Hi Doug. You need to look at two things here. The first of course is short term revenue and that is the obvious one. The less obvious is based on the future resale of the property. Is your plan to hold the property for more than 20 years? If not, a low lease rate will drastically affect your resale value based on cap rates. There won't be a way to fix that issue easily down the road even when the economy rights itself.
If you are holding the property long term (20+ years) then the decision is not as easy. How long can you afford to allow the space to sit empty? How much more do you have to charge in rent to make up for the building sitting empty for 12 months more? What does your local market look like? Are there other choices in the area for this client? If you are the only spot in the area, counter with a shorter term lease option. This way your tenant get the benefit of a good lease rate now and you get the ability correct the income down the road so you are priced correctly at the time you are going to sell.
Good luck in your decision.
Nov 4, 2010