Question

Lease lengths for commercial property can vary considerably. All else equal, owners prefer longer leases for which of the following reasons?

A) Increased flexibility
B) Greater potential for higher rental income
C) Easier property management
D) Reduced risk of vacancies

Answer 1

Owners prefer longer leases for reduced risk of vacancies, greater potential for higher rental income, and easier property management.

Step-by-step explanation:

Owners prefer longer leases for commercial property for reduced risk of vacancies, greater potential for higher rental income, and easier property management.

1. Reduced risk of vacancies: Longer leases provide stability and a guaranteed income stream for property owners. With longer leases, owners don't have to worry about finding new tenants frequently, reducing the risk of vacancies and the associated costs.
2. Greater potential for higher rental income: Longer leases usually come with higher rental rates. Property owners can negotiate higher rental rates over a longer period, increasing their potential for higher rental income.
3. Easier property management: Long-term tenants provide stability and make property management easier. Owners can establish long-term relationships with tenants, reducing the need for frequent repairs, turnover costs, and marketing efforts.