Your biggest competitor isn't only the building down the block

A tenant occupies 10,000 square feet, and its lease is coming up for renewal. A building down the street offers comparable space at $3 per square foot less, which would save the tenant $30,000 a year. The tenant renews anyway.

To the landlord of the competing building, that looks like a mistake.

And maybe it is, in the long term.

But on the tenant side, this phenomenon is actually one of the most predictable outcomes in commercial leasing. Landlords with vacant space usually measure their competition by surveying nearby buildings.

In truth, though?

The competitor that wins most often is not a building or area.

It is the tenant's decision to stay put.

Why tenants stay

Economists call this status quo bias. The term comes from a 1988 study by William Samuelson and Richard Zeckhauser, who found that people tend to keep their current option even when a better one is available.

One of the clearest demonstrations has nothing to do with real estate. Economists Brigitte Madrian and Dennis Shea studied a large company that began enrolling new employees in its 401(k) plan automatically, with the option to opt out. Before the change, about 37% of new hires signed up. After it, about 86% did. The plan offered the same benefits as before. The only difference was that joining no longer took any effort.

In commercial leasing, the option that takes no effort is almost always the renewal.

The national rental numbers show it clearly. In the apartment market, where lease data is the most complete, 56% of residents with leases expiring in the first half of 2026 renewed,

according to RealPage. Renewal rent increases have averaged 3.5% this year, while rents on new move-ins have risen 1.9%. Residents stayed, and paid more to do it.

‍Why the pull is so strong

Research on how people weigh losses helps explain the effect. In 1979, Daniel Kahneman and Amos Tversky showed that people feel a loss more strongly than a gain of the same size.

A tenant considering a move knows exactly what it would give up, whether that is a short commute or a landlord who responds quickly. What it would gain is less certain, because it has not occupied the new space yet. In the example above, the $30,000 a year is real, but so is the risk that the new building disappoints. As a result, the case for staying often seems stronger than the numbers alone would justify.

There is a practical side, too. If a company stays and its space is adequate, no one is likely to be criticized for the decision. If it moves and the new space falls short, the person who recommended the move will be held responsible. For that person, renewing is usually the lower-risk choice.

What this means when you have space to fill

A tenant does not have to make any decisions in order to stay. Moving requires a series of them, including site tours and internal approvals, and each one gives the tenant another opportunity to drop the search.

This is why a small rent discount often fails to win a new tenant. The tenant is not only comparing to another building. It is comparing your offer to the option of doing nothing, and that option has the advantage of requiring no effort.

Make your space the easy choice

The 401(k) example shows how to use human nature to a landlord's advantage. The company did not change anyone's mind about saving. It changed which option required effort, and landlords can apply the same idea.

A suite that is already built out removes one of the main reasons tenants hesitate, which is uncertainty about construction timing and cost. A short, clear lease and help coordinating the move reduce the effort further. Easy transitions and smooth communication. None of these steps changes the rent, but each makes a move easier for the tenant to approve.

Once moving requires little more effort than staying, the tenant can compare the two spaces on their merits. That is a comparison a better building should win.

What this means at renewal

The same tendency works to a landlord's advantage at renewal. Many tenants renew without testing the market, and it is easy to read that as satisfaction. In many cases it reflects inertia instead.

Inertia lasts until something interrupts it. A large rent increase can prompt a tenant to look elsewhere, and so can a strong offer from a competing landlord. Landlords who keep their buildings in good condition and price renewals with this in mind give tenants fewer reasons to start looking.

What this means for apartments

The same pattern holds in multifamily, and in some ways it is stronger. A renter thinking about moving has to find a new unit and pay for the move, and a family may have to change schools, so many residents will renew at a higher rent rather than go through it. That is why, as the national numbers above show, renewal increases can run ahead of what the same unit would rent for to a new resident.

It works until the gap gets too wide. Pushing renewals too hard raises turnover, and every move-out brings vacancy, turnover costs and the expense of finding a new resident.

For an owner leasing up a new building, the challenge runs the other way. Renters are comfortable where they are, so a modest rent discount often isn't enough to get them to move. Making the move easy, through flexible move-in dates or help with moving costs, often does more.

Guess what? Owners do it too

Owners are subject to the same bias. A property that has been held for years and produces steady income is rarely reexamined, because selling or repositioning it would take considerable work. As a result, some properties stay in a portfolio after their best use has changed or after the capital could earn more elsewhere.

A useful question is whether the owner would buy the property today at its current value. If the answer is no, continuing to hold it is still a decision, even if no one made it deliberately.

The bottom line

Most landlords know which buildings they are competing against. Fewer account for the tenant's current lease, which is often the stronger competitor. A lower rent rarely beats it but an offer that makes the move clearly worthwhile and easy to carry out usually does.

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