your “income loss” from that property becomes a net gain. Or, at the very least, it’s less damaging than leasing the property at a discounted rate.
The other consideration is that once a property lowers the costs to lease, it brings down the average rental costs in that area. Simply letting it sit empty allows them to keep the rents higher on properties that aren’t currently vacant.
This is why nearly 1/3 of all commercial properties in NYC are vacant. The rents are so incredibly high that very few business could operate out of them and ever make a profit. But no one wants to lower their rents as that would allow their current tenants to potentially negotiate a lower rate when their leases expire.
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