this post was submitted on 25 Oct 2023
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I find this so strange because in residential real estate there’s seldom any real relationship between a property’s value and the rent the owner charges.
How on earth is it better for a property to sit vacant for months upon months with a rent too high for the market, than for it to be leased constantly at a lower rent?
Rent is definitely a factor along with interest rates but the article talks about it "The key reason why is to do with how retail properties are valued, which comes down to what the asking rent on the property.".
The issue is that if you were getting 1000/wk and then the tenant left you now have a temporarily vacant property if you lower the rent and get someone back in at 600/wk now your property valuation is 40% less which matters a lot for loans.
It's also worth noting that commercial leases are often much longer so they might be waiting for a rebound in the market before renting it out.
Unfortunately this can lead to death spirals in a lot of areas.