OFFICE LEASING TRENDS
Written by: Michelle Fude
Michelle Fude specializes in office leasing and tenant representation. She focuses on canvasing all competitive properties to confirm tenant rosters, identify initial target markets and complete daily cold calling. Michelle delivers constant communication to clients through activity reporting on all current deal activity and provides daily creative solutions and proactive marketing plans specific to each property. Keep reading to get Michelle’s take on office leasing trends post-coronavirus.
Why do you think average lease term lengths seem to be staying the same?
The average lease term staying relatively the same doesn’t surprise me. It’s still too early. We had this amazing economy and the best market activity in years, so I think the deals that closed in April and May were deals already in the works that were able to still proceed and execute even with COVID-19 spreading. What I think will ultimately affect the average lease term will be if and when there is a surge of sublease space in the market. The sublease terms more often than not will be much more flexible to prospective Tenants with less in rental rate and shorter terms. When our Landlords are competing with sublease space (could be even in their own buildings) they will have to be more flexible and offer more concessions, like free rent, TI dollars, and incentives such as moving allowances or furniture allowances.
Looking at sublease data year-over-year it isn’t too far apart but did increase significantly since the end of 2019. I expect that to increase tremendously moving forward. It seems from talking to clients and looking at companies in our own properties that many companies are still primarily working remotely and have not officially opened their offices. I think once companies prioritize coming back into the office is when they will start having conversations about saving costs in their space, letting people work remotely permanently, subleasing their space, etc. I predict that in the next six months, employers will have those conversations and that sublease space on the market will increase. Depending on the supply, this will affect items such as what the Landlord’s will offer for a deal – that’s when the length of leases will start to really be affected.