Comment by jfengel
7 hours ago
A three year lease locks in the lower revenue. If the market recovers tomorrow you can have the full price for nearly as long.
But I'm not convinced the risk-reward calculation fully explains it. You can see plenty of places where they know full well it's not going to rent at the price they're asking. I think there are other factors, including not letting your other high-lease tenants think that they're now occupying a low-rent establishment.
Your jewelry store would rather not suddenly be next to a cheapo nail salon. And if you've got a third property to lease, the high-fashion brand looking at it will see the nail salon and move on.
This is the same reason in housing market where landlords let their property sit empty instead of accepting lower rent. There is a perception that lower rents attract problem tenants and it’s not worth the headache even if that means losing money.