Office landlords offer discounts to lock in leases

Companies in the country’s largest office markets are seeking to reduce physical space

National /
Apr.April 06, 2021 10:40 AM
More companies are keeping their offices, but are downsizing those spaces to allow employees to work remotely part-time. (iStock)

More companies are keeping their offices, but are downsizing those spaces to allow employees to work remotely part-time. (iStock)

 

Office landlords in New York, Chicago and San Francisco could be taking a hit in the next few years even if some companies lock in long-term leases.

More companies are keeping their offices, but are downsizing those spaces to allow employees to work remotely part-time, according to data from VTS, first reported by the Wall Street Journal.

The analysis shows that landlords are giving tenants discounts of up to 13 percent compared to rents in the first quarter of 2020. Firms are also looking at an average of about 10 percent less space than they were looking at in the first quarter of 2020.

Even as more people are getting the Covid-19 vaccine, many employees are reluctant to return to the office. The U.S. office vacancy rate rose to 11.9 percent in the first quarter, according to the report, which cited data from CoStar.

Landlords are willing to offer rent breaks to prevent vacancies from rising, but these rent discounts could lead to lower valuations of office buildings in major cities.

One positive sign for office owners: Companies are still looking to secure long-term leases.
Over 45 percent of the tenants negotiating with landlords are seeking to make commitments of at least seven years. That’s up from 34 percent in 2019, according to the report.

[WSJ] — Keith Larsen


Related Articles

arrow_forward_ios
A Jersey City development meant to update sewer infrastructure, build climate resilience and create a two-acre park has completed phase one of environmental cleanup. (Aerial via Ennead Architects)
Argent Ventures, H&R advance 18-acre Jersey City development
Argent Ventures, H&R advance 18-acre Jersey City development
Laurent Tourondel's LT Burger is scheduled to open its Westhampton location this summer. (Google Maps, Getty, LT Burger)
LT Burger to open in Westhampton
LT Burger to open in Westhampton
Mall of America with JPMorgan Chase' Jamie Dimon (left) and Goldman Sachs' David Solomon (Getty)
Banks, real estate investors circle Mall of America
Banks, real estate investors circle Mall of America
Mack-Cali’s CEO Mahbod Nia with 99 Wood Avenue South, 101 Wood Avenue South in Iselin, NJ, and 333 and 343 Thornall Street in Edison, NJ (Google Maps)
Mack-Cali Realty sells Metropark complex for $254M
Mack-Cali Realty sells Metropark complex for $254M
Mack-Cali Realty CEO Mahbod Nia and MaryAnne Gilmartin (Photos via Mack-Cali Realty)
Mack-Cali Realty names Mahbod Nia as CEO
Mack-Cali Realty names Mahbod Nia as CEO
Shinnecock Indian Nation Chairman Bryan Polite and an aerial of Shinnecock Nation in Southampton (Linkedin, Google Maps)
Southampton sees casino plan as tribe’s bargaining chip
Southampton sees casino plan as tribe’s bargaining chip
A rendering of the facility at 1029 Newark Avenue in Elizabeth, Fidelco chairman Marc Berson and Elberon Development Group chairman Ann Evans Estabrook (Photos via JLL, Fidelco and Elberon)
Cold storage facility in New Jersey gets $34M loan
Cold storage facility in New Jersey gets $34M loan
The American Dream mall in East Rutherford, New Jersey (Getty)
Bonds for troubled American Dream mall up 25% this year
Bonds for troubled American Dream mall up 25% this year
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...