The increased vacancy in office space over the last 18 months has created a golden opportunity for Tenants. Forward thinking occupiers of office space are looking to take advantage of the reduced pricing in rental rates and the heightened concessions (free rent, tenant improvement allowances etc.) that currently exist in todays “Tenant’s” market.
How long this dynamic will last is uncertain. As the economy continues to rebound, absorption of office space will start to accelerate. NAIOP’s latest demand forecast indicates a return to normal (as measured by net absorption) by the second half of 2022.
While many companies will be working with a hybrid model, where a certain percentage of an organization’s employees are not in the office 100% of the time, most companies still require an office.
Will the footprint of the post-Covid office be smaller or bigger? Utilizing a hybrid model, one would think these offices will be smaller. However, the pre-Covid trend of placing as many people as possible in an open, collaborative work environment resulting in less square footage/person is not likely to continue due to social distancing concerns. This would argue for more square footage/person.
Each organization will need to determine the type of work environment that best promotes their company’s brand, creativity, collaboration, and employee engagement.
Regardless of the shape your office space takes, opportunistic tenants now have significant leverage at the negotiating table for the first time in a decade and are in prime position to lock in powerful, long-term beneficial real estate cost savings.
howardcommercial is a St Louis-based commercial real estate firm providing conflict-free advisory services to tenants, owner-occupiers and investors. Our fiduciary responsibility is to our clients and we represent them vigorously to produce superior results. www.howardcommercial.net
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