I scoped the main line and found that a pipe in the basement has completely rotted away.

Such as tax preparers, sandwich shops, etc.... that will really suffer if traffic volume dries up.If this is his thought on this, it comes down to preserving the "Asset Value" of the shopping center through tenant mix.Storage units seem to be low volume traffic draws compared to a Home Depot or something like that.

Depending on your loan type, you will need to ask your lender if anything will prevent financing, if so those repairs will need to be done prior to closing - example roof needs replacing, poly pipes, wood rot, etc. 

Seems high for just a tank, very low for a complete new septic (I paid $12,000 for a new 1000 gal tank and leaching fields in Middlefield CT a couple years ago).Rotted sills and termite damage could be minor, could be major.

Or has the market dried up with newer homes already?

Looks like it needs flooring, paint, countertops, cabinet refinishing (or replacement), roof repair, dry rot repair, maybe foundation repair, lots of wall repair, and possibly plumbing/electrical repair (nothing can be seen in the photos but common in that area).I agree with @Dylan Vargas that there is no money to be made in flipping this property based on your numbers. 

Double check, but it seems like a pretty cut and dry breach of contract case. 

We need something that requires a bit more technical ability, roof repair or replacement, interior remodel or reconfigure, rot repairs needed, that kind of thing. 

I have conducted a  dry listing to see if I could get interest and was able to 8 applications in 24 hours before I removed the listing at a rate of 700$ per room.

COULD THIS BE PART OF THE ROT UNDER THE FLOORING?