Lower rent income is still better than constant 0. At least it covers necessary repairs.
One would expect that after some months of making nothing, the landlord would start to have second thoughts.
Depends on the terms of the lease and the expected changes in the future. Suppose you're negotiating a 5-year lease. There aren't too many new businesses at the moment, and so the market price is 25% below typical rates. If you take it and rent right away, then you get 3.75 normal years worth of rent over the next 5 years. On the other hand, if you expect that things will get back to normal in 6 months, then you might want to wait and rent in 6 months instead. Over the next 5 years, you then get 4.5 normal years worth of rent.
The numbers vary based on location, and what the crystal ball tells you about if/when the prices will change, but there can be a financial incentive to keep things empty until to avoid locking yourself into a low rate. I'd agree with other posters that there should be a tax on vacant commercial properties, so that it tips the equations in favor of renting now vs waiting indefinitely.
I would imagine that a string of 2-year leases would work better in that case. More flexibility.
"if you expect that things will get back to normal" - sure, but after several years of vacancy you are deep in red numbers, so it would make sense to reevaluate that position. That is a reason why I would not expect to see long-term vacant properties in places that do have reasonable demand.
I agree that it is illogical to expect a significant change in market price after several years of low demand. However, I don't think people behave perfectly logically, and so it is important to also determine what people are likely to do.
If you need a loan or so, won't the bank actually investigate if the units are vacant?
Some kind of regulation that imposed an equation that increasingly devalues property from its last rented price the longer it remains vacant would do wonders here at correcting the market distortions. Another way to implement that would be to value vacant properties using the total rents charged over the past 5 years -- so the more vacancy there is in that, the more your total rent suffers.
Lenders can (and should) make this change too. It doesn't even need to be imposed top-down by the government.
The movie “The Big Short” actually does a great job of showing this but for the 08 financial crisis.
The problem arises when predictions about the future don't come true. Like a pandemic lowers the value of living in a city, so the amount of rent you can charge goes down. Do you admit that to the bank and let them change the terms of the loan (or have them foreclose), or do you pretend everything is fine, keep your asking rent high, and hope things turn around before the bank calls you?
We don't rent a place because there is a cost in managing the renter too, and a single bad renter would probably wipe all the gains.