Your company is looking for new space, and you and your tenant representative have narrowed it down to two attractive buildings with competitive lease terms. Building 1 is a little cheaper, and has a better tenant improvement (work letter) on the table than Building 2.

Your broker says take the space that costs more – Building 2. Why?

As an exclusive tenant rep with no loyalty to any building owner, he or she knows the market, and tells you that, "Building 1 is under water. (A tenant rep can also help if you're stuck in the middle of a lease in a bankrupt building.)

Building 1 is a prototypical troubled property. If a building was purchased or refinanced at the peak of the market in the mid-2000s, its mortgage may exceed the present value of the property. The landlord may be having trouble paying the mortgage due to vacancies or the need to reduce rents to lure tenants.

Don't consider leasing space in an "under water” property even if the lease terms are more attractive than comparable spaces. Run, do not walk away, from such offers.

It's this simple: a landlord's financial stress can interfere with things like maintaining basic building services and not being able to fund the promised tenant improvements (TI), Leasing at an underwater building is risky business – you may find yourself dealing with new people