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Not necessarily from the perspective of the bank, but the borrower/owner, I've heard of the concept of `prevailing market rent` to be a driver of this. If I re
by joncrocks 3y ago
Not necessarily from the perspective of the bank, but the borrower/owner, I've heard of the concept of `prevailing market rent` to be a driver of this.
If I rent out a space to A, they may have clauses that reference the rent/average rent for the building vs. their space. So it might be preferential for me to wait to fill a space at a higher price, financially.
In addition, renting out at a lower rate may end up turning up in surveys of rent in the area, leading to a lower average, meaning that future renters of space that is currently rented will try and negotiate downwards in the future.
- mrgoldenbrown 3y agoif you're worried about rent surveys, wouldn't vacant units ($0 / sq foot) be the worst possible scenario?
- eszed 3y agoFor that explanation to work, the vacant spaces must somehow be excluded from the "prevailing rate" calculation. Perhaps by calculating their rent according to their asking price - which would, interestingly, give (large-scale, at least) landlords even more incentive to hold a few properties vacant - or perhaps by entirely removing them from the equation. I don't know if GP's description is correct, but if it is then I agree with you (I assume) that $0-income spaces ought to be in some way included in the average.