In theory it’s a great idea. The problem usually is with financing. The value of any commercial property is directly tied to the leases that generate the cash. So if you have a building that’s appraised, and likely financed, based on a certain lease rate (income generated), the minute that you accept a lower lease rate, the value of your property decreases for the term of that lease. It’s the reason that we don’t see empty CRU’s filled with tenants for years and years. Owners would rather hold out for higher lease rates than to take a lesser rate and ensure that the property is ultimately worth less. It’s the same theory that makes every commercial plaza chase after Tim Hortons, Subway, any Bank etc. those tenants are stable and pay the highest lease rates. If you are the owner, would you rather rent to Sam’s Donair shop or TD Bank? I’ll tell you what your banker would want.
