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I've never understood why there isn't a D - lower prices until you get a commercial tenant who's willing to take you up at your asking price. As others have mentioned, converting from commercial to residential isn't cheap. Why do commercial prices stay sky high with a high vacancy rate?

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The property owner almost certainly has debt that needs to be refinanced every few years. Willingness of a lender to finance is based on projected rental income. If the asking rents are high, the projected income is high. This apparently works for a while even if the property is not actually leased. It would seem to me that at some point the lenders would start saying "yeah the projected income looks great but we notice that the building has actually been vacant for two years..." but I don't operate in this world so it's something of a mystery to me.

However if the building value has dropped, the lender's collateral value has dropped and probably below their owed balance. No one wants to 'realize' the new lower value, including the lender, so they tend to extend the loan and hope for the best.

Because they can enter forbearance and just wait

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