It Depends - May Be the First Best Answer

Last Updated: August 2026
Read Time: 3 - 5 minutes
Author: Andrew Lofredo, CEO, CRE Vertical Advisors

Should we take the national tenant at a lower rent?

Should we extend an existing tenant today at below-market rent?

Does a 1031 exchange make sense?

Should we refinance or sell?

Should we renovate the vacant space before we have a tenant?

These questions come up constantly in the middle market, among family offices, high-net-worth investors and private owners who don't operate against a fund mandate or answer to an investment committee. Institutional capital often has these questions answered before a deal reaches the table, since the mandate defines the objective in advance. Owners outside that world don't have that shortcut. Each decision has to be worked out on its own terms, against that owner's specific goals.

After more than 30 years in commercial real estate, my answer to questions like these often starts with the same two words: it depends. I mean that as a starting point, not a hedge. It depends because there usually isn't the right decision without understanding the objective, the facts, the alternatives and the risks. The more immediate question is what the decision depends on.

Of course, fundamentals come into play and can increase the speed of decisions by not having to recreate the wheel each time.. Know your market, underwrite conservatively, understand your capital structure, and, do not lose money. But the fundamentals are where the analysis starts. Once they're in place, the real decisions live in the nuance: which tenant, which term, which timing, which structure. That's where "it depends" comes into play – and drives, which fundamentals to rely on.

Start With the Real Goal

Before analyzing the alternatives, I like to ask a simple question: what are we really trying to accomplish? Or, in more dynamic terms: what does winning look like?

One of the easiest mistakes to make when faced with a decision is to optimize for a lesser goal. A lesser goal isn't necessarily a bad goal. It's usually something we genuinely want. Higher rent is good. Higher occupancy is good. Lower interest rates are good. Reducing taxes is good. Lower operating expenses are good. The problem comes when one of those goals becomes the objective rather than a component of the larger strategy. In systems thinking, there is a concept that over optimizing one component can act as a detriment to the system as a whole.

Consider a 1031 exchange. Deferring taxes can create significant value, but the ultimate objective presumably isn't simply to avoid paying taxes. It's to preserve and grow wealth. If completing the exchange requires an owner to overpay for a replacement property, accept risks they otherwise wouldn't accept, or buy an asset they wouldn't purchase without the tax deadline, we need to ask whether the tax strategy is serving the investment strategy or whether the investment strategy has become subordinate to the tax strategy. Tax efficiency is an objective, but it isn't always the sole objective, and that same principle applies throughout commercial real estate. 

The National Tenant or the Higher Rent?

Suppose we're leasing a shopping center. A national tenant offers $30 per square foot. A local operator offers $35. Which lease should we take?

If we're solving for rent, the answer seems obvious. But what are we really trying to accomplish? Maybe we're preparing the property for a refinance or sale, and the national tenant's credit and lease term could have an impact well beyond the $5 difference in rent. Maybe the local operator has excellent financials, requires significantly less tenant improvement money and is a better fit for the center. Maybe one use creates more traffic, one requires an expensive buildout, or the national tenant has termination rights or has an onerous lease form that you are required to use, which make its apparent credit less valuable than it initially appears.

The question isn't just who will pay the highest rent. It's which lease best advances the strategy for this asset. And the answer depends.

Take Below-Market Rent Today or Wait?

Now consider an existing tenant paying below-market rent. They're a strong tenant and willing to extend early, but they want to remain below market. Do we take the certainty or wait?

Again, it depends, and the analysis here runs through a different set of questions than the leasing decision above. How far below market is the proposed rent, and how confident are we in the market rent? What would replacing the tenant cost, and how much downtime could we experience? What tenant improvements and commissions would be required, and how important is the tenant to the rest of the property? What is ownership planning to do with the asset? An owner preparing to refinance may value long-term contractual cash flow differently than an owner planning a major repositioning, and the decision has to follow the strategy rather than a fixed rule.

Four Questions

While the underlying analysis can become complicated, the decision process can remain relatively simple. When the answer is it depends, we come back to four overarching questions.

What are we really trying to accomplish? Define success before evaluating the alternatives, and ask whether the metric we're focused on is the real objective or simply a lesser goal.

What do we know, and what are we assuming? Separate facts from assumptions, and identify what information could materially change the decision. We rarely have perfect information in commercial real estate. The goal isn't to eliminate uncertainty. It's to understand where it exists.

What are the trade-offs? Every meaningful decision gives us something and costs us something. What do we gain, what do we give up, and what is the opportunity cost? What happens if we're wrong, and is that risk acceptable given what we're trying to accomplish? The appropriate comparison isn't simply one option versus doing nothing. It is one option versus the best realistic alternative.

What can we control, and what do we do next? We can't control interest rates, economic cycles, tenant decisions or capital markets, but we can control how we prepare and respond. We can control our due diligence, negotiations, capital planning, financing structure and execution. Eventually, analysis must become a decision, and a decision has to become action.

Knowing What It Depends On

Commercial real estate is full of rules of thumb: maximize rent, keep occupancy high, minimize expenses, reduce borrowing costs, defer taxes. They exist because they're usually right, which is exactly what makes them dangerous when you have nuanced goals. A rule that's usually right is easy to apply without thinking, and not thinking can lead to lost opportunity. The same goes for the default decision patterns and metrics that come with them, the standard playbook for how a lease, a refinance or an exchange is supposed to go. They're useful precisely because they save us from re-deriving every decision from scratch, which is certainly valuable, but only as a starting point.

This distinction carries even more weight outside institutional ownership. Institutional capital typically operates against a defined mandate: a fund-level IRR hurdle, a set hold period, an investment committee applying the same underwriting criteria across every deal. In that world, the objective is often already answered before a given decision reaches the table. Family offices, high-net-worth investors and private owners rarely have that luxury. The objective is more likely to be specific to that owner: a liquidity need tied to a family event, a legacy asset held for reasons that have nothing to do with current yield, a generational transfer that changes what "success" means for this property. Rules of thumb built for standardized mandates don't account for any of that, which is exactly why the questions behind "it depends" do more work in these settings than in institutional ones.

A property is a collection of interconnected decisions, where leasing affects financing, financing affects cash flow, and capital spending affects leasing, all of it running back to what ownership is trying to accomplish. Treating any one rule of thumb, or any one default pattern, as the objective breaks that chain somewhere.

That's what it depends accomplishes: forcing the question back to what are we really trying to accomplish, what do we know versus assume, what are the trade-offs, and what can we control? Not a way of delaying the decision. A way of making sure the decision holds up.

This article is for general informational and educational purposes only and does not constitute legal, tax, financial, or investment advice. The views expressed are those of the author and are based on market conditions as of the date of publication, which are subject to change. Readers should consult with their own legal, financial, and tax advisors before making any real estate or capital planning decisions.