Chris Carmen / June 2, 2022
Recently, I read a good article about record spending by landlords on improvements to their office properties and tenants making improvements to their office suites. It seems counterintuitive for each to be spending money in this post-COVID world: Landlords spending money when their buildings are seeing sharp increases in vacancy, and; Tenants improving office suites when much of their staff has moved to remote working, leaving us wondering “why improve the space now?”
Landlords are coming off record occupancy levels pre-COVID and now are faced with increasing vacancy as lease expirations are causing tenants to vacate altogether or at lease shrink their office footprint resulting from fewer employees working from the office. However, landlords know the market is changing and in order to lease their space going forward, they need to differentiate themselves from the competition by adding amenities such as foodservice, fitness facilities, bike storage, tenant lounges, etc. So essentially, the landlords are investing in their future success by getting ahead of the softer office market.
Tenants too, are changing the way they’re doing business. The traditional office that accommodated all of most of the company’s employees in an “all-in” office environment, is now shifting the function of the office space to what many are calling a “Hub”, which will accommodate the company’s meeting needs for internal and external meeting, as well as allowing a portion of the company’s employees working from the office on certain days of the week, or simply when they need to come in for collaboration purposes, etc.
What this means to tenants as they “find themselves” through inventive hybrid work models and changing on-site office needs is that landlords are going to be willing to invest in your company’s office space to accommodate the changes your company is making in its work environment. Further, chances are employees will be coming back to work in a building that will be offering a wider array of tenant amenities. And as vacancy rises, for at least the next few years while the office market finds equilibrium, tenants will likely save money on office rents and flexibility of lease terms. When considering leasing office space, or simply renegotiating your existing lease, the wisest step you can take is to engage a Tenant Representative that specializes in representing office tenants and understands the market, what sort of incentives can be procured with a new lease, or what’s possible when renegotiating the existing office lease.
If you’d like to read the original article I referenced, click here.
Image by Wokandapix from Pixabay
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