AIUI it's they have borrowed money to buy the property based on a certain rental income. If they accept a lower rent, it would compromise the terms of the loan so it's preferable to keep the place empty as the rent hasn't gone down.
I missed that. It's actually rarely like that at all footflaps.
The loan covenants will usually include an income cover ratio: being the ratio between the interest payable on the loan and the rent being received at any point in time. Being unlet is to receive a lower rent than being let at a low rent. That would increase the likelihood of breaching the ICR covenant.
More often, maintainiing headline rents (i.e. the ones that get quoted in deal sheets) is far more important to maintain the overall ERV of an area/business park. (ERV = Estimated Rental Value). Fudging the headline rent, by doing a deal at that rate, but then softening it with rent free periods or capped service charge rates etc is quite normal. Its when the softening gets carried away just to get a tenant in to absorb the rates liability that it can damage the underlying Value of the property. And that's when the banking covenants might come in: namely, the Loan to Value ratio (LTV). The loan is a set amount, the value can move around (although only when a valuation is required, and that might usually be limited to no more than once a year) - if the ERV has dropped massively because the landlord (or another neighbouring landlord) has done a really soft deal, denting the rental value of the are, then the underlying Value will fall, the debt has remained at the same level so the LTV ratio has risen, probably breaching a covenant threshold and causing all sorts of pain to the landlord. And usually RBS
So, no, landlords rarely prefer empty buildings to rented buildings. Particularly since vacant building rates relief was abolished.