[MereInterest]

> Lower rent income is still better than constant 0.

Depends on the terms of the lease and the expected changes in the future. Suppose you're negotiating a 5-year lease. There aren't too many new businesses at the moment, and so the market price is 25% below typical rates. If you take it and rent right away, then you get 3.75 normal years worth of rent over the next 5 years. On the other hand, if you expect that things will get back to normal in 6 months, then you might want to wait and rent in 6 months instead. Over the next 5 years, you then get 4.5 normal years worth of rent.

The numbers vary based on location, and what the crystal ball tells you about if/when the prices will change, but there can be a financial incentive to keep things empty until to avoid locking yourself into a low rate. I'd agree with other posters that there should be a tax on vacant commercial properties, so that it tips the equations in favor of renting now vs waiting indefinitely.

[inglor_cz]

Yeah, a 5-year lease is a big commitment, for both the landlord and the renting business.

I would imagine that a string of 2-year leases would work better in that case. More flexibility.

"if you expect that things will get back to normal" - sure, but after several years of vacancy you are deep in red numbers, so it would make sense to reevaluate that position. That is a reason why I would not expect to see long-term vacant properties in places that do have reasonable demand.

[CydeWeys]

Unfortunately, unlike with residential, there's a substantial amount of upfront build-out time and costs that go into retail. For most retail renters it simply doesn't make sense to sign a short lease.

[MereInterest]

The expectation can be significantly different from reality, because that's how humans work. We form an expectation of what something is intrinsically worth, and then get surprised when market conditions change. People still see that pinned price as the "true" price, and any differences as temporary fluctuations soon to be corrected once people change their minds.

I agree that it is illogical to expect a significant change in market price after several years of low demand. However, I don't think people behave perfectly logically, and so it is important to also determine what people are likely to do.