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Landlords are primarily concerned with one thing. Property values. It doesn't matter to them what the returns are month-to-month. If the property is appreciating, then their investment is successful. So, if face rents are appreciating (which Australian landlords ensure through fixed rental increases that escalate at a rate higher than CPI), then that's all that matters. Here’s why. A Property's Value is calculated by taking the Net Income, dividing that by the Capitalisation “or Cap” Rate and minusing Capital Required. Here's an example. Let’s look at the value of a CBD office building. A Landlord’s valuer would assign a Cap Rate (purchasing yield) to the Net Income. In this case, let’s assume a 6% Cap Rate. In scenario 1 we'll assume Total Face Net Rents in the building are $5,000,000 and The Landlord has promised $1,000,000 in incentives back to tenants. So, the value of this property becomes $82 million In the second scenario let's assume that The Landlord offers lower rents instead of providing incentives. Total Face Net Rents in the building then sit at $4,000,000. So, the value of this property is only $67 million. From the outside, the investments in these scenarios appear to be the same. But, to Landlords, the higher rent levels can be purchased, locking in the value of their property.