Landlords increasingly cut up office spaces to fight leasing slowdown

Steven Durels of SL Green
Steven Durels of SL Green

In an ever-more-dire office leasing market, landlords have re-tooled their strategy, Crain’s reports. Instead of pooling smaller spaces together to create a space appealing to a large, blue-chip tenant, landlords are now cutting up spaces to court smaller tenants, as a way of hedging their bets.

For instance, at the Graybar Building at 420 Lexington Avenue, SL Green is dividing 10,000 to 20,000 square-foot spaces into 2,500- to 6,000-square-foot units, and building out the spaces for free, Crain’s said. 

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“For the small tenant, that takes inconvenience and capital cost out of the equation,” Steven Durels, executive vice president and director of leasing at SL Green, told Crain’s. “[The shift] is driven by small tenants being the biggest force in the market.”

And these days, the risky tenants might also be the large ones that would traditionally anchor an office building — a large bank or insurance firm.

“I would hate to be reliant on a business plan for a building that is dependent on securing a large lease from a Merrill Lynch or a Bank of America,” Nicholas Bienstock, a managing partner at private equity shop Savanna, told the magazine. [Crain’s] — Guelda Voien