lessees may be able to negotiate a low rent because of their status.
For example, a government department, an anchor tenant in a shopping
centre or a large institution. This factor is known as the micro
micro factor and is an important variable in investment value
that is often overlooked or glossed over by valuation commentators.
There is good argument for using the "credit worthiness" of
each tenant (as determined by financial rating agencies) and using
this rating to determine the appropriate capitalization rate against
importance of this factor is also shown by the success of banks and
government departments leaseback auctions that when analyzed, show
very low capitalization rates, regardless of location. That is, the
analysis shows that location is not as important as the quality of
the tenant. In many cases leases to quality tenants are not "out
of line" where it is expected that the premises would most
likely been leased to such a tenant.
anchor tenant in a shopping centre or where it is the norm to rent
commercial buildings to such tenants (for example, in Canberra). In
these cases, the rents are market rents.