Bloomberg Businessweek April 18, 2022 pp28-29 |Finance|”When Commercial Real Estate Gets Punchy” “Details in Dallas, LA, and Denver highlight how crazy the market has gotten” “THE BOTTOM LINE Competition for the best offices is fierce, but owners of less coveted space are offering sweeteners such as months of free rent or money to fund renovations.”
Read Bloomberg Businessweek for all the details
Summary by 2244
Commercial Real Estate-Pictured office space available on Addie Roy just off of RM2244 at Weston Lane. At least four other office complexes on westbound RM2244 between TX360 and St. Stephens Road have also posted available space.
2244 has been following commercial real estate and reckoned that with more WFH eventually there would be some contraction in office space. We certainly are seeing lease signs pop up in the RM2244 area and Austin for space in smaller office buildings or office complexes. This Bloomberg Businessweek brief gives an insight to what’s happening along those lines now in key markets.
Confirmed only “2 in 5 white-collar employees make it to their desks on any given day.” Office vacancies are at “16%, and in many cities they’ve doubled in the past two years.”
As it turns out the prominent tech firms are still competing for “supernice offices” as there remains a sense that “plush digs can attract talent.”
Some landlords were hit by early outs when companies struggling during the pandemic abandoned leases early. This, in combination with lessening demand due to WFH, has owners of “less flashy” space in a highly competitive environment. They are being played against a client’s existing landlord and landlords from multiple locations. Consequently owners, in these spaces, are having to entice prospects with free rent, large renovation budgets, extra parking, and even contingency space to accommodate the new tenants during any renovation. Common threads across the negotiated deals is a level of downsizing and significant savings to the leasee.
Examples are provided
The Bank’s (Dallas) search lasted from August 2020 to February 2022 and resulted in a downsizing from 34,000 sqft to 24,000 sqft, rent unchanged but with a ten year lease they were awarded eight months of free rent and twice the renovation budget of two other prospective landlords that were competing for the lease.
The Law Firm’s (Los Angeles) search lasted from early 2018 to February 2022 and resulted in a downsizing from 95,000 sqft to 87,000 sqft with some premium extras with the space, “almost two years of free rent,” contingency space, “extra parking for clients and Wi-Fi in the garage.” The deal won by their existing landlord “...was multiple millions of dollars better.”
The Junk Hauler’s (Denver) search lasted from Summer 2021 to December 2021 and resulted in the owner securing a hard-to-get one year lease for 2,400 sqft at $2,450/month including “13 parking spaces (10 more than typical). Previously the firm had only a coworking space.