Monday, April 29, 2013

Lease renewal

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.

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