They can borrow against the property at the stated rent instead of what the market would actually pay. As soon as they accept lower rents they can no longer claim it's worth as much in collateral.
Hmm. I would never have expected the kinds of lenders who might be in a position to accept a large commercial property as collateral to be so gullible as to just accept that number at face value without paying any attention to other factors that might call it into question.
Or are the "lenders" in this case actually retail investors who are buying into dodgy REITs and suchlike?
Commercial properties are valued based on their cap rate, so while vacancy is important to a potential buyer the seller is going to take the current square-foot rental rate and multiply it by the total size to get the projected annual revenue. They can then offer an 8% cap rate or other attractive return on a much higher asking price. As soon as they lower lease rates to increase occupancy the asset value is impacted moving forward, so if you've got a big inventory of commercial real estate that you're looking to sell it may be worth it to keep it largely vacant for years.
As a buyer you need to watch for new tenants at attractive rates as well. Sometimes the seller signs a 5 or 10 year lease with a connected company to drive up the cap rate, then a few months after selling the tenant defaults. As the landlord your recourse is limited, slow and expensive.
RTP in Durham, NC--there are so many office parks that were just 80-90% empty after 2001. I have a hard time imagining that any of them have any decent occupancy even now. That whole area must be commercial RE hell for some investors somewhere. When Nortel tanked they took down a good portion of the local economy. Sad.
Can't imagine there are still many mostly empty office parks left in RTP. I'm not a commercial real estate expert, but I'd expect if that were the case you wouldn't see so many brand new office-park type buildings going up. E.g. new buildings like this one that Microsoft moved into within the past couple years: https://goo.gl/maps/VRVCHMccD1S2
There's dozens of buildings like these either recently built or under construction in or near RTP.