Office Leasing: It’s a Tenant’s Market

Gregg Cohen Office Leasing Specialist

The big question I get now is “Gregg, why do you say it’s a tenant’s market for office space? What’s happening in the market that gives you that indication?”

We’ve seen office space vacancy rates in New York City creep up close to 20% in the office market. And we’ve seen landlords be more flexible than they’ve ever been before.

What do I mean by landlord flexibility?

The market has witnessed things that in the recent past just were never considered. For example, lease terms previously where landlords held firm for five to 10 years are agreeing to shorter-term leases. Landlords are sometimes even willing to build for as little as three years now, whereas before, 5-7 years was a minimum. Flexibility is also taking the form of landlords conceding to cancellation rights, renewal, and expansion rights that once were only reserved for the few. Additionally, we are seeing more free rent and larger work letters being offered

We are also seeing landlords invest more money in the interiors of their buildings to redo them as well as creating amenity space to help attract companies and their talent. What do I mean by amenities? You’ve seen everything from outdoor space to gyms with Pelotons, to golf simulators, to pools. You’ve got outdoor terraces. You’ve got common areas now where there are lounges. You’ve seen music and some of the buildings in Rockefeller Center with Tishman making it feel like a hotel. At the old 708 Third Avenue, 10 Grand Central has repositioned with Marx even having its own smell as such. So right now, landlords are doing whatever they can to be able to help tenants feel comfortable and want to be in their buildings.

 Landlords have also done things to help get tenants across the line. No longer do you need to bring your own furniture. They’ll furnish the space for you and build it into a deal. They’ll wire the space for you. Take that headache away from you. They’ll give you termination rights so that you can get out with flexibility. These are all examples of things that the landlords are doing right now to make you feel more comfortable as a tenant coming into a space.

Where would I say there is more flexibility than less? 

I’d say in Class B and Class C buildings, there is more flexibility, and the tenant even has a greater advantage. There is a greater advantage if you’re a larger tenant than you’re a smaller tenant. What we’re seeing is a lot of people downsizing into smaller space. As a result, there’s more demand for that space. And there are usually more tenants that want small space than there is small space to fill all of that demand. 

In conclusion, it’s a tenant’s market with opportunities to be creative for you and your company. 

Any questions? Please feel free to contact me. 

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