Commercial lease below market price - pros and cons

[Bobby Kolev]

Hi everyone, looking for your thoughts on a subject I am sure many small retail landlord are pondering one form or another.

I consider allowing a tenant in on a month-to-month basis from April til December at 50% normal retail price as they need less than 50% of the space available though if the business picks up they will definitely utilize the other half as well (and get to normal rent, of course).

Being month-to-month and with minimal changes/investment required I keep the option to showcase to other candidates and switch them on the fly if a better candidate shows up.

My concerns are less with the tenant than with the appraisal and tax office. My thinking is that for the current year the suite will be counted as empty as it was empty on 1/1/2021. If the tenant does not agree to substantial lease increase in December then the space can again be empty at 1/1/2022.

What are your thoughts on the pros and cons of short term leasing at 50% discount and specifically appraisal/tax implications of such a move?

[Joel Owens]

Seems like a ton of work with a bunch of negatives instead of waiting for a strong tenant with a long term lease. If you have high vacancy in your market and not much expansion for businesses then might make sense to get some money coming in.