With property prices having fallen somewhat on very light volume and at least some people predicting much bigger declines to come, my attention has been on the leasing market. As a long term property investor, it is far more important to me to maintain occupancy than to extract the maximum fair market rent.
With that objective in mind, I have just agreed to renew a lease at an increased rental of 4.8%. Based on recent comparables (not many in this building), I had assesses the market rent as being slightly higher and would have represented a rental increase of 7.1%. However, if the tenant had not signed up for a new lease, I would have been faced with a vacancy of uncertain duration, at least some redecoration costs as well as agency commission. Settling for a little less than market rent to keep the tenant for another two years was unquestionably the right thing to do.