I buy both. Vacant buildings and leased buildings. But the way I price them is completely different. And I think a lot of sellers don’t fully understand how much vacancy changes the math.

Featured takeaway

The Vacant Discount Is Real Money, Not Negotiation

Sellers often underestimate the cost to lease an empty building. Understanding the 15-25% discount helps you price realistically and avoid costly holding periods.

Real Leases vs. Handshake Deals

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Real Leases vs. Handshake Deals

Month-to-month tenants and informal arrangements create cap rate risk. Buyers add 0.5-1% to their cap rate for non-enforceable leases, which directly reduces your sale price.

The Cost to Stabilize Vacancy

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The Cost to Stabilize Vacancy

Tenant improvements ($5-20/SF), leasing commissions (4-6%), and carrying costs (6-12 months) combine to create a genuine 15-25% vacancy discount.

Partial Vacancy Requires Anchors

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Partial Vacancy Requires Anchors

Half-leased buildings only qualify for a portfolio premium if existing tenants are strong enough to support lease-up of the vacant portion.

Timing Matters More Than Aggressive Leasing

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Timing Matters More Than Aggressive Leasing

Pushing tenants into quick short-term leases to boost the sale price often costs more in time, money, and risk than selling vacant.

Bottom line: If your building is vacant, sell it vacant rather than burning time and money on short-term leasing just to bump the price.

Lease Documentation: Month-to-month holdings are not the same as signed leases in buyer underwriting.
Stabilization Timeline: Budget 6-12 months for lease-up and plan your sale date accordingly.
Improvement Costs: Tenant improvements and commissions eat directly into value recovery on vacant space.
Partial Leasing Risk: Anchoring tenants must be strong enough to support additional lease-up during your holding period.

Leased buildings: the simpler equation

When a building has tenants on real leases, the value is based on the income. NOI divided by cap rate. I’ve written about this before. It’s straightforward. The better the tenants, the longer the leases, the lower the cap rate, the higher the value. A fully leased flex building with established tenants on 3-5 year NNN leases is a pretty easy deal to price.

The Leasing Gamble Doesn’t Always Pay

Sellers often lease up a vacant building to increase the sale price. But the time, tenant improvement costs, and leasing commissions often exceed the value increase. A strong tenant on a 3-5 year lease does add value. Month-to-month tenants do not. If you can’t land a real lease in the next 2-3 months, sell vacant. The cost of waiting usually exceeds the price gain.

The key word there is “real” leases. Month-to-month holdovers are not the same as a signed 5-year lease. A tenant who’s been on a handshake deal for three years is not the same as one with a written agreement. I see this a lot, especially with older buildings in Asheville and the smaller markets. The income might look good but if it’s not backed by enforceable leases, the risk is higher and the cap rate goes up.

Vacant buildings: the math flips

An empty building has no income. So you can’t use the income approach directly. Instead, I work backwards. I figure out what the building would earn once it’s stabilized (fully leased at market rents) and then subtract everything it takes to get there.

That includes:

Tenant improvement costs: $5-20/SF depending on the space and the tenant type
Leasing commissions: Usually 4-6% of the total lease value
Carrying costs during lease-up: Property taxes, insurance, utilities, and maintenance for however long the building sits empty. Usually 6-12 months for a typical flex or industrial building
A risk premium: Because there’s no guarantee the building leases up on my timeline

All of that typically shaves 15-25% off what the building would be worth if it were already leased. That’s the vacant discount. It’s not a negotiation tactic. It’s real money I’m going to spend and real risk I’m taking on.

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The in-between

Partially vacant buildings are the trickiest. Half the building is leased, half isn’t. I’ve seen a bunch of these in Columbia and across the Carolinas. The leased portion gets valued on the income. The vacant portion gets the vacant treatment. And then I look at whether the existing tenants are strong enough to anchor the building while I lease up the rest.

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What this means for you

If your building is currently vacant and you’re thinking about selling, don’t try to lease it up first just to get a higher sale price. Unless you can get a strong tenant on a long-term lease quickly, you’re burning time and money. Sell it to me vacant. I know how to lease it up. That’s what I do.

And if your building is leased, lock down those tenants. Get them on written leases. Push for 3+ year terms if you can. Every year of lease term you add increases the value of your building.

Seller takeaway

Your building’s value depends on lease quality and occupancy status. If you own a partially or fully vacant property in the Carolinas and want a realistic pricing assessment, call Roth Capital at 704-600-3839. We’ll explain exactly what your property is worth in its current condition.

Either way, call me. I buy both. 704-600-3839.

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Vacant vs. Leased: How It Changes the Deal When You Sell

The Vacant Discount Is Real Money, Not Negotiation