Why Commercial Real Estate Landlords Won’t Lower Office Rents (Even If the Building Is Basically a Ghost Town)
Ah, the modern office: once a bustling hive of productivity, coffee breaks, and passive-aggressive fridge notes, now a quiet, echo-filled monument to the Pre-Zoom Era. With so many cubicles sitting vacant and Keurig machines gathering dust, you'd think commercial landlords would be practically begging tenants to move in with rock-bottom rent prices.
But nope.
Somehow, despite vacancy rates higher than Snoop Dogg, landlords are sticking to their sky-high lease rates like it's 2019 and WeWork is still cool. So what gives? Why aren’t these savvy real estate overlords slashing prices like it’s a Black Friday doorbuster?
Let’s dive into the strange psychology (and stranger math) behind this mystery.
1. If We Lower Rent, Everyone Wants Lower Rent
Landlords know that the moment they drop the rent for one tenant, every other tenant gets that glimmer in their eye. You know the one. The "hey, why am I paying $35/sq ft for an office no one’s sat in since the before-times?" kind of look.
It’s not just a slippery slope—it’s a financial avalanche. Before long, their building turns into a discount mall with 10-year leases written in Comic Sans.
2. Appraisals: It’s All About the Vibes (and the Rent Rolls)
Buildings aren’t valued based on good vibes, ergonomic chairs, or how many kombucha taps they’ve got. Nope—it’s all about that sweet, sweet rent roll. If a landlord lowers rents, the building’s value drops faster than employee morale during performance review season.
And if the value drops? Their loan terms might change, lenders start side-eyeing them, and things get very awkward very quickly.
3. Vacancy Is a Feature, Not a Bug (For Tax Purposes)
Believe it or not, having some vacancy can actually help landlords out on their taxes. (Don’t worry, your accountant still thinks you can't write off that “business” trip to Cabo.) And when a landlord’s cash flow is still solid thanks to existing leases, sitting on empty space isn’t as painful as you’d think.
4. They're Waiting for the 'Big Fish' Tenant
You: “Here’s a modest offer for a few thousand square feet.”
Landlord: squints “Hmm. I think I’ll hold out for a Fortune 500 company to lease the whole floor at full price.”
Landlords are basically fishing with gold-plated rods, waiting for the corporate marlins while ignoring the perfectly respectable trout waving cash at them.
5. Pride. Ego. Denial.
Some landlords are still emotionally stuck in 2018. “The market will bounce back,” they say, sipping espresso in their corner office—alone. They don’t want to admit that flex work is here to stay, and that Karen from accounting is never giving up her sweatpants.
Admitting the rent needs to drop is like admitting their building isn’t a premium Class A asset. And that? That’s personal.
In Conclusion…
Office landlords may not be lowering the rent, but it’s not (entirely) because they’re villains twirling mustaches while swimming in tenant security deposits. They’ve got spreadsheets, bankers, and a fragile sense of pride all telling them: hold the line.
But hey, if you're hunting for a new office space and your dream spot looks emptier than a holiday party invite list sent in February, it never hurts to ask. Just be ready for a polite “no” wrapped in commercial real estate jargon and the faint scent of denial.